House Report 119-106 - ONE BIG BEAUTIFUL BILL ACT

[House Report 119-106]
[From the U.S. Government Publishing Office]

119th Congress } { REPORT
HOUSE OF REPRESENTATIVES
1st Session } { 119-106

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ONE BIG BEAUTIFUL BILL

ACT

----------

R E P O R T

OF THE

COMMITTEE ON THE BUDGET

HOUSE OF REPRESENTATIVES

[TO ACCOMPANY H.R. 1]

together with

MINORITY VIEWS

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Book 2 of 2

May 20, 2025.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed

__________

U.S. GOVERNMENT PUBLISHING OFFICE
60-416 WASHINGTON : 2025

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COMMITTEE ON THE BUDGET

JODEY C. ARRINGTON, Texas, Chairman

RALPH NORMAN, South Carolina BRENDAN F. BOYLE, Pennsylvania,
TOM McCLINTOCK, California, Ranking Ranking Member
Member LLOYD DOGGETT, Texas
GLENN GROTHMAN, Wisconsin ROBERT C. ``BOBBY'' SCOTT,
LLOYD SMUCKER, Pennsylvania Virginia
EARL L. ``BUDDY'' CARTER, Georgia SCOTT H. PETERS, California
BEN CLINE, Virginia JIMMY PANETTA, California
JACK BERGMAN, Michigan BONNIE WATSON COLEMAN, New Jersey
CHIP ROY, Texas STACEY E. PLASKETT, Virgin Islands
MARLIN A. STUTZMAN, Indiana VERONICA ESCOBAR, Texas
BLAKE D. MOORE, Utah ILHAN OMAR, Minnesota
RON ESTES, Kansas BECCA BALINT, Vermont
JOSH BRECHEEN, Oklahoma MARCY KAPTUR, Ohio
JAY OBERNOLTE, California PRAMILA JAYAPAL, Washington
MIKE CAREY, Ohio JUDY CHU, California
CHUCK EDWARDS, North Carolina PAUL TONKO, New York
ANDREW S. CLYDE, Georgia MORGAN McGARVEY, Kentucky
ERIN HOUCHIN, Indiana GABE AMO, Rhode Island
ADDISON P. McDOWELL, North Carolina
BRANDON GILL, Texas
TIM MOORE, North Carolina

Professional Staff

GARY ANDRES, Staff Director
GREG WARING, Minority Staff Director

C O N T E N T S

Page
Introduction by the Committee on the Budget...................... 3
Title I--Committee on Agriculture................................ 11
Title II--Committee on Armed Services............................ 105
Title III--Committee on Education and Workforce.................. 165
Title IV--Committee on Energy and Commerce....................... 473
Title V--Committee on Financial Services......................... 641
Title VI--Committee on Homeland Security......................... 735
Title VII--Committee on the Judiciary............................ 805
Title VIII--Committee on Natural Resources....................... 929
Title IX--Committee on Oversight and Government Reform........... 1089
Title X--Committee on Transportation and Infrastructure.......... 1153
Title XI--Committee on Ways and Means............................ 1309
Committee on the Budget:
Votes of the Committee on the Budget......................... 1943
Other House Report Requirements.............................. 1953
Views of Committee Members................................... 2063
One Big Beautiful Bill Act (legislative text).................... 2067

House of Representatives,
Committee on Ways and Means,
Washington, DC, May 14, 2025.
Hon. Jodey C. Arrington,
Chairman, Committee on the Budget,
House of Representatives, Washington, DC.
Dear Chairman Arrington: Pursuant to section 2001 of the
Concurrent Resolution on the Budget for Fiscal Year 2025, I
hereby transmit these recommendations which have been approved
by vote of the Committee on Ways and Means to the House
Committee on the Budget. This submission is in order to comply
with reconciliation directives included in H. Con. Res. 14, the
Concurrent Resolution on the Budget for Fiscal Year 2025, and
is consistent with section 310 of the Congressional Budget Act
of 1974.
Sincerely,
Jason Smith,
Chairman.

Amendment in the Nature of a Substitute

to Committee Print

Providing for Reconciliation

Offered by Mr. Smith of Missouri

Strike title XI and insert the following:

TITLE XI--COMMITTEE ON WAYS AND MEANS, ``THE ONE, BIG, BEAUTIFUL BILL''

SEC. 110000. REFERENCES TO THE INTERNAL REVENUE CODE OF 1986, ETC.

(a) References.--Except as otherwise expressly provided,
whenever in this title, an amendment or repeal is expressed in
terms of an amendment to, or repeal of, 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.
(b) Certain Rules Regarding Effect of Rate Changes Not
Applicable.--Section 15 of the Internal Revenue Code of 1986
shall not apply to any change in rate of tax by reason of any
provision of, or amendment made by, this title.

Subtitle A--Make American Families and Workers Thrive Again

PART 1--PERMANENTLY PREVENTING TAX HIKES ON AMERICAN FAMILIES AND
WORKERS

SEC. 110001. EXTENSION OF MODIFICATION OF RATES.

(a) In General.--Section 1(j) is amended--
(1) in paragraph (1), by striking ``, and before
January 1, 2026'', and
(2) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(b) Inflation Adjustment.--Section 1(j)(3)(B)(i) is amended
by inserting ``in the case of any taxable year beginning after
December 31, 2025, solely for purposes of determining the
dollar amounts at which the 35-percent rate bracket ends and
the 37-percent rate bracket begins,'' before ``subsection
(f)(3)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110002. EXTENSION OF INCREASED STANDARD DEDUCTION AND TEMPORARY
ENHANCEMENT.

(a) In General.--Section 63(c)(7) is amended--
(1) by striking ``, and before January 1, 2026'' in
the matter preceding subparagraph (A), and
(2) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(b) Temporary Additional Increase in Standard Deduction.--
Section 63(c)(7) is amended by adding at the end the following
new subparagraph:
``(C) Temporary additional increase in
standard deduction.--In the case of any taxable
year beginning after December 31, 2024, and
before January 1, 2029--
``(i) the dollar amount otherwise in
effect under paragraph (2)(B) shall be
increased by $1,500, and
``(ii) the dollar amount otherwise in
effect under paragraph (2)(C) shall be
increased by $1,000.''.
(c) Recalculation of Inflation Adjustment.--Section
63(c)(7)(B)(ii)(II) is amended by striking ``, determined by
substituting `2017' for `2016' in subparagraph (A)(ii)
thereof''.
(d) Effective Date.--
(1) In general.--The amendments made by subsection
(a) shall apply to taxable years beginning after
December 31, 2025.
(2) Temporary additional increase in standard
deduction.--The amendment made by subsection (b) shall
apply to taxable years beginning after December 31,
2024.

SEC. 110003. TERMINATION OF DEDUCTION FOR PERSONAL EXEMPTIONS.

(a) In General.--Section 151(d)(5) is amended--
(1) by striking ``and before January 1, 2026'', and
(2) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110004. EXTENSION OF INCREASED CHILD TAX CREDIT AND TEMPORARY
ENHANCEMENT.

(a) Extension of Expanded Child Tax Credit.--Section 24(h) is
amended--
(1) in paragraph (1), by striking ``and before
January 1, 2026,'', and
(2) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(b) Increase in Child Tax Credit.--Section 24(h)(2) is
amended to read as follows:
``(2) Credit amount.--Subsection (a) shall be applied
by substituting--
``(A) in the case of taxable years beginning
after December 31, 2024, and before December
31, 2028, `$2,500' for `$1,000', or
``(B) in the case of any subsequent taxable
year, `$2,000' for `$1,000'.''.
(c) Social Security Number Required.--Section 24(h)(7) is
amended to read as follows:
``(7) Social security number required.--
``(A) In general.--No credit shall be allowed
under this section to a taxpayer with respect
to any qualifying child unless the taxpayer
includes on the return of tax for the taxable
year--
``(i) such individual's social
security number,
``(ii) the social security number of
such qualifying child, and
``(iii) if the individual is married,
the social security number of such
individual's spouse.
``(B) Social security number.--For purposes
of this paragraph, the term `social security
number' means a social security number issued
to an individual by the Social Security
Administration, but only if the social security
number is issued--
``(i) to a citizen of the United
States or pursuant to subclause (I) (or
that portion of subclause (III) that
relates to subclause (I)) of section
205(c)(2)(B)(i) of the Social Security
Act, and
``(ii) before the due date for such
return.
``(C) Married individuals.--Rules similar to
the rules of section 32(d) shall apply to this
section.''.
(d) Inflation Adjustments.--
(1) In general.--Section 24(i) is amended to read as
follows:
``(i) Inflation Adjustments.--
``(1) Maximum amount of refundable credit.--In the
case of a taxable year beginning after 2024, the $1,400
amount in subsection (h)(5) 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 `2017' for `2016' in
subparagraph (A)(ii) thereof.
``(2) Special rule for adjustment of credit amount.--
In the case of a taxable year beginning after 2028, the
$2,000 amount in subsection (h)(2)(B), 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 `2024' for `2016' in
subparagraph (A)(ii) thereof.
``(3) Rounding.--If any increase under this
subsection is not a multiple of $100, such increase
shall be rounded to the next lowest multiple of
$100.''.
(e) Conforming Amendment.--Section 24(h)(5) is amended to
read as follows:
``(5) Maximum amount of refundable credit.--The
amount determined under subsection (d)(1)(A) with
respect to any qualifying child shall not exceed
$1,400, and such subsection shall be applied without
regard to paragraph (4) of this subsection.''.
(f) Treatment of Certain Benefits of Members of Religious and
Apostolic Associations as Earned Income.--Section 24(d)(1) is
amended by adding at the end the following: ``For purposes of
subparagraph (B), any amount treated as a dividend received
under the last sentence of section 501(d) shall be treated as
earned income which is taken into account in computing taxable
income for the taxable year.''.
(g) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

SEC. 110005. EXTENSION OF DEDUCTION FOR QUALIFIED BUSINESS INCOME AND
PERMANENT ENHANCEMENT.

(a) Made Permanent.--Section 199A is amended by striking
subsection (i).
(b) Increase in Deduction.--Subsections (a)(2), (b)(1)(B),
and (b)(2)(A) of section 199A are each amended by striking ``20
percent'' and inserting ``23 percent''.
(c) Modification of Limitations Based on Taxable Income.--
(1) In general.--Section 199A(b)(3) is amended to
read as follows:
``(3) Modification of determination of combined
qualified business income amount based on taxable
income.--
``(A) Exception from limitations.--In the
case of any taxpayer whose taxable income for
the taxable year does not exceed the threshold
amount--
``(i) paragraph (2) shall be applied
without regard to subparagraph (B), and
``(ii) a specified service trade or
business shall not fail to be treated
as a qualified trade or business solely
by reason of subsection (d)(1)(A).
``(B) Phase-in of limitations.--In the case
of any taxpayer whose taxable income for the
taxable year exceeds the threshold amount, the
sum described in paragraph (1)(A) (determined
without regard to this subparagraph) shall
instead be an amount (if greater) equal to the
excess (if any) of--
``(i) the sum described in paragraph
(1)(A) (determined by applying the
rules of clauses (i) and (ii) of
subparagraph (A)), over
``(ii) the limitation phase-in
amount.
``(C) Limitation phase-in amount.--For
purposes of subparagraph (B), the limitation
phase-in amount shall be an amount equal to 75
percent of the excess (if any) of--
``(i) the taxable income of the
taxpayer for the taxable year, over
``(ii) the threshold amount.''.
(2) Conforming amendment.--Section 199A(d) is amended
by striking paragraph (3).
(d) Deduction for Qualified Business Income to Apply to
Certain Interest Dividends of Qualified Business Development
Companies.--
(1) In general.--Subsections (b)(1)(B) and (c)(1) of
section 199A are each amended by inserting ``,
qualified BDC interest dividends,'' after ``qualified
REIT dividends''.
(2) Qualified bdc interest dividend defined.--Section
199A(e) is amended by adding at the end the following
new paragraph:
``(5) Qualified bdc interest dividend.--
``(A) In general.--The term `qualified BDC
interest dividend' means any dividend from an
electing business development company received
during the taxable year which is attributable
to net interest income of such company which is
properly allocable to a qualified trade or
business of such company.
``(B) Electing business development
company.--For purposes of this paragraph, the
term `electing business development company'
means a business development company (as
defined in section 2(a) of the Investment
Company Act of 1940) which has an election in
effect under section 851 to be treated as a
regulated investment company.''.
(e) Modified Inflation Adjustment.--Section 199A(e)(2)(B) is
amended--
(1) by striking ``2018'' and inserting ``2025'', and
(2) in clause (ii), by striking ``, determined by
substituting `calendar year 2017' for `calendar year
2016' in subparagraph (A)(ii) thereof''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110006. EXTENSION OF INCREASED ESTATE AND GIFT TAX EXEMPTION
AMOUNTS AND PERMANENT ENHANCEMENT.

(a) In General.--Section 2010(c)(3) is amended--
(1) in subparagraph (A) by striking ``$5,000,000''
and inserting ``$15,000,000'',
(2) in subparagraph (B)--
(A) in the matter preceding clause (i), by
striking ``2011'' and inserting ``2026'', and
(B) in clause (ii), by striking ``calendar
year 2010'' and inserting ``calendar year
2025'', and
(3) by striking subparagraph (C).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110007. EXTENSION OF INCREASED ALTERNATIVE MINIMUM TAX EXEMPTION
AND PHASE-OUT THRESHOLDS.

(a) In General.--Section 55(d)(4) is amended--
(1) in subparagraph (A), by striking ``, and before
January 1, 2026'', and
(2) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110008. EXTENSION OF LIMITATION ON DEDUCTION FOR QUALIFIED
RESIDENCE INTEREST.

(a) In General.--Section 163(h)(3)(F) is amended--
(1) in clause (i), by striking ``, and before January
1, 2026'',
(2) by striking clause (ii) and redesignating clauses
(iii) and (iv) as clauses (ii) and (iii), respectively,
and
(3) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110009. EXTENSION OF LIMITATION ON CASUALTY LOSS DEDUCTION.

(a) In General.--Section 165(h)(5) is amended--
(1) in subparagraph (A), by striking ``and before
January 1, 2026,'', and
(2) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110010. TERMINATION OF MISCELLANEOUS ITEMIZED DEDUCTION.

(a) In General.--Section 67(g) is amended--
(1) by striking ``, and before January 1, 2026'', and
(2) by striking ``2018 Through 2025'' and in the
heading inserting ``Beginning After 2017''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110011. LIMITATION ON TAX BENEFIT OF ITEMIZED DEDUCTIONS.

(a) In General.--Section 68 is amended to read as follows:

``SEC. 68. LIMITATION ON TAX BENEFIT OF ITEMIZED DEDUCTIONS.

``(a) In General.--In the case of an individual, the amount
of the itemized deductions otherwise allowable for the taxable
year (determined without regard to this section) shall be
reduced by 2/37 of the lesser of--
``(1) such amount of itemized deductions, or
``(2) so much of the taxable income of the taxpayer
for the taxable year (determined without regard to this
section and increased by such amount of itemized
deductions) as exceeds the dollar amount at which the
37 percent rate bracket under section 1 begins with
respect to the taxpayer.
``(b) Coordination With Other Limitations.--This section
shall be applied after the application of any other limitation
on the allowance of any itemized deduction.''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2025.

SEC. 110012. TERMINATION OF QUALIFIED BICYCLE COMMUTING REIMBURSEMENT
EXCLUSION.

(a) In General.--Section 132(f)(8) is amended by striking ``,
and before January 1, 2026''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2025.

SEC. 110013. EXTENSION OF LIMITATION ON EXCLUSION AND DEDUCTION FOR
MOVING EXPENSES.

(a) Termination of Deduction.--Section 217(k) is amended--
(1) by striking ``, and before January 1, 2026'', and
(2) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(b) Termination of Reimbursement.--Section 132(g)(2) is
amended--
(1) by striking ``, and before January 1, 2026'', and
(2) by striking ``2018 Through 2025'' in the heading
and inserting ``Beginning After 2017''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110014. EXTENSION OF LIMITATION ON WAGERING LOSSES.

(a) In General.--Section 165(d) is amended by striking ``and
before January 1, 2026,''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2025.

SEC. 110015. EXTENSION OF INCREASED LIMITATION ON CONTRIBUTIONS TO ABLE
ACCOUNTS AND PERMANENT ENHANCEMENT.

(a) In General.--Section 529A(b)(2)(B) is amended--
(1) in clause (i), by inserting ``(determined by
substituting `1996' for `1997' in paragraph (2)(B)
thereof)'' after ``section 2503(b)'', and
(2) in clause (ii), by striking ``before January 1,
2026''.
(b) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall
apply to contributions made after December 31, 2025.
(2) Modified inflation adjustment.--The amendment
made by subsection (a)(1) shall apply to taxable years
beginning after December 31, 2025.

SEC. 110016. EXTENSION OF SAVERS CREDIT ALLOWED FOR ABLE CONTRIBUTIONS.

(a) In General.--Section 25B(d)(1) is amended to read as
follows:
``(1) In general.--The term `qualified retirement
savings contributions' means, with respect to any
taxable year, the sum of--
``(A) the amount of contributions made by the
eligible individual during such taxable year to
the ABLE account (within the meaning of section
529A) of which such individual is the
designated beneficiary, and
``(B) in the case of any taxable year
beginning before January 1, 2027--
``(i) the amount of the qualified
retirement contributions (as defined in
section 219(e)) made by the eligible
individual,
``(ii) the amount of--
``(I) any elective deferrals
(as defined in section
402(g)(3)) of such individual,
and
``(II) any elective deferral
of compensation by such
individual under an eligible
deferred compensation plan (as
defined in section 457(b)) of
an eligible employer described
in section 457(e)(1)(A), and
``(iii) the amount of voluntary
employee contributions by such
individual to any qualified retirement
plan (as defined in section
4974(c)).''.
(b) Coordination With SECURE 2.0 Act of 2022 Amendment.--
Paragraph (1) of section 103(e) of the SECURE 2.0 Act of 2022
is repealed, and the Internal Revenue Code of 1986 shall be
applied and administered as though such paragraph were never
enacted.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after December 31, 2025.

SEC. 110017. EXTENSION OF ROLLOVERS FROM QUALIFIED TUITION PROGRAMS TO
ABLE ACCOUNTS PERMITTED.

(a) In General.--Section 529(c)(3)(C)(i)(III) is amended by
striking ``before January 1, 2026,''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2025.

SEC. 110018. EXTENSION OF TREATMENT OF CERTAIN INDIVIDUALS PERFORMING
SERVICES IN THE SINAI PENINSULA AND ENHANCEMENT TO
INCLUDE ADDITIONAL AREAS.

(a) Treatment Made Permanent.--Section 11026(a) of Public Law
115-97 is amended by striking ``with respect to the applicable
period,''.
(b) Kenya, Mali, Burkina Faso, and Chad Included as Hazardous
Duty Areas.--Section 11026(b) of Public Law 115-97 is amended
to read as follows:
``(b) Qualified Hazardous Duty Area.--For purposes of this
section, the term 'qualified hazardous duty area' means--
``(1) the Sinai Peninsula of Egypt, if as of
December, 22, 2017, any member of the Armed Forces of
the United States is entitled to special pay under
section 310 of title 37, United States Code (relating
to special pay; duty subject to hostile fire or
imminent danger), for services performed in such
location, and
``(2) Kenya, Mali, Burkina Faso, and Chad if, as of
the date of the enactment of this paragraph, any member
of the Armed Forces of the United States is entitled to
special pay under such section, for services performed
in such location.
Such term includes any such location only during the period
such entitlement is in effect with respect to such location.''.
(c) Conforming Amendment.--Section 11026 of Public Law 115-97
is amended by striking subsections (c) and (d).
(d) Effective Date.--The amendments made by this section
shall take effect on January 1, 2026.

SEC. 110019. EXTENSION OF EXCLUSION FROM GROSS INCOME OF STUDENT LOANS
DISCHARGED ON ACCOUNT OF DEATH OR DISABILITY.

(a) In General.--Section 108(f)(5) is amended to read as
follows:
``(5) Discharges on account of death or disability.--
``(A) 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 for such taxable
year by reason of the discharge (in whole or in
part) of any loan described in subparagraph
(B), if such discharge was--
``(i) pursuant to subsection (a) or
(d) of section 437 of the Higher
Education Act of 1965 or the parallel
benefit under part D of title IV of
such Act (relating to the repayment of
loan liability),
``(ii) pursuant to section
464(c)(1)(F) of such Act, or
``(iii) otherwise discharged on
account of death or total and permanent
disability of the student.
``(B) Loans discharged.--A loan is described
in this subparagraph if such loan is--
``(i) a student loan (as defined in
paragraph (2)), or
``(ii) a private education loan (as
defined in section 140(a) of the
Consumer Credit Protection Act (15
U.S.C. 1650(a)).
``(C) Social security number requirement.--
``(i) In general.--Subparagraph (A)
shall not apply with respect to any
discharge during any taxable year
unless the taxpayer includes on the
return of tax for such taxable year--
``(I) the taxpayer's social
security number, and
``(II) if the taxpayer is
married, the social security
number of such taxpayers's
spouse.
``(ii) Social security number.--For
purposes of this subparagraph, the term
`social security number' has the
meaning given such term in section
24(h)(7).
``(iii) Married individuals.--Rules
similar to the rules of section 32(d)
shall apply to this subparagraph.''.
(b) Omission of Correct Social Security Number Treated as
Mathematical or Clerical Error.--Section 6213(g)(2) is amended
by striking ``and'' at the end of subparagraph (U), by striking
the period at the end of subparagraph (V) and inserting ``,
and'', and by inserting after subparagraph (V) the following
new subparagraph:
``(W) an omission of a correct social
security number required under section
108(f)(5)(C) (relating to discharges on account
of death or disability).''.
(c) Effective Date.--The amendments made by this section
shall apply to discharges after December 31, 2025.

PART 2--ADDITIONAL TAX RELIEF FOR AMERICAN FAMILIES AND WORKERS

SEC. 110101. NO TAX ON TIPS.

(a) Deduction Allowed.--Part VII of subchapter B of chapter 1
is amended by redesignating section 224 as section 225 and by
inserting after section 223 the following new section:

``SEC. 224. QUALIFIED TIPS.

``(a) In General.--There shall be allowed as a deduction an
amount equal to the qualified tips received during the taxable
year that are included on statements furnished to the
individual pursuant to section 6041(d)(3), 6041A(e)(3),
6050W(f)(2), 6051(a)(18), or reported by the taxpayer on Form
4137 (or successor).
``(b) Tips Received in Course of Trade or Business.--In the
case of qualified tips received by an individual during any
taxable year in the course of any trade or business of such
individual, such qualified tips shall be taken into account
under subsection (a) only to the extent that the gross receipts
of the taxpayer from such trade or business for such taxable
year (including such qualified tips) exceeds the sum of--
``(1) cost of goods sold that are allocable to such
receipts, plus
``(2) other expenses, losses, or deductions (other
than the deduction allowed under this section), which
are properly allocable to such receipts.
``(c) Qualified Tips.--For purposes of this section--
``(1) In general.--The term `qualified tip' means any
cash tip received by an individual in an occupation
which traditionally and customarily received tips on or
before December 31, 2024, as provided by the Secretary.
``(2) Exclusions.--Such term shall not include any
amount received by an individual unless--
``(A) such amount is paid voluntarily without
any consequence in the event of nonpayment, is
not the subject of negotiation, and is
determined by the payor,
``(B) the trade or business in the course of
which the individual receives such amount is
not a specified service trade or business (as
defined in section 199A(d)(2)),
``(C) such individual is not a highly
compensated employee (as defined in section
414(q)(1)) of any employer for the calendar
year in which the taxable year begins, and does
not receive earned income in excess of the
dollar amount in effect under section
414(q)(1)(B)(i) for such calendar year, and
``(D) such other requirements as may be
established by the Secretary in regulations or
other guidance are satisfied.
``(d) Social Security Number Required.--
``(1) In general.--No deduction shall be allowed
under this section unless the taxpayer includes on the
return of tax for the taxable year--
``(A) such individual's social security
number (as defined in section 24(h)(7)), and
``(B) if the individual is married, the
social security number of such individual's
spouse.
``(2) Married individuals.--Rules similar to the
rules of section 32(d) shall apply to this section.
``(e) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary to prevent
reclassification of income as qualified tips, including
regulations or other guidance to prevent abuse of the deduction
allowed by this section.
``(f) Termination.--No deduction shall be allowed under this
section for any taxable year beginning after December 31,
2028.''.
(b) Deduction Allowed to Non-itemizers.--Section 63(b) is
amended by striking ``and'' at the end of paragraph (3), by
striking the period at the end of paragraph (4) and inserting
``and'', and by adding at the end the following new paragraph:
``(5) the deduction provided in section 224.''.
(c) Omission of Correct Social Security Number Treated as
Mathematical or Clerical Error.--Section 6213(g)(2), as amended
by the preceding provisions of this Act, is amended by striking
``and'' at the end of subparagraph (V), by striking the period
at the end of subparagraph (W) and inserting ``, and'', and by
inserting after subparagraph (W) the following new
subparagraph:
``(X) an omission of a correct social
security number required under section 224(d)
(relating to deduction for qualified tips).''.
(d) Exclusion From Qualified Business Income.--Section
199A(c)(4) is amended by striking ``and'' at the end of
subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting ``, and'', and by adding at the
end the following new subparagraph:
``(D) any amount with respect to which a
deduction is allowable to the taxpayer under
section 224(a) for the taxable year.''.
(e) Extension of Tip Credit to Beauty Service Business.--
Section 45B(b)(2) is amended to read as follows:
(1) In general.--
``(2) Application only to certain lines of
business.--In applying paragraph (1) there shall be
taken into account only tips received from customers or
clients in connection with the following services:
``(A) The providing, delivering, or serving
of food or beverages for consumption, if the
tipping of employees delivering or serving food
or beverages by customers is customary.
``(B) The providing of any of the following
services to a customer or client if the tipping
of employees providing such services is
customary:
``(i) Barbering and hair care.
``(ii) Nail care.
``(iii) Esthetics.
``(iv) Body and spa treatments.''.
(2) Credit determined with respect to minimum wage in
effect.--Section 45B(b)(1)(B) is amended--
(A) by striking ``as in effect on January 1,
2007, and'', and
(B) by inserting ``, and in the case of food
or beverage establishments, as in effect on
January 1, 2007'' after ``without regard to
section 3(m) of such Act''.
(f) Reporting Requirements.--
(1) Returns for payments made in the course of a
trade or business.--
(A) Statement furnished to secretary.--
Section 6041(a) is amended by inserting
``(including a separate accounting of any such
amounts properly designated as tips and whether
such tips are received in an occupation
described in section 224(c)(1))'' after ``such
gains, profits, and income''.
(B) Statement furnished to payee.--Section
6041(d) is amended by striking ``and'' at the
end of paragraph (1), by striking the period at
the end of paragraph (2) and inserting ``,
and'', and by inserting after paragraph (2) the
following new paragraph:
``(3) in the case of compensation to non-employees,
the portion of payments that have been properly
designated as tips and whether such tips are received
in an occupation described in section 224(c)(1).''.
(2) Returns for payments made for services and direct
sales.--
(A) Statement furnished to secretary.--
Section 6041A(a) is amended by inserting
``(including a separate accounting of any such
amounts properly designated as tips and whether
such tips are received in an occupation
described in section 224(c)(1))'' after
``amount of such payments''.
(B) Statement furnished to payee.--Section
6041A(e) is amended by striking ``and'' at the
end of paragraph (1), by striking the period at
the end of paragraph (2) and inserting ``,
and'', and by inserting after paragraph (2) the
following new paragraph:
``(3) the portion of payments that have been properly
designated as tips and whether such tips are received
in an occupation described in section 224(c)(1).''.
(3) Returns relating to third party settlement
organizations.--
(A) Statement furnished to secretary.--
Section 6050W(a) is amended by striking ``and''
at the end of paragraph (1), by striking the
period at the end of paragraph (2) and
inserting ``and'', and by adding at the end the
following new paragraph:
``(3) in the case of a third party settlement
organization, the portion of reportable payment
transactions that have been properly designated by
payors as tips and whether such tips are received in an
occupation described in section 224(c)(1).''.
(B) Statement furnished to payee.--Section
6050W(f)(2) is amended by inserting
``(including a separate accounting of any such
amounts that have been properly designated by
payors as tips and whether such tips are
received in an occupation described in section
224(c)(1))'' after ``reportable payment
transactions''.
(4) Returns related to wages.--Section 6051(a) is
amended by striking ``and'' at the end of paragraph
(16), by striking the period at the end of paragraph
(17) and inserting ``, and'', and by inserting after
paragraph (17) the following new paragraph:
``(18) the total amount of tips reported by the
employee under section 6053(a).''.
(g) Clerical Amendment.--The table of sections for part VII
of subchapter B of chapter 1 is amended by redesignating the
item relating to section 224 as relating to section 225 and by
inserting after the item relating to section 223 the following
new item:

``Sec. 224. Qualified tips.''.

(h) Published List of Occupations Traditionally Receiving
Tips.--Not later than 90 days after the date of the enactment
of this Act, the Secretary of the Treasury (or the Secretary's
delegate) shall publish a list of occupations which
traditionally and customarily received tips on or before
December 31, 2024, for purposes of section 224(c)(1) (as added
by subsection (a)).
(i) Withholding.--The Secretary of the Treasury (or the
Secretary's delegate) shall modify the tables and procedures
prescribed under section 3402(a) to take into account the
deduction allowed under section 224 (as added by this Act).
(j) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

SEC. 110102. NO TAX ON OVERTIME.

(a) Deduction Allowed.--Part VII of subchapter B of chapter
1, as amended by the preceding provisions of this Act, is
amended by redesignating section 225 as section 226 and by
inserting after section 224 the following new section:

``SEC. 225. QUALIFIED OVERTIME COMPENSATION.

``(a) In General.--There shall be allowed as a deduction an
amount equal to the qualified overtime compensation received
during the taxable year.
``(b) Qualified Overtime Compensation.--
``(1) In general.--For purposes of this section, the
term `qualified overtime compensation' means 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.
``(2) Exclusions.--Such term shall not include--
``(A) any qualified tip (as defined in
section 224(c)), or
``(B) any amount received by an individual
during a taxable year if such individual is a
highly compensated employee (as defined in
section 414(q)(1)) of any employer for the
calendar year in which the taxable year begins,
or receives earned income in excess of the
dollar amount in effect under section
414(q)(1)(B)(i) for such calendar year.
``(c) Social Security Number Required.--
``(1) In general.--No deduction shall be allowed
under this section unless the taxpayer includes on the
return of tax for the taxable year--
``(A) such individual's social security
number (as defined in section 24(h)(7)), and
``(B) if the individual is married, the
social security number of such individual's
spouse.
``(2) Married individuals.--Rules similar to the
rules of section 32(d) shall apply to this section.
``(d) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this section.
``(e) Termination.--No deduction shall be allowed under this
section for any taxable year beginning after December 31,
2028.''.
(b) Deduction Allowed to Non-itemizers.--Section 63(b), as
amended by the preceding provisions of this Act, is amended by
striking ``and'' at the end of paragraph (4), by striking the
period at the end of paragraph (5) and inserting ``and'', and
by adding at the end the following new paragraph:
``(6) the deduction provided in section 225.''.
(c) Requirement to Include Overtime Compensation on W-2.--
Section 6051(a), as amended by the preceding provision of this
Act, is amended by striking ``and'' at the end of paragraph
(17), by striking the period at the end of paragraph (18) and
inserting ``, and'', and by inserting after paragraph (18) the
following new paragraph:
``(19) the total amount of qualified overtime
compensation (as defined in section 225(b)).''.
(d) Omission of Correct Social Security Number Treated as
Mathematical or Clerical Error.--Section 6213(g)(2), as amended
by the preceding provisions of this Act, is amended by striking
``and'' at the end of subparagraph (W), by striking the period
at the end of subparagraph (X) and inserting ``, and'', and by
inserting after subparagraph (X) the following new
subparagraph:
``(Y) an omission of a correct social
security number required under section 225(c)
(relating to deduction for qualified
overtime).''.
(e) Clerical Amendment.--The table of sections for part VII
of subchapter B of chapter 1, as amended by the preceding
provisions of this Act, is amended by redesignating the item
relating to section 225 as an item relating to section 226 and
by inserting after the item relating to section 224 the
following new item:

``Sec. 225. Qualified overtime compensation.''.

(f) Withholding.--The Secretary of the Treasury (or the
Secretary's delegate) shall modify the tables and procedures
prescribed under section 3402(a) to take into account the
deduction allowed under section 225 (as added by this Act).
(g) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

SEC. 110103. ENHANCED DEDUCTION FOR SENIORS.

(a) In General.--Section 63(f) is amended by adding at the
end the following new paragraph:
``(5) Bonus additional amount for seniors.--
``(A) In general.--In the case of any taxable
year beginning after December 31, 2024, and
before January 1, 2029, the dollar amount in
effect under paragraph (1) shall be increased
by $4,000.
``(B) Limitation based on modified adjusted
gross income.--In the case of any taxpayer for
any taxable year, the $4,000 amount in
subparagraph(A) shall be reduced (but not below
zero) by 4 percent of so much of the taxpayer's
modified adjusted gross income as exceeds
$75,000 ($150,000 in the case of a joint
return).
``(C) Modified adjusted gross income.--For
purposes of this paragraph, 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.
``(D) Social security number required.--
``(i) In general.--Subparagraph (A)
shall not apply unless the taxpayer
includes on the return of tax for the
taxable year--
``(I) such individual's
social security number (as
defined in section 24(h)(7)),
and
``(II) if the individual is
married, the social security
number of such individual's
spouse.
``(ii) Married individuals.--Rules
similar to the rules of section 32(d)
shall apply to this section.
``(E) Coordination with inflation
adjustment.--Subsection (c)(4) shall not apply
to any dollar amount contained in this
paragraph.
``(F) Allowance to seniors who elect to
itemize.--In the case of a taxpayer who elects
to itemize deductions for any taxable year
beginning after December 31, 2024, and before
January 1, 2029, there shall be allowed as a
deduction the aggregate increase which would be
determined under subparagraph (A) (determined
after the application of subparagraphs (B),
(D), and (E)) with respect to such taxpayer for
such taxable year if such taxpayer did not so
elect to itemize deductions for such taxable
year.''.
(b) Omission of Correct Social Security Number Treated as
Mathematical or Clerical Error.--Section 6213(g)(2), as amended
by the preceding provisions of this Act, is amended by striking
``and'' at the end of subparagraph (X), by striking the period
at the end of subparagraph (Y) and inserting ``, and'', and by
inserting after subparagraph (Y) the following new
subparagraph:
``(Z) an omission of a correct social
security number required under section
63(f)(5)(D) (relating to bonus additional
amount for seniors).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

SEC. 110104. NO TAX ON CAR LOAN INTEREST.

(a) In General.--Section 163(h) is amended by redesignating
paragraph (4) as paragraph (5) and by inserting after paragraph
(3) the following new paragraph:
``(4) Special rules for taxable years 2024 through
2028 relating to qualified passenger vehicle loan
interest.--
``(A) In general.--In the case of taxable
years beginning after December 31, 2024, and
before January 1, 2029, for purposes of this
subsection the term `personal interest' shall
not include qualified passenger vehicle loan
interest.
``(B) Qualified passenger vehicle loan
interest defined.--
``(i) In general.--For purposes of
this paragraph, the term `qualified
passenger vehicle loan interest' means
any interest which is paid or accrued
during the taxable year on indebtedness
incurred by the taxpayer after December
31, 2024, for the purchase of, and that
is secured by a first lien on, an
applicable passenger vehicle for
personal use.
``(ii) Exceptions.--Such term shall
not include any amount paid or incurred
on any of the following:
``(I) A loan to finance fleet
sales.
``(II) A personal cash loan
secured by a vehicle previously
purchased by the taxpayer.
``(III) A loan incurred for
the purchase of a commercial
vehicle that is not used for
personal purposes.
``(IV) Any lease financing.
``(V) A loan to finance the
purchase of a vehicle with a
salvage title.
``(VI) A loan to finance the
purchase of a vehicle intended
to be used for scrap or parts.
``(C) Limitations.--
``(i) Dollar limit.--The amount of
interest taken into account by a
taxpayer under subparagraph (B) for any
taxable year shall not exceed $10,000.
``(ii) Limitation based on modified
adjusted gross income.--
``(I) In general.--The amount
which is otherwise allowable as
a deduction under subsection
(a) as qualified passenger
vehicle loan interest
(determined without regard to
this clause and after the
application of clause (i))
shall be reduced (but not below
zero) by $200 for each $1,000
(or portion thereof) by which
the modified adjusted gross
income of the taxpayer for the
taxable year exceeds $100,000
($200,000 in the case of a
joint return).
``(II) Modified adjusted
gross income.--For purposes of
this clause, 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.
``(D) Applicable passenger vehicle.--The term
`applicable passenger vehicle' means any
vehicle--
``(i)(I) which is manufactured
primarily for use on public streets,
roads, and highways,
``(II) which has at least 2 wheels,
and
``(III) which is a car, minivan, van,
sport utility vehicle, pickup truck, or
motorcycle,
``(ii) which is an all-terrain
vehicle (designed for use on land), or
``(iii) any trailer, camper, or
vehicle (designed for use on land)
which--
``(I) is designed to provide
temporary living quarters for
recreational, camping, or
seasonal use, and
``(II) is a motor vehicle or
is designed to be towed by, or
affixed to, a motor vehicle.
Such term shall not include any vehicle the
final assembly of which did not occur within
the United States.
``(E) Other definitions and special rules.--
For purposes of this paragraph--
``(i) All-terrain vehicle.--The term
`all-terrain vehicle' means any
motorized vehicle which has 3 or 4
wheels, a seat designed to be straddled
by the operator, and handlebars for
steering control.
``(ii) Final assembly.--For purposes
of subparagraph (D), the term `final
assembly' means the process by which a
manufacturer produces a vehicle at, or
through the use of, a plant, factory,
or other place from which the vehicle
is delivered to a dealer or importer
with all component parts necessary for
the mechanical operation of the vehicle
included with the vehicle, whether or
not the component parts are permanently
installed in or on the vehicle.
``(iii) Treatment of refinancing.--
Indebtedness described in subparagraph
(B) shall include indebtedness that
results from refinancing any
indebtedness described in such
subparagraph, and that is secured by a
first lien on the applicable passenger
vehicle with respect to which the
refinanced indebtedness was incurred,
but only to the extent the amount of
such resulting indebtedness does not
exceed the amount of such refinanced
indebtedness.
``(iv) Related parties.--Indebtedness
described in subparagraph (B) shall not
include any indebtedness owed to a
person who is related (within the
meaning of section 267(b) or 707(b)(1))
to the taxpayer.''.
(b) Deduction Allowed Whether or Not Taxpayer Itemizes.--
Section 62(a) is amended by inserting after paragraph (21) the
following new paragraph:
``(22) Qualified passenger vehicle loan interest.--So
much of the deduction allowed by section 163(a) as is
attributable to the exception under section
163(h)(4)(A).''.
(c) Reporting.--Subpart B of part III of subchapter A of
chapter 61 is amended by adding at the end the following new
section:

``SEC. 6050AA. RETURNS RELATING TO APPLICABLE PASSENGER VEHICLE LOAN
INTEREST RECEIVED IN TRADE OR BUSINESS FROM
INDIVIDUALS.

``(a) In General.--Any person--
``(1) who is engaged in a trade or business, and
``(2) who, in the course of such trade or business,
receives from any individual interest aggregating $600
or more for any calendar year on a specified passenger
vehicle loan,
shall make the return described in subsection (b) with respect
to each individual from whom such interest was received at such
time as the Secretary may provide.
``(b) Form and Manner of Returns.--A return is described in
this subsection if such return--
``(1) is in such form as the Secretary may prescribe,
and
``(2) contains--
``(A) the name and address of the individual
from whom the interest described in subsection
(a)(2) was received,
``(B) the amount of such interest received
for the calendar year,
``(C) the amount of outstanding principal on
the specified passenger vehicle loan as of the
beginning of such calendar year,
``(D) the date of the origination of such
loan,
``(E) the year, make, and model of the
applicable passenger vehicle which secures such
loan (or such other description of such vehicle
as the Secretary may prescribe), and
``(F) such other information as the Secretary
may prescribe.
``(c) Statements to Be Furnished to Individuals With Respect
to Whom Information Is Required.--Every person required to make
a return under subsection (a) shall furnish to each individual
whose name is required to be set forth in such return a written
statement showing--
``(1) the name, address, and phone number of the
information contact of the person required to make such
return, and
``(2) the information described in subparagraphs (B),
(C), (D), and (E) of subsection (b)(2) with respect to
such individual (and such information as is described
in subsection (b)(2)(F) with respect to such individual
as the Secretary may provide for purpoeses of this
subsection).
The written statement required under the preceding sentence
shall be furnished on or before January 31 of the year
following the calendar year for which the return under
subsection (a) was required to be made.
``(d) Definitions.--For purposes of this section--
``(1) In general.--Terms used in this section which
are also used in paragraph (4) of section 163(h) shall
have the same meaning as when used in such paragraph.
``(2) Specified passenger vehicle loan.--The term
`specified passenger vehicle loan' means the
indebtedness described in section 163(h)(4)(B) with
respect to any applicable passenger vehicle.
``(e) 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 to prevent the
duplicate reporting of information under this section.''.
(d) Conforming Amendments.--
(1) Section 56(e)(1)(B) is amended by striking
``section 163(h)(4)'' and inserting ``section
163(h)(5)''.
(2) The table of sections for subpart B of part III
of subchapter A of chapter 61 is amended by adding at
the end the following new item:

``Sec. 6050AA. Returns relating to applicable passenger vehicle loan
interest received in trade or business from individuals.''.

(e) Effective Date.--The amendments made by this section
shall apply to indebtedness incurred after December 31, 2024.

SEC. 110105. ENHANCEMENT OF EMPLOYER-PROVIDED CHILD CARE CREDIT.

(a) Increase of Amount of Qualified Child Care Expenditures
Taken Into Account.--Section 45F(a)(1) is amended by striking
``25 percent'' and inserting ``40 percent (50 percent in the
case of an eligible small business)''.
(b) Increase of Maximum Credit Amount.--Subsection (b) of
section 45F is amended to read as follows:
``(b) Dollar Limitation.--
``(1) In general.--The credit allowable under
subsection (a) for any taxable year shall not exceed
$500,000 ($600,000 in the case of an eligible small
business).
``(2) Inflation adjustment.--In the case of any
taxable year beginning after 2026, the $500,0000 and
$600,000 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.''.
(c) Eligible Small Business.--Section 45F(c) is amended by
adding at the end the following new paragraph:
``(4) Eligible small business.--The term `eligible
small business' means a business that meets the gross
receipts test of section 448(c), determined--
``(A) by substituting `5-taxable-year' for
`3-taxable-year' in paragraph (1) thereof, and
``(B) by substituting `5-year' for `3-year'
each place such term appears in paragraph
(3)(A) thereof.''.
(d) Credit Allowed for Third-party Intermediaries.--Section
45F(c)(1)(A)(iii) is amended by inserting ``, or under a
contract with an intermediate entity that contracts with one or
more qualified child care facilities to provide such child care
services'' before the period at the end.
(e) Treatment of Jointly Owned or Operated Child Care
Facility.--Section 45F(c)(2) is amended by adding at the end
the following new subparagraph:
``(C) Treatment of jointly owned or operated
child care facility.--A facility shall not fail
to be treated as a qualified child care
facility of the taxpayer merely because such
facility is jointly owned or operated by the
taxpayer and other persons.''.
(f) Regulations and Guidance.--Section 45F is amended by
adding at the end the following new subsection:
``(g) Regulations and Guidance.--The Secretary shall issue
such regulations or other guidance as may be necessary to carry
out the purposes of this section, including guidance to carry
out the purposes of paragraphs (1)(A)(iii) and (2)(C) of
subsection (c).''.
(g) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after December 31,
2025.

SEC. 110106. EXTENSION AND ENHANCEMENT OF PAID FAMILY AND MEDICAL LEAVE
CREDIT.

(a) In General.--Section 45S is amended--
(1) in subsection (a)--
(A) by striking paragraph (1) and inserting
the following:
``(1) In general.--For purposes of section 38, in the
case of an eligible employer, the paid family and
medical leave credit is an amount equal to either of
the following (as elected by such employer):
``(A) The applicable percentage of the amount
of wages paid to qualifying employees with
respect to any period in which such employees
are on family and medical leave.
``(B) If such employer has an insurance
policy with regards to the provision of paid
family and medical leave which is in force
during the taxable year, the applicable
percentage of the total amount of premiums paid
or incurred by such employer during such
taxable year with respect to such insurance
policy.'', and
(B) by adding at the end the following:
``(3) Rate of payment determined without regard to
whether leave is taken.--For purposes of determining
the applicable percentage with respect to paragraph
(1)(B), the rate of payment under the insurance policy
shall be determined without regard to whether any
qualifying employees were on family and medical leave
during the taxable year.'',
(2) in subsection (b)(1), by striking ``credit
allowed'' and inserting ``wages taken into account'',
(3) in subsection (c), by striking paragraphs (3) and
(4) and inserting the following:
``(3) Aggregation rule.--
``(A) In general.--Except as provided in
subparagraph (B), all persons which are treated
as a single employer under subsections (b) and
(c) of section 414 shall be treated as a single
employer.
``(B) Exception.--
``(i) In general.--Subparagraph (A)
shall not apply to any person who
establishes to the satisfaction of the
Secretary that such person has a
substantial and legitimate business
reason for failing to provide a written
policy described in paragraph (1) or
(2).
``(ii) Substantial and legitimate
business reason.--For purposes of
clause (i), the term `substantial and
legitimate business reason' shall not
include the operation of a separate
line of business, the rate of wages or
category of jobs for employees (or any
similar basis), or the application of
State or local laws relating to family
and medical leave, but may include the
grouping of employees of a common law
employer.
``(4) Treatment of benefits mandated or paid for by
state or local governments.--For purposes of this
section, any leave which is paid by a State or local
government or required by State or local law--
``(A) except as provided in subparagraph (B),
shall be taken into account in determining the
amount of paid family and medical leave
provided by the employer, and
``(B) shall not be taken into account in
determining the amount of the paid family and
medical leave credit under subsection (a).'',
(4) in subsection (d)--
(A) in paragraph (1), by inserting ``(or, at
the election of the employer, for not less than
6 months)'' after ``1 year or more'', and
(B) in paragraph (2)--
(i) by inserting ``, as determined on
an annualized basis (pro-rata for part-
time employees),'' after
``compensation'', and
(ii) by striking the period at the
end and inserting ``, and'', and
(C) by adding at the end the following:
``(3) is customarily employed for not less than 20
hours per week.'', and
(5) by striking subsection (i).
(b) No Double Benefit.--Section 280C(a) is amended--
(1) by striking ``45S(a)'' and inserting
``45S(a)(1)(A)'', and
(2) by inserting after the first sentence the
following: ``No deduction shall be allowed for that
portion of the premiums paid or incurred for the
taxable year which is equal to that portion of the paid
family and medical leave credit which is determined for
the taxable year under section 45S(a)(1)(B).''
(c) Outreach.--
(1) SBA and resource partners.--Each district office
of the Small Business Administration and each resource
partner of the Small Business Administration, including
small business development centers described in section
21 of the Small Business Act (15 U.S.C. 648)), women's
business centers described in section 29 of such Act
(15 U.S.C. 656), each chapter of the Service Corps of
Retired Executives described in section 8(b)(1)(B) of
such Act (15 U.S.C. 637(b)(1)(B)), and Veteran Business
Outreach Centers described in section 32 of such Act
(15 U.S.C. 657b), shall conduct outreach to relevant
parties regarding the paid family and medical leave
credit under section 45S of the Internal Revenue Code
of 1986, including through--
(A) targeted communications, education,
training, and technical assistance; and
(B) the development of a written paid family
leave policy, as described in paragraphs (1)
and (2) of section 45S(c) of the Internal
Revenue Code of 1986.
(2) Internal revenue service.--The Secretary of the
Treasury (or the Secretary's delegate) shall perform
targeted outreach to employers and other relevant
entities regarding the availability and requirements of
the paid family and medical leave credit under section
45S of the Internal Revenue Code of 1986, including
providing relevant information as part of Internal
Revenue Service communications that are regularly
issued to entities that provide payroll services, tax
professionals, and small businesses.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110107. ENHANCEMENT OF ADOPTION CREDIT.

(a) In General.--Section 23(a) is amended by adding at the
end the following new paragraph:
``(4) Portion of credit refundable.--So much of the
credit allowed under paragraph (1) as does not exceed
$5,000 shall be treated as a credit allowed under
subpart C and not as a credit allowed under this
subpart.''.
(b) Adjustments for Inflation.--Section 23(h) is amended to
read as follows:
``(h) Adjustments for Inflation.--
``(1) In general.--In the case of a taxable year
beginning after December 31, 2002, each of the dollar
amounts in paragraphs (3) and (4) of subsection (a) and
paragraphs (1) and (2)(A)(i) of subsection (b) 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 2001'
for `calendar year 2016' in subparagraph
(A)(ii) thereof.
``(2) Rounding.--If any amount as increased under
paragraph (1) is not a multiple of $10, such amount
shall be rounded to the nearest multiple of $10.
``(3) Special rule for refundable portion.--In the
case of the dollar amount in subsection (a)(4),
paragraph (1) shall be applied--
``(A) by substituting `2025' for `2002' in
the matter preceding subparagraph (A), and
``(B) by substituting `calendar year 2024'
for `calendar year 2001' in subparagraph (B)
thereof.''.
(c) Exclusion of Refundable Portion of Credit From
Carryforward.--Section 23(c)(1) is amended by striking ``credit
allowable under subsection (a)'' and inserting ``portion of the
credit allowable under subsection (a) which is allowed under
this subpart''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

SEC. 110108. RECOGNIZING INDIAN TRIBAL GOVERNMENTS FOR PURPOSES OF
DETERMINING WHETHER A CHILD HAS SPECIAL NEEDS FOR
PURPOSES OF THE ADOPTION CREDIT.

(a) In General.--Section 23(d)(3) is amended--
(1) in subparagraph (A), by inserting ``or Indian
tribal government'' after ``a State'', and
(2) in subparagraph (B), by inserting ``or Indian
tribal government'' after ``such State''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

SEC. 110109. TAX CREDIT FOR CONTRIBUTIONS OF INDIVIDUALS TO SCHOLARSHIP
GRANTING ORGANIZATIONS.

(a) Allowance of Credit.--
(1) 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. QUALIFIED ELEMENTARY AND SECONDARY EDUCATION SCHOLARSHIPS.

``(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 the
aggregate amount of qualified contributions made by the
taxpayer during the taxable year.
``(b) Limitations.--
``(1) In general.--The credit allowed under
subsection (a) to any taxpayer for any taxable year
shall not exceed an amount equal to the greater of--
``(A) 10 percent of the adjusted gross income
of the taxpayer for the taxable year, or
``(B) $5,000.
``(2) Allocation of volume cap.--The credit allowed
under subsection (a) to any taxpayer for any taxable
year shall not exceed the amount of the volume cap
allocated by the Secretary to such taxpayer under
subsection (g) with respect to qualified contributions
made by the taxpayer during the taxable year.
``(3) Reduction based on state credit.--The amount
allowed as a credit under subsection (a) for a taxable
year shall be reduced by the amount allowed as a credit
on any State tax return of the taxpayer for qualified
contributions made by the taxpayer during the taxable
year.
``(c) Definitions.--For purposes of this section--
``(1) Eligible student.--The term `eligible student'
means an individual who--
``(A) is a member of a household with an
income which is not greater than 300 percent of
the area median gross income (as such term is
used in section 42), and
``(B) is eligible to enroll in a public
elementary or secondary school.
``(2) Qualified contribution.--The term `qualified
contribution' means a charitable contribution (as
defined by section 170(c)) to a scholarship granting
organization in the form of cash or marketable
securities.
``(3) Qualified elementary or secondary education
expense.--The term `qualified elementary or secondary
education expense' means the following expenses in
connection with enrollment or attendance at, or for
students enrolled at or attending, an elementary or
secondary public, private, or religious school:
``(A) Tuition.
``(B) Curriculum and curricular materials.
``(C) Books or other instructional materials.
``(D) Online educational materials.
``(E) Tuition for tutoring or educational
classes outside of the home, including at a
tutoring facility, but only if the tutor or
instructor is not related to the student and--
``(i) is licensed as a teacher in any
State,
``(ii) has taught at an eligible
educational institution, or
``(iii) is a subject matter expert in
the relevant subject.
``(F) Fees for a nationally standardized
norm-referenced achievement test, an advanced
placement examination, or any examinations
related to college or university admission.
``(G) Fees for dual enrollment in an
institution of higher education.
``(H) Educational therapies for students with
disabilities provided by a licensed or
accredited practitioner or provider, including
occupational, behavioral, physical, and speech-
language therapies.
Such term shall include expenses for the purposes
described in subparagraphs (A) through (H) in
connection with a homeschool (whether treated as a
homeschool or a private school for purposes of
applicable State law). No amount paid to an elementary
or secondary school shall be considered a qualified
elementary or secondary education expense for the
purposes of this section unless such school
demonstrates that it maintains a policy whereby its
admissions standards do not take into account whether
the student seeking enrollment has a current
individualized education plan, nor takes into account
that the student requires equitable services for a
learning disability, and if a student does have such an
individualized education plan, the school abides by the
plan's terms and provides services outlined therein.
``(4) Scholarship granting organization.--The term
`scholarship granting organization' means any
organization--
``(A) which--
``(i) is described in section
501(c)(3) and exempt from tax under
section 501(a), and
``(ii) is not a private foundation,
``(B) substantially all of the activities of
which are providing scholarships for qualified
elementary or secondary education expenses of
eligible students,
``(C) which prevents the co-mingling of
qualified contributions with other amounts by
maintaining one or more separate accounts
exclusively for qualified contributions, and
``(D) which either--
``(i) meets the requirements of
subsection (d), or
``(ii) pursuant to State law, was
able (as of the date of the enactment
of this section) to receive
contributions that are eligible for a
State tax credit if such contributions
are used by the organization to provide
scholarships to individual elementary
and secondary students, including
scholarships for attending private
schools.
``(d) Requirements for Scholarship Granting Organizations.--
``(1) In general.--An organization meets the
requirements of this subsection if--
``(A) such organization provides scholarships
to 2 or more students, provided that not all
such students attend the same school,
``(B) such organization does not provide
scholarships for any expenses other than
qualified elementary or secondary education
expenses,
``(C) such organization provides a
scholarship to eligible students with a
priority for--
``(i) students awarded a scholarship
the previous school year, and
``(ii) after application of clause
(i), any such students who have a
sibling who was awarded a scholarship
from such organization,
``(D) such organization does not earmark or
set aside contributions for scholarships on
behalf of any particular student,
``(E) such organization takes appropriate
steps to verify the annual household income and
family size of eligible students to whom it
awards scholarships, and limits them to a
member of a household for which the income does
not exceed the amount established under
subsection (c)(1)(A),
``(F) such organization--
``(i) obtains from an independent
certified public accountant annual
financial and compliance audits, and
``(ii) certifies to the Secretary (at
such time, and in such form and manner,
as the Secretary may prescribe) that
the audit described in clause (i) has
been completed, and
``(G) no officer or board member of such
organization has been convicted of a felony.
``(2) Income verification.--For purposes of paragraph
(1)(E), review of all of the following (as applicable)
shall be treated as satisfying the requirement to take
appropriate steps to verify annual household income:
``(A) Federal and State income tax returns or
tax return transcripts with applicable
schedules for the taxable year prior to
application.
``(B) Income reporting statements for tax
purposes or wage and income transcripts from
the Internal Revenue Service.
``(C) Notarized income verification letter
from employers.
``(D) Unemployment or workers compensation
statements.
``(E) Budget letters regarding public
assistance payments and Supplemental Nutrition
Assistance Program (SNAP) payments including a
list of household members.
``(3) Independent certified public accountant.--For
purposes of paragraph (1)(F), the term `independent
certified public accountant' means, with respect to an
organization, a certified public accountant who is not
a person described in section 465(b)(3)(A) with respect
to such organization or any employee of such
organization.
``(4) Prohibition on self-dealing.--
``(A) In general.--A scholarship granting
organization may not award a scholarship to any
disqualified person.
``(B) Disqualified person.--For purposes of
this paragraph, a disqualified person shall be
determined pursuant to rules similar to the
rules of section 4946.
``(e) Denial of Double Benefit.--Any qualified contribution
for which a credit is allowed under this section shall not be
taken into account as a charitable contribution for purposes of
section 170.
``(f) Carryforward of Unused Credit.--
``(1) In general.--If the credit allowable under
subsection (a) for any taxable year exceeds the
limitation imposed by section 26(a) for such taxable
year reduced by the sum of the credits allowable under
this subpart (other than this section, section 23, and
section 25D), such excess shall be carried to the
succeeding taxable year and added to the credit
allowable under subsection (a) for such taxable year.
``(2) Limitation.--No credit may be carried forward
under this subsection to any taxable year following the
fifth taxable year after the taxable year in which the
credit arose. For purposes of the preceding sentence,
credits shall be treated as used on a first-in first-
out basis.
``(g) Volume Cap.--
``(1) In general.--The volume cap applicable under
this section shall be $5,000,000,000 for each of
calendar years 2026 through 2029, and zero for calendar
years thereafter. Such amount shall be allocated by the
Secretary as provided in paragraph (2) to taxpayers
with respect to qualified contributions made by such
taxpayers, except that 10 percent of such amount shall
be divided evenly among the States, and shall be
available with respect to individuals residing in such
States.
``(2) First-come, first-serve.--For purposes of
applying the volume cap under this section, such volume
cap for any calendar year shall be allocated by the
Secretary on a first-come, first-serve basis, as
determined based on the time (during such calendar
year) at which the taxpayer made the qualified
contribution with respect to which the allocation is
made. The Secretary shall not make any allocation of
volume cap for any calendar year after December 31 of
such calendar year.
``(3) Real-time information.--For purposes of this
section, the Secretary shall develop a system to track
the amount of qualified contributions made during the
calendar year for which a credit may be claimed under
this section, with such information to be updated in
real time.
``(4) Annual increases.--
``(A) In general.--In the case of the
calendar year after a high-use calendar year,
the dollar amount otherwise in effect under
paragraph (1) for such calendar year shall be
equal to 105 percent of the dollar amount in
effect for such high-use calendar year.
``(B) High-use calendar year.--For purposes
of this subsection, the term `high-use calendar
year' means any calendar year for which 90
percent or more of the volume cap in effect for
such calendar year under paragraph (1) is
allocated to taxpayers.
``(C) Prevention of decreases in annual
volume cap.--The volume cap in effect under
paragraph (1) for any calendar year shall not
be less than the volume cap in effect under
such paragraph for the preceding calendar year.
``(D) Publication of annual volume cap.--The
Secretary shall make publicly available the
dollar amount of the volume cap in effect under
paragraph (1) for each calendar year.
``(5) States.--For purposes of this subsection, the
term `State' includes the District of Columbia.''.
(2) Conforming amendments.--
(A) Section 25(e)(1)(C) is amended by
striking ``and 25D'' and inserting ``25D, and
25F''.
(B) 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. Qualified elementary and secondary education
scholarships.''.
(b) Failure of Scholarship Granting Organizations to Make
Distributions.--
(1) In general.--Chapter 42 is amended by adding at
the end the following new subchapter:

``Subchapter I--Scholarship Granting Organizations

``Sec. 4969. Failure to distribute receipts.

``SEC. 4969. FAILURE TO DISTRIBUTE RECEIPTS.

``(a) In General.--In the case of any scholarship granting
organization (as defined in section 25F) which has been
determined by the Secretary to have failed to satisfy the
requirement under subsection (b) for any taxable year, any
contribution made to such organization during the first taxable
year beginning after the date of such determination shall not
be treated as a qualified contribution (as defined in section
25F(c)(2)) for purposes of section 25F.
``(b) Requirement.--The requirement described in this
subsection is that the amount of receipts of the scholarship
granting organization for the taxable year which are
distributed before the distribution deadline with respect to
such receipts shall not be less than the required distribution
amount with respect to such taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Required distribution amount.--
``(A) In general.--The required distribution
amount with respect to a taxable year is the
amount equal to 100 percent of the total
receipts of the scholarship granting
organization for such taxable year--
``(i) reduced by the sum of such
receipts that are retained for
reasonable administrative expenses for
the taxable year or are carried to the
succeeding taxable year under
subparagraph (C), and
``(ii) increased by the amount of the
carryover under subparagraph (C) from
the preceding taxable year.
``(B) Safe harbor for reasonable
administrative expenses.--For purposes of
subparagraph (A)(i), if the percentage of total
receipts of a scholarship granting organization
for a taxable year which are used for
administrative purposes is equal to or less
than 10 percent, such expenses shall be deemed
to be reasonable for purposes of such
subparagraph.
``(C) Carryover.--With respect to the amount
of the total receipts of a scholarship granting
organization with respect to any taxable year,
an amount not greater than 15 percent of such
amount may, at the election of such
organization, be carried to the succeeding
taxable year.
``(2) Distributions.--The term `distribution'
includes amounts which are formally committed but not
distributed. A formal commitment described in the
preceding sentence may include contributions set aside
for eligible students for more than one year.
``(3) Distribution deadline.--The distribution
deadline with respect to receipts for a taxable year is
the first day of the third taxable year following the
taxable year in which such receipts are received by the
scholarship granting organization.''.
(2) Clerical amendment.--The table of subchapters for
chapter 42 is amended by adding at the end the
following new item:

``subchapter i--scholarship granting organizations''.

SEC. 110110. ADDITIONAL ELEMENTARY, SECONDARY, AND HOME SCHOOL EXPENSES
TREATED AS QUALIFIED HIGHER EDUCATION EXPENSES FOR
PURPOSES OF 529 ACCOUNTS.

(a) In General.--Section 529(c)(7) is amended to read as
follows:
``(7) Treatment of elementary and secondary
tuition.--Any reference in this section to the term
`qualified higher education expense' shall include a
reference to the following expenses in connection with
enrollment or attendance at, or for students enrolled
at or attending, an elementary or secondary public,
private, or religious school:
``(A) Tuition.
``(B) Curriculum and curricular materials.
``(C) Books or other instructional materials.
``(D) Online educational materials.
``(E) Tuition for tutoring or educational
classes outside of the home, including at a
tutoring facility, but only if the tutor or
instructor is not related to the student and--
``(i) is licensed as a teacher in any
State,
``(ii) has taught at an eligible
educational institution, or
``(iii) is a subject matter expert in
the relevant subject.
``(F) Fees for a nationally standardized
norm-referenced achievement test, an advanced
placement examination, or any examinations
related to college or university admission.
``(G) Fees for dual enrollment in an
institution of higher education.
``(H) Educational therapies for students with
disabilities provided by a licensed or
accredited practitioner or provider, including
occupational, behavioral, physical, and speech-
language therapies.
Such term shall include expenses for the purposes
described in subparagraphs (A) through (H) in
connection with a homeschool (whether treated as a
homeschool or a private school for purposes of
applicable State law).''.
(b) Effective Date.--The amendment made by this section shall
apply to distributions made after the date of the enactment of
this Act.

SEC. 110111. CERTAIN POSTSECONDARY CREDENTIALING EXPENSES TREATED AS
QUALIFIED HIGHER EDUCATION EXPENSES FOR PURPOSES OF
529 ACCOUNTS.

(a) In General.--Section 529(e)(3) is amended by adding at
the end the following new subparagraph:
``(C) Certain postsecondary credentialing
expenses.--The term `qualified higher education
expenses' includes qualified postsecondary
credentialing expenses (as defined in
subsection (f)).''.
(b) Qualified Postsecondary Credentialing Expenses.--Section
529 is amended by redesignating subsection (f) as subsection
(g) and by inserting after subsection (e) the following new
subsection:
``(f) Qualified Postsecondary Credentialing Expenses.--For
purposes of this section--
``(1) In general.--The term `qualified postsecondary
credentialing expenses' means--
``(A) tuition, fees, books, supplies, and
equipment required for the enrollment or
attendance of a designated beneficiary in a
recognized postsecondary credential program, or
any other expense incurred in connection with
enrollment in or attendance at a recognized
postsecondary credential program if such
expense would, if incurred in connection with
enrollment or attendance at an eligible
educational institution, be covered under
subsection (e)(3)(A),
``(B) fees for testing if such testing is
required to obtain or maintain a recognized
postsecondary credential, and
``(C) fees for continuing education if such
education is required to maintain a recognized
postsecondary credential.
``(2) Recognized postsecondary credential program.--
The term `recognized postsecondary credential program'
means any program to obtain a recognized postsecondary
credential if--
``(A) such program is included on a State
list prepared under section 122(d) of the
Workforce Innovation and Opportunity Act (29
U.S.C. 3152(d)),
``(B) such program is listed in the WEAMS
Public directory (or successor directory)
maintained by the Department of Veterans
Affairs,
``(C) an examination (developed or
administered by an organization widely
recognized as providing reputable credentials
in the occupation) is required to obtain or
maintain such credential and such organization
recognizes such program as providing training
or education which prepares individuals to take
such examination, or
``(D) such program is identified by the
Secretary, after consultation with the
Secretary of Labor, as being a reputable
program for obtaining a recognized
postsecondary credential for purposes of this
subsection.
``(3) Recognized postsecondary credential.--The term
`recognized postsecondary credential' means--
``(A) any postsecondary employment credential
that is industry recognized, including--
``(i) any postsecondary employment
credential issued by a program that is
accredited by the Institute for
Credentialing Excellence, the National
Commission on Certifying Agencies, or
the American National Standards
Institute,
``(ii) any postsecondary employment
credential that is included in the
Credentialing Opportunities On-Line
(COOL) directory of credentialing
programs (or successor directory)
maintained by the Department of Defense
or by any branch of the Armed Services,
and
``(iii) any postsecondary employment
credential identified for purposes of
this clause by the Secretary, after
consultation with the Secretary of
Labor, as being industry recognized,
``(B) any certificate of completion of an
apprenticeship that is registered and certified
with the Secretary of Labor under the National
Apprenticeship Act (29 U.S.C. 50),
``(C) any occupational or professional
license issued or recognized by a State or the
Federal Government (and any certification that
satisfies a condition for obtaining such a
license), and
``(D) any recognized postsecondary credential
as defined in section 3 of the Workforce
Innovation and Opportunity Act (29 U.S.C.
3102).''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions made after the date of the
enactment of this Act.

SEC. 110112. REINSTATEMENT OF PARTIAL DEDUCTION FOR CHARITABLE
CONTRIBUTIONS OF INDIVIDUALS WHO DO NOT ELECT TO
ITEMIZE.

(a) In General.--Section 170(p) is amended--
(1) by striking ``$300 ($600'' and inserting ``$150
($300'', and
(2) by striking ``in 2021'' and inserting ``after
December 31, 2024, and before January 1, 2029''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

SEC. 110113. EXCLUSION FOR CERTAIN EMPLOYER PAYMENTS OF STUDENT LOANS
UNDER EDUCATIONAL ASSISTANCE PROGRAMS MADE
PERMANENT AND ADJUSTED FOR INFLATION.

(a) In General.--Section 127(c)(1)(B) is amended by striking
``in the case of payments made before January 1, 2026,''.
(b) Inflation Adjustment.--Section 127 is amended--
(1) by redesignating subsection (d) as subsection
(e), and
(2) by inserting after subsection (c) the following
new subsection:
``(d) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning after 2026, both of the $5,250 amounts in
subsection (a)(2) 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.
``(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) Effective Date.--The amendment made by this section shall
apply to payments made after December 31, 2025.

SEC. 110114. EXTENSION OF RULES FOR TREATMENT OF CERTAIN DISASTER-
RELATED PERSONAL CASUALTY LOSSES.

For purposes of applying section 304(b) of the Taxpayer
Certainty and Disaster Tax Relief Act of 2020 (division EE of
Public Law 116-260), section 301 of such Act shall be applied
by substituting the date of the enactment of this section for
``the date of the enactment of this Act'' each place it
appears.

SEC. 110115. MAGA ACCOUNTS.

(a) In General.--Subchapter F of chapter 1 is amended by
adding at the end the following new part:

``PART IX--MAGA ACCOUNTS

``SEC. 530A. MAGA ACCOUNTS.

``(a) General Rule.--A MAGA account shall be exempt from
taxation under this subtitle. Notwithstanding the preceding
sentence, such account shall be subject to the taxes imposed by
section 511 (relating to imposition of tax on unrelated
business income of charitable organizations).
``(b) MAGA Account.--For purposes of this section--
``(1) In general.--The term `money account for growth
and advancement' or `MAGA account' means a trust
created or organized in the United States for the
exclusive benefit of an individual and which is
designated (in such manner as the Secretary shall
prescribe) at the time of the establishment of the
trust as a MAGA account, but only if the written
governing instrument creating the trust meets the
following requirements:
``(A) The individual establishing the account
shall provide to the trustee the social
security number of such individual and of the
account beneficiary.
``(B) Except in the case of a qualified
rollover contribution described in subsection
(e), no contribution will be accepted--
``(i) before January 1, 2026,
``(ii) unless it is in cash,
``(iii) unless the account
beneficiary has not attained age 18,
and
``(iv) if such contribution would
result in aggregate contributions for
the taxable year exceeding the
contribution limit specified in
subsection (c)(1).
``(C) No distribution (other than a
distribution of a qualified rollover
contribution) will be allowed--
``(i) before the date on which the
account beneficiary attains age 18, or
``(ii) in the case of such an account
the account beneficiary of which has
not attained age 25, if the aggregate
distributions from such account exceeds
the amount that is \1/2\ the cash
equivalent value of the account on the
date on which the account beneficiary
attains age 18.
``(D) The account beneficiary has not
attained age 8 on the date of the establishment
of the account.
``(E) The trustee is a bank (as defined in
section 408(n)) or another person who
demonstrates to the satisfaction of the
Secretary that the manner in which that person
will administer the trust will be consistent
with the requirements of this section or who
has so demonstrated with respect to any
individual retirement plan.
``(F) The interest of an individual in the
balance of his account is nonforfeitable.
``(G) The assets of the trust shall not be
commingled with other property except in a
common trust fund or common investment fund.
``(H) No part of the trust funds will be
invested in any asset other than eligible
investments.
``(2) Eligible investments.--The term `eligible
investments' means stock of a regulated investment
company (within the meaning of section 851) which--
``(A) tracks a well-established index of
United States equities (or which invests in an
equivalent diversified portfolio of United
States equities),
``(B) does not use leverage,
``(C) minimizes fees and expenses, and
``(D) meets such other criteria as the
Secretary determines appropriate for purposes
of this section.
``(3) Account beneficiary.--The term `account
beneficiary' means the individual on whose behalf the
MAGA account was established.
``(c) Treatment of Contributions.--
``(1) Contribution limit.--The contribution limit for
any taxable year is $5,000.
``(2) Contributions from tax exempt sources and
rollover contributions.--The amount contributed to a
MAGA account for purposes of paragraph (1) shall be
determined without regard to--
``(A) a qualified rollover contribution,
``(B) any contribution from the Federal
Government or any State, local, or tribal
government, or
``(C) any contribution made through the
program established under subsection (l).
``(3) Cost-of-living adjustment.--
``(A) In general.--In the case of any taxable
year beginning in a calendar year after 2026,
the $5,000 amount under paragraph (1) 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, determined by
substituting `calendar year 2025' for
`calendar year 2016' in subparagraph
(A)(ii) thereof.
``(B) Rounding.--If any increase under
subparagraph (A) is not a multiple of $100,
such amount shall be rounded to the next lower
multiple of $100.
``(d) Distributions.--
``(1) Amounts allocable to investment in the
contract.--A distribution from a MAGA account of an
amount allocable to the investment in the contract
shall not be includible in the gross income of the
distributee.
``(2) Amounts allocable to income on the contract
used for qualified expenses.--A distribution from a
MAGA account of an amount allocable to income on the
contract and which is used exclusively to pay for
qualified expenses shall be includible in net capital
gain of the distributee under section 1(h)(12).
``(3) Amounts includible in gross income.--Any
distribution from a MAGA account which is not described
in paragraph (1) or (2) shall be includible in the
gross income of the distributee.
``(4) Qualified expenses.--For purposes of this
subsection, the term `qualified expenses' means any of
the following expenses paid or incurred for the benefit
of the account beneficiary:
``(A) Qualified higher education expenses (as
defined in section 529(e)(3)) determined
without regard to section 529(c)(7).
``(B) Qualified post-secondary credentialing
expenses (as defined in section 529(f)).
``(C) Under regulations provided by the
Secretary, amounts paid or incurred with
respect to any small businesses for which the
beneficiary has obtained any small business
loan, small farm loan, or similar loan.
``(D) Any amount used for the purchase (as
defined in section 36(c)(3)) of the principal
residence (as used in section 121) of the
account beneficiary if such account beneficiary
is a first-time homebuyer (as defined in
section 36(c)(1)) with respect to such
purchase.
``(5) Exceptions.--Paragraphs (2) and (3) shall not
apply to any distribution which is a qualified rollover
contribution.
``(6) Additional tax on certain distributions.--In
the case of a distributee who has not attained age 30,
the tax imposed by this chapter on the account
beneficiary for any taxable year in which there is a
distribution from a MAGA account of such beneficiary
which is includible in gross income under paragraph (3)
shall be increased by 10 percent of the amount which is
so includible.
``(e) Qualified Rollover Contribution.--For purposes of this
section, the term `qualified rollover contribution' means an
amount which is paid in a direct trustee-to-trustee transfer
from a MAGA account maintained for the benefit of the account
beneficiary to a MAGA account maintained for such beneficiary.
``(f) Treatment After Death of Account Beneficiary.--Rules
similar to the rules of section 223(f)(8) shall apply for
purposes of this section.
``(g) Determinations of Aggregate Distributions and
Investment in Contract in the Case of Certain Rollover
Contributions.--In the case of a qualified rollover
contribution which is described in subsection (e)(2), any
determination required under this section of the amount of the
investment of the contract or of aggregate distributions from
the MAGA account shall be determined with respect to the
aggregate of such amounts for all MAGA accounts of the same
account beneficiary.
``(h) Custodial Accounts.--For purposes of this section, a
custodial account shall be treated as a trust under this
section if--
``(1) the custodial account would, except for the
fact that it is not a trust, constitute a trust which
meets the requirements of subsection (b)(1), and
``(2) the assets of such account are held by a bank
(as defined in section 408(n)) or another person who
demonstrates, to the satisfaction of the Secretary,
that the manner in which he will administer the account
will be consistent with the requirements of this
section.
For purposes of this title, in the case of a custodial account
treated as a trust by reason of the preceding sentence, the
person holding the assets of such account shall be treated as
the trustee thereof.
``(i) Termination.--
``(1) Age 31.--Upon the date on which the account
beneficiary attains age 31, a MAGA account shall cease
to be a MAGA account and the amount in such account
shall be treated as distributed for purposes of
subsection (d).
``(2) Multiple accounts of one beneficiary.--
``(A) In general.--In the case of any
duplicate MAGA account of any account
beneficiary other than a MAGA account which is
established by the deposit through a qualified
rollover contribution of the entire amount of
another MAGA account of the account
beneficiary--
``(i) such duplicate MAGA account
shall cease to be a MAGA account and
the amount in such account shall be
treated as distributed for purposes of
subsection (d), and
``(ii) there is imposed an excise tax
on the account beneficiary in an amount
equal to so much of cash value of the
account as is allocable to income on
the contract.
``(B) Withholding requirement.--In the case
of an account terminated under subparagraph
(A), the trustee shall deduct and withhold upon
the amount to be distributed the amount in
excess described in subparagraph (A)(ii).
``(C) Notification.--The Secretary, upon
determining that a duplicate account exists,
shall provide a notice to the account
beneficiary of such duplicate account (and the
account custodian, in the case of a custodial
account) and to each trustee of any MAGA
account of the account beneficiary of such
duplicate account which identifies each MAGA
account of such beneficiary and the trustee of
each such account.
``(D) Duplicate account.--For purposes of
this paragraph, the term `duplicate account'
means--
``(i) in the case of an account
beneficiary for the benefit of whom an
account was established by the
Secretary under section 6434, any other
MAGA account of such account
beneficiary, or
``(ii) in the case of any other
account beneficiary, any MAGA account
established after the first MAGA
account established for the benefit of
such account beneficiary.
``(j) Investment in the Contract.--For purposes of this
section, rules similar to the rules applied to a qualified
tuition program (as defined in section 529(b)) under section
72(e)(9) shall apply for purposes of determining the investment
in the contract, except that such amount shall be determined
without regard to any contribution which is described in
subsection (c)(2).
``(k) Reports.--The trustee of a MAGA account shall make such
reports regarding such account to the Secretary and to the
beneficiary of the account with respect to contributions,
distributions, the amount of investment in the contract, and
such other matters as the Secretary may require. The reports
required by this subsection shall be filed at such time and in
such manner and furnished to such individuals at such time and
in such manner as may be required.
``(l) Contributions to Predominately Unrelated Children.--The
Secretary shall establish a program through which contributions
may be made to the MAGA accounts of a large group of account
beneficiaries if--
``(1) the contribution is made by any person
described in any paragraph of section 501(c) and exempt
from taxation under section 501(a),
``(2) such accounts are selected on the basis of the
location of the residence of the account beneficiaries,
the school district in which such beneficiaries attend
school, or another basis the Secretary determines
appropriate, and
``(3) all individuals who are account beneficiaries
of such an account who meet the selected criteria
receive an equal portion of the contribution.''.
(b) Distribution Taxed at Same Rate as Net Capital Gains.--
Section 1(h) is amended by adding at the end the following new
paragraph:
``(12) Distributions from maga account taxed as net
capital gain.--For purposes of this subsection, the
term `net capital gain' means the net capital gain
(determined without regard to this paragraph) increased
by the amount includible in net capital gain under this
paragraph by reason of section 530A(d)(2).''.
(c) Tax on Excess Contributions.--
(1) In general.--Section 4973(a) is amended by
striking ``or'' at the end of paragraph (5), by
inserting ``or'' at the end of paragraph (6), and by
inserting after paragraph (6) the following new
paragraph:
``(7) a MAGA account (as defined in section
530A(b)),''.
(2) Excess contribution.--Section 4973 is amended by
adding at the end the following new subsection:
``(i) Excess Contributions to a MAGA Account.--For purposes
of this section, in the case of MAGA accounts (within the
meaning of section 530A), the term `excess contributions' means
the sum of--
``(1) the amount by which the amount contributed for
the calendar year to such account (other than qualified
rollover contributions (as defined in section 530A(e)))
exceeds the contribution limit under section 530A(c)(1)
(determined without regard to contributions described
in section 530A(c)(2)), and
``(2) the amount determined under this subsection for
the preceding calendar year, reduced by the excess (if
any) of the maximum amount allowable as a contribution
under section 530A(c)(1) (as so determined) for the
calendar year over the amount contributed to the
account for the calendar year (other than qualified
rollover contributions (as so defined)).''.
(d) Disclosure of Return Information to Facilitate Certain
Contributions.--Section 6103(l) is amended by adding at the end
the following new paragraph:
``(23) Disclosure of return information to enable
certain contributions to maga accounts.--Upon written
request signed by the head of the bureau or office of
the Department of the Treasury requesting the
inspection or disclosure, the Secretary may disclose
the following return information with respect to a MAGA
account (as defined in section 503A(b)) to officers and
employees of such bureau or office to the extent that
such disclosure is necessary to carry out section
530A(l):
``(A) Information necessary to identify the
account holders in a particular class of
beneficiaries identified by a donor as the
intended recipients.
``(B) The name, address, and social security
number of a beneficiary.
``(C) The account custodian and the address
of such custodian.
``(D) The account number.
``(E) The routing number.
``(F) To the extent determined by the
Secretary in regulations, such other return
information as the Secretary determines
necessary to ensure proper routing of funds
Return information disclosed under this paragraph may
only be used to identify account holders in a
particular class of beneficiaries or for the proper
routing of funds and may not be redisclosed by the
Secretary.''.
(e) Failure to Provide Reports on MAGA Accounts.--Section
6693(a)(2) is amended by striking ``and'' at the end of
subparagraph (E), by striking the period at the end of
subparagraph (F) and inserting ``, and'', and by adding at the
end the following new subparagraph:
``(G) section 530A(h) (relating to MAGA
accounts).''.
(f) Conforming Amendment.--The table of parts for subchapter
F of chapter 1 is amended by adding at the end the following
new item:

``Part IX. MAGA Accounts''.

(g) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

SEC. 110116. MAGA ACCOUNTS CONTRIBUTION PILOT PROGRAM.

(a) In General.--Subchapter B of chapter 65 is amended by
adding at the end the following new section:

``SEC. 6434. MAGA ACCOUNTS CONTRIBUTION PILOT PROGRAM.

``(a) In General.--In the case of any taxpayer with respect
to whom an eligible individual is a qualifying child, there
shall be allowed a one-time credit of $1,000 with respect to
each such eligible individual who is a qualifying child of such
taxpayer which shall be payable by the Secretary only to the
MAGA account with respect to which such eligible individual is
the account beneficiary.
``(b) Account Established by Secretary.--
``(1) In general.--In the case of any eligible
individual that the Secretary determines is not the
account beneficiary of any MAGA account as of the
qualifying date of such eligible individual, the
Secretary shall establish an account for the benefit of
such eligible individual.
``(2) Qualifying date.--For purposes of paragraph
(1), the term `qualifying date' means, with respect to
an eligible individual, the first date on which a
return of tax is filed by an individual with respect to
whom such eligible individual is a qualifying child
with respect to the taxable year to which such return
relates.
``(3) Notification.--In the case of any eligible
individual for the benefit of whom the Secretary
establishes an account under paragraph (1), the
Secretary shall--
``(A) notify any individual with respect to
whom such eligible individual is a qualifying
child for the taxable year described in
paragraph (2) of the establishment of such
account, and
``(B) shall provide an opportunity to such
individual to elect to decline the application
of this subsection to such qualifying child.
``(4) Determination of default trustee.--For purposes
of selecting a trustee for an account established under
paragraph (1), the Secretary shall take into account--
``(A) the history of reliability and
regulatory compliance of such trustee,
``(B) the customer service experience of such
trustee,
``(C) the costs imposed by such trustee on
the account or account beneficiary, and
``(D) to the extent practicable, the
preferences of any individual described in
paragraph (3)(A) with respect to such eligible
individual.
``(c) Eligible Individual.--For purposes of subsection (a),
the term eligible individual means an individual--
``(1) who is born after December 31, 2024, and before
January 1, 2029, and
``(2) who is a United States citizen at birth.
``(d) Social Security Number Required.--
``(1) In general.--No credit shall be allowed under
subsection (a) to a taxpayer unless such taxpayer
includes on the return of tax for the taxable year--
``(A) such individual's social security
number,
``(B) if such individual is married, the
social security number of such individual's
spouse, and
``(C) the social security number of the
eligible individual with respect to whom such
credit is allowed.
``(2) Social security number defined.--For purposes
of paragraph (1), the term `social security number'
shall have the meaning given such term in section
24(h)(7).
``(e) Definitions.--For purposes of this section--
``(1) Qualifying child.--The term qualifying child
has the meaning given such term in section 152(c).
``(2) MAGA account; account beneficiary.--The terms
`MAGA account' and `account beneficiary' have the
meaning given such terms in section 530A(b).''.
(b) Penalty for Negligent Claim or Fraudulent Claim.--Part I
of subchapter A of chapter 68 of subtitle F is amended by
adding at the end the following new section:

``SEC. 6659. IMPROPER CLAIM FOR MAGA ACCOUNT CONTRIBUTION PILOT PROGRAM
CREDIT.

``(a) In General.--In the case of any taxpayer that makes an
excessive claim for a credit under section 6434--
``(1) if such excess is a result of negligence or
disregard of the rules or regulations, there shall be
imposed a penalty of $500, or
``(2) if such excess is a result of fraud, there
shall be imposed a penalty of $1,000.
``(b) Definitions.--The terms `negligence' and `disregard'
have the same meaning as when such terms are used in section
6662.''.
(c) Omission of Correct Social Security Number Treated
Mathematical or Clerical Error.--Section 6213(g)(2), as amended
by the preceding provisions of this Act, 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
inserting after subparagraph (Z) the following new
subparagraph:
``(AA) an omission of a correct social
security number required under section
6434(d)(1) (relating to the MAGA accounts
contribution pilot program).''.
(d) Clerical Amendments.--
(1) The table of sections for subchapter B of chapter
65 is amended by adding at the end the following new
item:

``Sec. 6434. MAGA accounts contribution pilot program.''.

(2) The table of sections for part I of subchapter A
of chapter 68 of subtitle F is amended by inserting
after the item relating to section 6658 the following
new item:

``Sec. 6659. Improper claim for MAGA account contribution pilot program
credit.''.

(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2024.

PART 3--INVESTING IN HEALTH OF AMERICAN FAMILIES AND WORKERS

SEC. 110201. TREATMENT OF HEALTH REIMBURSEMENT ARRANGEMENTS INTEGRATED
WITH INDIVIDUAL MARKET COVERAGE.

(a) In General.--Section 9815(b) is amended--
(1) by striking ``Exception.--Notwithstanding
subsection (a)'' and inserting the following:
``Exceptions.--
``(1) Self-insured group health plans.--
Notwithstanding subsection (a)'', and
(2) by adding at the end the following new paragraph:
``(2) Custom health option and individual care
expense arrangements.--
``(A) In general.--For purposes of this
subchapter, a custom health option and
individual care expense arrangement shall be
treated as meeting the requirements of section
9802 and sections 2705, 2711, 2713, and 2715 of
title XXVII of the Public Health Service Act.
``(B) Custom health option and individual
care expense arrangements defined.--For
purposes of this section, the term `custom
health option and individual care expense
arrangement' means a health reimbursement
arrangement--
``(i) which is an employer-provided
group health plan funded solely by
employer contributions to provide
payments or reimbursements for medical
care subject to a maximum fixed dollar
amount for a period,
``(ii) under which such payments or
reimbursements may only be made for
medical care provided during periods
during which the individual is
covered--
``(I) under individual health
insurance coverage (other than
coverage that consists solely
of excepted benefits), or
``(II) under part A and B of
title XVIII of the Social
Security Act or part C of such
title,
``(iii) which meets the
nondiscrimination requirements of
subparagraph (C),
``(iv) which meets the substantiation
requirements of subparagraph (D), and
``(v) which meets the notice
requirements of subparagraph (E).
``(C) Nondiscrimination.--
``(i) In general.--An arrangement
meets the requirements of this
subparagraph if an employer offering
such arrangement to an employee within
a specified class of employee--
``(I) offers such arrangement
to all employees within such
specified class on the same
terms, and
``(II) does not offer any
other group health plan (other
than an account-based group
health plan or a group health
plan that consists solely of
excepted benefits) to any
employees within such specified
class.
In the case of an employer who offers a
group health plan provided through
health insurance coverage in the small
group market (that is subject to
section 2701 of the Public Health
Service Act) to all employees within
such specified class, subclause (II)
shall not apply to such group health
plan.
``(ii) Specified class of employee.--
For purposes of this subparagraph, any
of the following may be designated as a
specified class of employee:
``(I) Full-time employees.
``(II) Part-time employees.
``(III) Salaried employees.
``(IV) Non-salaried
employees.
``(V) Employees whose primary
site of employment is in the
same rating area.
``(VI) Employees who are
included in a unit of employees
covered under a collective
bargaining agreement to which
the employer is subject
(determined under rules similar
to the rules of section
105(h)).
``(VII) Employees who have
not met a group health plan, or
health insurance issuer
offering group health insurance
coverage, waiting period
requirement that satisfies
section 2708 of the Public
Health Service Act.
``(VIII) Seasonal employees.
``(IX) Employees who are
nonresident aliens and who
receive no earned income
(within the meaning of section
911(d)(2)) from the employer
which constitutes income from
sources within the United
States (within the meaning of
section 861(a)(3)).
``(X) Such other classes of
employees as the Secretary may
designate.
An employer may designate (in such
manner as is prescribed by the
Secretary) two or more of the classes
described in the preceding subclauses
as the specified class of employees to
which the arrangement is offered for
purposes of applying this subparagraph.
``(iii) Special rule for new hires.--
An employer may designate prospectively
so much of a specified class of
employees as are hired after a date set
by the employer. Such subclass of
employees shall be treated as the
specified class for purposes of
applying clause (i).
``(iv) Rules for determining type of
employee.--For purposes for clause
(ii), any determination of full-time,
part-time, or seasonal employment
status shall be made under rules
similar to the rules of section 105(h)
or 4980H, whichever the employer elects
for the plan year. Such election shall
apply with respect to all employees of
the employer for the plan year.
``(v) Permitted variation.--For
purposes of clause (i)(I), an
arrangement shall not fail to be
treated as provided on the same terms
within a specified class merely because
the maximum dollar amount of payments
and reimbursements which may be made
under the terms of the arrangement for
the year with respect to each employee
within such class--
``(I) increases as additional
dependents of the employee are
covered under the arrangement,
and
``(II) increases with respect
to a participant as the age of
the participant increases, but
not in excess of an amount
equal to 300 percent of the
lowest maximum dollar amount
with respect to such a
participant determined without
regard to age.
``(D) Substantiation requirements.--An
arrangement meets the requirements of this
subparagraph if the arrangement has reasonable
procedures to substantiate--
``(i) that the participant and any
dependents are, or will be, enrolled in
coverage described in subparagraph
(B)(ii) as of the beginning of the plan
year of the arrangement (or as of the
beginning of coverage under the
arrangement in the case of an employee
who first becomes eligible to
participate in the arrangement after
the date notice is given with respect
to the plan under subparagraph (E)
(determined without regard to clause
(iii) thereof), and
``(ii) any requests made for payment
or reimbursement of medical care under
the arrangement and that the
participant and any dependents remain
so enrolled.
``(E) Notice.--
``(i) In general.--Except as provided
in clause (iii), an arrangement meets
the requirements of this subparagraph
if, under the arrangement, each
employee eligible to participate is,
not later than 60 days before the
beginning of the plan year, given
written notice of the employee's rights
and obligations under the arrangement
which--
``(I) is sufficiently
accurate and comprehensive to
apprise the employee of such
rights and obligations, and
``(II) is written in a manner
calculated to be understood by
the average employee eligible
to participate.
``(ii) Notice requirements.--Such
notice shall include such information
as the Secretary may by regulation
prescribe.
``(iii) Notice deadline for certain
employees.--In the case of an
employee--
``(I) who first becomes
eligible to participate in the
arrangement after the date
notice is given with respect to
the plan under clause (i)
(determined without regard to
this clause), or
``(II) whose employer is
first established fewer than
120 days before the beginning
of the first plan year of the
arrangement,
the requirements of this subparagraph
shall be treated as met if the notice
required under clause (i) is provided
not later than the date the arrangement
may take effect with respect to such
employee.''.
(b) Inclusion of CHOICE Arrangment Permitted Benefits on W-
2.--
(1) In general.--Section 6051(a), as amended by the
preceding provisions of this Act, is amended by
striking ``and'' at the end of paragraph (17), by
striking the period at the end of paragraph (18) and
inserting ``, and'', and by inserting after paragraph
(18) the following new paragraph:
``(19) the total amount of permitted benefits for
enrolled individuals under a custom health option and
individual care expense arrangement (as defined in
section 9815(b)(2)) with respect to such employee.''.
(c) Treatment of Current Rules Relating to Certain
Arrangements.--
(1) No inference.--To the extent not inconsistent
with the amendments made by this section--
(A) no inference shall be made from such
amendments with respect to the rules prescribed
in the Federal Register on June 20, 2019, (84
Fed. Reg. 28888) relating to health
reimbursement arrangements and other account-
based group health plans, and
(B) any reference to custom health option and
individual care expense arrangements shall for
purposes of such rules be treated as including
a reference to individual coverage health
reimbursement arrangements.
(2) Other conforming of rules.--The Secretary of the
Treasury, the Secretary of Health and Human Services,
and the Secretary of Labor shall modify such rules as
may be necessary to conform to the amendments made by
this section.
(d) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2025.

SEC. 110202. PARTICIPANTS IN CHOICE ARRANGEMENT ELIGIBLE FOR PURCHASE
OF EXCHANGE INSURANCE UNDER CAFETERIA PLAN.

(a) In General.--Section 125(f)(3) is amended by adding at
the end the following new subparagraph:
``(C) Exception for participants in CHOICE
arrangement.--Subparagraph (A) shall not apply
in the case of an employee participating in a
custom health option and individual care
expense arrangement (within the meaning of
section 9815(b)(2)) offered by the employee's
employer.''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2025.

SEC. 110203. EMPLOYER CREDIT FOR CHOICE ARRANGEMENT.

(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 is amended by adding at the end the following new
section:

``SEC. 45BB. EMPLOYER CREDIT FOR CHOICE ARRANGEMENT.

``(a) In General.--For purposes of section 38, in the case of
an eligible employer, the CHOICE arrangement credit determined
under this section for any taxable year is an amount, with
respect to each employee enrolled during the credit period in a
CHOICE arrangement maintained by the employer, equal to--
``(1) $100 multiplied by the number of months for
which the employee is so enrolled during the first year
in the credit period, and
``(2) one-half of the dollar amount in effect under
paragraph (1) for the taxable year, multiplied by the
number of months for which the employee is so enrolled
during the second year of the credit period.
``(b) Arrangement Must Constitute Minimum Essential
Coverage.--An employee shall not be taken into account under
subsection (a) unless such employee's eligibility for the
CHOICE arrangement (determined without regard to the employee
being enrolled) would cause the employee to be treated under
section 36B(c)(2) as being eligible for minimum essential
coverage consisting of an eligible employer-sponsored plan (as
defined in section 5000A(f)(2)).
``(c) Definitions.--For purposes of this section--
``(1) CHOICE arrangement.--The term `CHOICE
arrangement' means a custom health option and
individual care expense arrangement (as defined in
section 9815(b)(2)(B)).
``(2) Credit period.--The credit period with respect
to an eligible employer is the first 2 one-year periods
beginning with the month during which the employer
first establishes a CHOICE arrangement on behalf of
employees of the employer.
``(3) Eligible employer.--The term `eligible
employer' means, with respect to any taxable year
beginning in a calendar year, an employer who is not an
applicable large employer for the calendar year under
section 4980H.
``(d) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning in a calendar year after 2026, the dollar
amount in subsection (a) 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
by substituting `calendar year 2025' for
`calendar year 2016' in subparagraph (A)(ii)
thereof.
``(2) Rounding.--If any amount after adjustment under
paragraph (1) is not a multiple of $10, such amount
shall be rounded to the next lower multiple of $10.''.
(b) Credit Made 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 CHOICE arrangement credit determined under
section 45BB(a).''.
(c) Credit Allowed Against Alternative Minimum Tax.--Section
38(c)(4)(B) is amended--
(1) by redesignating clauses (x), (xi), and (xii) as
clauses (xi), (xii), and (xiii), respectively, and
(2) by inserting after clause (ix) the following new
clause:
``(x) the credit determined under
section 45BB,''.
(d) Clerical Amendment.--The table of sections for subpart D
of part IV of subchapter A of chapter 1 is amended by adding at
the end the following new item:

``Sec. 45BB. Employer credit for CHOICE arrangement.''.

(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110204. INDIVIDUALS ENTITLED TO PART A OF MEDICARE BY REASON OF
AGE ALLOWED TO CONTRIBUTE TO HEALTH SAVINGS
ACCOUNTS.

(a) In General.--Section 223(c)(1)(B) is amended by striking
``and'' at the end of clause (ii), by striking the period at
the end of clause (iii) and inserting ``, and'', and by adding
at the end the following new clause:
``(iv) entitlement to hospital
insurance benefits under part A of
title XVIII of the Social Security Act
by reason of section 226(a) of such
Act.''.
(b) Treatment of Health Insurance Purchased From Account.--
Section 223(d)(2)(C)(iv) is amended by inserting ``and who is
not an eligible individual'' after ``who has attained the age
specified in section 1811 of the Social Security Act''.
(c) Coordination With Penalty on Distributions Not Used for
Qualified Medical Expenses.--Section 223(f)(4)(C) is amended by
striking ``Subparagraph (A)'' and inserting ``Except in the
case of an eligible individual, subparagraph (A)''
(d) Conforming Amendment.--Section 223(b)(7) is amended by
inserting ``(other than an entitlement to benefits described in
subsection (c)(1)(B)(iv))'' after ``Social Security Act''.
(e) Effective Date.--The amendments made by this section
shall apply to months beginning after December 31, 2025.

SEC. 110205. TREATMENT OF DIRECT PRIMARY CARE SERVICE ARRANGEMENTS.

(a) In General.--Section 223(c)(1) is amended by adding at
the end the following new subparagraph:
``(E) Treatment of direct primary care
service arrangements.--
``(i) In general.--A direct primary
care service arrangement shall not be
treated as a health plan for purposes
of subparagraph (A)(ii).
``(ii) Direct primary care service
arrangement.--For purposes of this
subparagraph--
``(I) In general.--The term
`direct primary care service
arrangement' means, with
respect to any individual, an
arrangement under which such
individual is provided medical
care (as defined in section
213(d)) consisting solely of
primary care services provided
by primary care practitioners
(as defined in section
1833(x)(2)(A) of the Social
Security Act, determined
without regard to clause (ii)
thereof), if the sole
compensation for such care is a
fixed periodic fee.
``(II) Limitation.--With
respect to any individual for
any month, such term shall not
include any arrangement if the
aggregate fees for all direct
primary care service
arrangements (determined
without regard to this
subclause) with respect to such
individual for such month
exceed $150 (twice such dollar
amount in the case of an
individual with any direct
primary care service
arrangement (as so determined)
that covers more than one
individual).
``(iii) Certain services specifically
excluded from treatment as primary care
services.--For purposes of this
subparagraph, the term `primary care
services' shall not include--
``(I) procedures that require
the use of general anesthesia,
``(II) prescription drugs
(other than vaccines), and
``(III) laboratory services
not typically administered in
an ambulatory primary care
setting.
The Secretary, after consultation with
the Secretary of Health and Human
Services, shall issue regulations or
other guidance regarding the
application of this clause.''.
(b) Direct Primary Care Service Arrangement Fees Treated as
Medical Expenses.--Section 223(d)(2)(C) is amended by striking
``or'' at the end of clause (iii), by striking the period at
the end of clause (iv) and inserting ``, or'', and by adding at
the end the following new clause:
``(v) any direct primary care service
arrangement.''.
(c) Inflation Adjustment.--Section 223(g)(1) is amended--
(1) by inserting ``, (c)(1)(E)(ii)(II),'' after
``(b)(2)'' each place it appears, and
(2) in subparagraph (B), by striking ``clause (ii)''
in clause (i) and inserting ``clauses (ii) and (iii)''
, by striking ``and'' at the end of clause (i), by
striking the period at the end of clause (ii) and
inserting ``, and'', and by inserting after clause (ii)
the following new clause:
``(iii) in the case of the dollar
amount in subsection (c)(1)(E)(ii)(II)
for taxable years beginning in calendar
years after 2026, `calendar year
2025'.''.''.
(d) Effective Date.--The amendments made by this section
shall apply to months beginning after December 31, 2025.

SEC. 110206. ALLOWANCE OF BRONZE AND CATASTROPHIC PLANS IN CONNECTION
WITH HEALTH SAVINGS ACCOUNTS.

(a) In General.--Section 223(c)(2) is amended by adding at
the end the following new subparagraph:
``(H) Bronze and catastrophic plans treated
as high deductible health plans.--The term
`high deductible health plan' shall include any
plan--
``(i) available as individual
coverage through an Exchange
established under section 1311 or 1321
of the Patient Protection and
Affordable Care Act, and
``(ii) described in subsection
(d)(1)(A) or (e) of section 1302 of
such Act.''.
(b) Effective Date.--The amendment made by this section shall
apply to months beginning after December 31, 2025.

SEC. 110207. ON-SITE EMPLOYEE CLINICS.

(a) In General.--Section 223(c)(1), as amended by the
preceding provisions of this Act, is amended by adding at the
end the following new subparagraph:
``(F) Special rule for qualified items and
services.--
``(i) In general.--For purposes of
subparagraph (A)(ii), an individual
shall not be treated as covered under a
health plan described in subclauses (I)
and (II) of such subparagraph merely
because the individual is eligible to
receive, or receives, qualified items
and services--
``(I) at a healthcare
facility located at a facility
owned or leased by the employer
of the individual (or of the
individual's spouse), or
``(II) at a healthcare
facility operated primarily for
the benefit of employees of the
employer of the individual (or
of the individual's spouse).
``(ii) Qualified items and services
defined.--For purposes of this
subparagraph, the term `qualified items
and services' means the following:
``(I) Physical examination.
``(II) Immunizations,
including injections of
antigens provided by employees.
``(III) Drugs or biologicals
other than a prescribed drug
(as such term is defined in
section 213(d)(3)).
``(IV) Treatment for injuries
occurring in the course of
employment.
``(V) Preventive care for
chronic conditions (as defined
in clause (iv)).
``(VI) Drug testing.
``(VII) Hearing or vision
screenings and related
services.
``(iii) Aggregation.--For purposes of
clause (i), all persons treated as a
single employer under subsection (b),
(c), (m), or (o) of section 414 shall
be treated as a single employer.
``(iv) Preventive care for chronic
conditions.--For purposes of this
subparagraph, the term `preventive care
for chronic conditions' means any item
or service specified in the Appendix of
Internal Revenue Service Notice 2019-45
which is prescribed to treat an
individual diagnosed with the
associated chronic condition specified
in such Appendix for the purpose of
preventing the exacerbation of such
chronic condition or the development of
a secondary condition, including any
amendment, addition, removal, or other
modification made by the Secretary
(pursuant to the authority granted to
the Secretary under paragraph (2)(C))
to the items or services specified in
such Appendix subsequent to the date of
publication of such Notice.''.
(b) Effective Date.--The amendments made by this section
shall apply to months in taxable years beginning after December
31, 2025.

SEC. 110208. CERTAIN AMOUNTS PAID FOR PHYSICAL ACTIVITY, FITNESS, AND
EXERCISE TREATED AS AMOUNTS PAID FOR MEDICAL CARE.

(a) In General.--Section 223(d)(2)(A) is amended by adding at
the end the following: ``For purposes of this subparagraph,
amounts paid for qualified sports and fitness expenses shall be
treated as paid for medical care.''.
(b) Qualified Sports and Fitness Expenses.--Section 223(d)(2)
is amended by adding at the end the following new subparagraph:
``(E) Qualified sports and fitness
expenses.--For purposes of this paragraph--
``(i) In general.--The term
`qualified sports and fitness expenses'
means amounts paid exclusively for the
sole purpose of participating in a
physical activity including--
``(I) for membership at a
fitness facility, or
``(II) for participation or
instruction in physical
exercise or physical activity.
``(ii) Overall dollar limitation.--
``(I) In general.--The
aggregate amount treated as
qualified sports and fitness
expenses with respect to any
taxpayer for any taxable year
shall not exceed $500 ($1,000
in the case of a joint return
or a head of household (as
defined in section 2(b))).
``(II) Monthly limit.--The
amount taken into account under
subparagraph (A) as paid for
participating in a physical
activity during a month
beginning during the taxable
year shall not exceed an amount
equal to 1/12 of the amount in
effect with respect to the
taxpayer for the taxable year
under subclause (I).
``(iii) Fitness facility.--For
purposes of clause (i)(I), the term
`fitness facility' means a facility--
``(I) which provides
instruction in a program of
physical exercise, offers
facilities for the
preservation, maintenance,
encouragement, or development
of physical fitness, or serves
as the site of such a program
of a State or local government,
``(II) which is not a private
club owned and operated by its
members,
``(III) which does not offer
golf, hunting, sailing, or
riding facilities,
``(IV) the health or fitness
component of which is not
incidental to its overall
function and purpose, and
``(V) which is fully
compliant with the State of
jurisdiction and Federal anti-
discrimination laws.
``(iv) Treatment of personal
trainers, exercise videos, etc.--The
term `qualified sports and fitness
expenses' shall not include any amount
paid for--
``(I) videos, books, or
similar materials,
``(II) remote or virtual
instruction in a physical
exercise or physical activity,
unless such instruction is
live, or
``(III) one-on-one personal
training.
``(v) Programs which include
components other than physical exercise
and physical activity.--Rules similar
to the rules of section 213(d)(6) shall
apply in the case of any program that
includes physical exercise or physical
activity and also other components. For
purposes of the preceding sentence,
travel and accommodations shall be
treated as a separate component.
``(vi) Membership, participation, and
instruction must be continuing.--An
amount shall not be treated as paid for
the purpose of participating in a
physical activity unless--
``(I) in the case of a
membership at a fitness
facility, such membership is
for more than 1 day, and
``(II) in the case of
participation or instruction in
physical exercise or physical
activity, the amount paid
constitutes payment for more
than 1 occasion of such
participation or instruction.
``(vii) Cost-of-living adjustment.--
In the case of any taxable year
beginning in a calendar year after
2026, each dollar amount in clause
(ii)(I) 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 such
taxable year begins by
substituting `calendar year
2025' for `calendar year 2016'
in subparagraph (A)(ii)
thereof.
If any increase under the preceding
sentence is not a multiple of $50, such
increase shall be rounded to the
nearest multiple of $50.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110209. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE
SAME HEALTH SAVINGS ACCOUNT.

(a) In General.--Section 223(b)(5) is amended to read as
follows:
``(5) Special rule for married individuals with
family coverage.--
``(A) In general.--In the case of individuals
who are married to each other, if both spouses
are eligible individuals and either spouse has
family coverage under a high deductible health
plan as of the first day of any month--
``(i) the limitation under paragraph
(1) shall be applied by not taking into
account any other high deductible
health plan coverage of either spouse
(and if such spouses both have family
coverage under separate high deductible
health plans, only one such coverage
shall be taken into account),
``(ii) such limitation (after
application of clause (i)) shall be
reduced by the aggregate amount paid to
Archer MSAs of such spouses for the
taxable year, and
``(iii) such limitation (after
application of clauses (i) and (ii))
shall be divided equally between such
spouses unless they agree on a
different division.
``(B) Treatment of additional contribution
amounts.--If both spouses referred to in
subparagraph (A) have attained age 55 before
the close of the taxable year, the limitation
referred to in subparagraph (A)(iii) which is
subject to division between the spouses shall
include the additional contribution amounts
determined under paragraph (3) for both
spouses. In any other case, any additional
contribution amount determined under paragraph
(3) shall not be taken into account under
subparagraph (A)(iii) and shall not be subject
to division between the spouses.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 110210. FSA AND HRA TERMINATIONS OR CONVERSIONS TO FUND HSAS.

(a) In General.--Section 106(e)(2) is amended to read as
follows:
``(2) Qualified HSA distribution.--For purposes of
this subsection--
``(A) In general.--The term `qualified HSA
distribution' means, with respect to any
employee, a distribution from a health flexible
spending arrangement or health reimbursement
arrangement of such employee contributed
directly to a health savings account of such
employee if--
``(i) such distribution is made in
connection with such employee
establishing coverage under a high
deductible health plan (as defined in
section 223(c)(2)) if during the 4-year
period preceding the date the employee
so establishes coverage the employee
was not covered under such a high
deductible health plan, and
``(ii) such arrangement is described
in section 223(c)(1)(B)(v) with respect
to any portion of the plan year
remaining after such distribution is
made, if such employee remains enrolled
in such arrangement.
``(B) Dollar limitation.--The aggregate
amount of distributions from health flexible
spending arrangements and health reimbursement
arrangements of any employee which may be
treated as qualified HSA distributions in
connection with an establishment of coverage
described in subparagraph (A)(i) shall not
exceed the dollar amount in effect under
section 125(i)(1) (twice such amount in the
case of coverage which is described in section
223(b)(2)(B)).''.
(b) Partial Reduction of Limitation on Deductible HSA
Contributions.--Section 223(b)(4) is amended by striking
``and'' at the end of subparagraph (B), by striking the period
at the end of subparagraph (C) and inserting ``, and'', and by
inserting after subparagraph (C) the following new
subparagraph:
``(D) so much of any qualified HSA
distribution (as defined in section 106(e)(2))
made to a health savings account of such
individual during the taxable year as does not
exceed the aggregate increases in the balance
of the arrangement from which such distribution
is made which occur during the portion of the
plan year which precedes such distribution
(other than any balance carried over to such
plan year and determined without regard to any
decrease in such balance during such portion of
the plan year).''.
(c) Conversion to Hsa-compatible Arrangement for Remainder of
Plan Year.--Section 223(c)(1)(B), as amended by this preceding
provisions of this Act, 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 new clause:
``(v) coverage under a health
flexible spending arrangement or health
reimbursement arrangement for the
portion of the plan year after a
qualified HSA distribution (as defined
in section 106(e)(2) determined without
regard to subparagraph (A)(ii) thereof)
is made, if the terms of such
arrangement which apply for such
portion of the plan year are such that,
if such terms applied for the entire
plan year, then such arrangement would
not be taken into account under
subparagraph (A)(ii) of this paragraph
for such plan year.''.
(d) Inclusion of Qualified HSA Distributions on w-2.--
(1) In general.--Section 6051(a), as amended by the
preceding provisions of this Act, is amended by
striking ``and'' at the end of paragraph (18), by
striking the period at the end of paragraph (19) and
inserting ``, and'', and by inserting after paragraph
(19) the following new paragraph:
``(20) the amount of any qualified HSA distribution
(as defined in section 106(e)(2)) with respect to such
employee.''.
(2) Conforming amendment.--Section 6051(a)(12) is
amended by inserting ``(other than any qualified HSA
distribution, as defined in section 106(e)(2))'' before
the comma at the end.
(e) Effective Date.--The amendments made by this section
shall apply to distributions made after December 31, 2025.

SEC. 110211. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE
ESTABLISHMENT OF HEALTH SAVINGS ACCOUNT.

(a) In General.--Section 223(d)(2), as amended by the
preceding provisions of this Act, is amended by adding at the
end the following new subparagraph:
``(F) Treatment of certain medical expenses
incurred before establishment of account.--If a
health savings account is established during
the 60-day period beginning on the date that
coverage of the account beneficiary under a
high deductible health plan begins, then,
solely for purposes of determining whether an
amount paid is used for a qualified medical
expense, such account shall be treated as
having been established on the date that such
coverage begins.''.
(b) Effective Date.--The amendment made by this section shall
apply with respect to coverage beginning after December 31,
2025.

SEC. 110212. CONTRIBUTIONS PERMITTED IF SPOUSE HAS HEALTH FLEXIBLE
SPENDING ARRANGEMENT.

(a) Contributions Permitted if Spouse Has a Health Flexible
Spending Arrangement.--Section 223(c)(1)(B), as amended by this
preceding provisions of this Act, is amended by striking
``and'' at the end of clause (iv), by striking the period at
the end of clause (v) and inserting ``, and'', and by adding at
the end the following new clause:
``(vi) coverage under a health
flexible spending arrangement of the
spouse of the individual for any plan
year of such arrangement if the
aggregate reimbursements under such
arrangement for such year do not exceed
the aggregate expenses which would be
eligible for reimbursement under such
arrangement if such expenses were
determined without regard to any
expenses paid or incurred with respect
to such individual.''.
(b) Effective Date.--The amendment made by this section shall
apply to plan years beginning after December 31, 2025.

SEC. 110213. INCREASE IN HEALTH SAVINGS ACCOUNT CONTRIBUTION LIMITATION
FOR CERTAIN INDIVIDUALS.

(a) Increase.--
(1) In general.--Section 223(b) is amended by adding
at the end the following new paragraph:
``(9) Increase in limitation for certain taxpayers.--
``(A) In general.--The applicable limitation
under subparagraphs (A) and (B) of paragraph
(2) shall be increased by $4,300 and $8,550,
respectively.
``(B) Limitation based on modified adjusted
gross income.--The amount of the increase under
subparagraph (A) (determined without regard to
this subparagraph) shall be reduced (but not
below zero) by the amount which bears the same
ratio to the amount of such increase (as so
determined) as--
``(i) the excess (if any) of--
``(I) the taxpayer's adjusted
gross income for such taxable
year, over
``(II) $75,000 ($150,000 in
the case of a joint return, if
the eligible individual has
family coverage), bears to
``(ii) $25,000 ($50,000 in the case
of a joint return, if the eligible
individual has family coverage).
For purposes of the preceding sentence,
adjusted gross income shall be determined in
the same manner as under section 219(g)(3)(A),
except determined without regard to any
deduction allowed under this section.''.
(2) Only to apply to employee contributions.--Section
106(d)(1) is amended by inserting ``and section
223(b)(9)'' after ``determined without regard to this
subsection''.
(b) Inflation Adjustment.--Section 223(g), as amended by the
preceding provisions of this Act, is amended--
(1) by inserting ``, (b)(9)(A), (b)(9)(B)(i)(II),''
before ``and (c)(2)(A)'' each place it appears,
(2) by striking ``clauses (ii) and (ii)'' in
paragraph (1)(B)(i) and inserting ``clauses (ii),
(iii), and (iv)'',
(3) by striking ``and'' at the end of paragraph
(1)(B)(ii),
(4) by striking the period at the end of paragraph
(1)(B)(iii) and inserting ``, and'', and
(5) by inserting after paragraph (1)(B)(iii) the
following new clause:
``(iv) in the case of the dollar
amounts in subsections (b)(9)(A) and
(b)(9)(B)(i)(II), `calendar year
2025'.''.
(c) Effective Date.--
(1) Subsection (a).--The amendments made by
subsection (a) shall apply to taxable years beginning
after December 31, 2025.
(2) Subsection (b).--The amendments made by
subsection (b) shall apply to taxable years beginning
after December 31, 2026.

SEC. 110214. REGULATIONS.

The Secretary of the Treasury and the Secretary of Health and
Human Services may each prescribe such rules and other guidance
as may be necessary or appropriate to carry out the amendments
made by this part.

Subtitle B--Make Rural America and Main Street Grow Again

PART 1--EXTENSION OF TAX CUTS AND JOBS ACT REFORMS FOR RURAL AMERICA
AND MAIN STREET

SEC. 111001. EXTENSION OF SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN
PROPERTY.

(a) In General.--Section 168(k) is amended--
(1) in paragraph (2)--
(A) by striking ``January 1, 2027'' each
place it appears and inserting ``January 1,
2030'', and
(B) in subparagraph (B)--
(i) in clause (i)(II), by striking
``January 1, 2028'' and inserting
``January 1, 2031'', and
(ii) in the heading of clause (ii),
by striking ``pre-january 1, 2027
basis'' and inserting ``pre-january 1,
2030 basis'',
(2) in paragraph (5)(A), by striking ``January 1,
2027'' and inserting ``January 1, 2030'', and
(3) in paragraph (6)--
(A) in subparagraph (A)--
(i) by inserting ``in the case of
property acquired by the taxpayer
before January 20, 2025,'' after
``Except as otherwise provided in this
paragraph'' , and
(ii) by striking ``and'' at the end
of clause (iv), by striking the period
at the end of clause (v) and inserting
``, and'', and by adding at the end the
following new clause:
``(vi) in the case of property placed
in service after December 31, 2026, 0
percent.'',
(B) in subparagraph (B)--
(i) by striking ``In the case of
property described'' and inserting ``In
the case of property acquired by the
taxpayer before January 20, 2025 and
described'', and
(ii) by striking ``and'' at the end
of clause (iv), by striking the period
at the end of clause (v) and inserting
``, and'', and by adding at the end the
following new clause:
``(vi) in the case of property placed
in service after December 31, 2027, 0
percent.'',
(C) in subparagraph (C), by inserting ``and''
at the end of clause (iii), by striking clauses
(iv) and (v), and by adding at the end the
following new clause:
``(iv) in the case of a plant which
is planted or grafted after January 19,
2025, and before January 1, 2030, 100
percent.'', and
(D) by adding at the end the following new
subparagraph:
``(D) Rule for property acquired after
january 19, 2025.--
``(i) In general.--In the case of
property acquired by the taxpayer after
January 19, 2025 and placed in service
after such date and before January 1,
2030 (January 1, 2031, in the case of
property described in subparagraph (B)
or (C) of paragraph (2)), the term
`applicable percentage' means 100
percent.
``(ii) Acquisition date
determination.--For purposes of clause
(i), property shall not be treated as
acquired after the date on which a
written binding contract is entered
into for such acquisition.''.
(b) Conforming Amendment.--Section 460(c)(6)(B) is amended by
striking ``which'' and all that follows through the period and
inserting ``which has a recovery period of 7 years or less.''.
(c) Effective Dates.--
(1) In general.--Except as provided by paragraph (2),
the amendments made by this section shall apply to
property acquired after January 19, 2025 and placed in
service after such date.
(2) Specified plants.--The amendments made by this
section shall apply to specified plants planted or
grafted after January 19, 2025.

SEC. 111002. DEDUCTION OF DOMESTIC RESEARCH AND EXPERIMENTAL
EXPENDITURES.

(a) Suspension of Amortization for Domestic Research and
Experimental Expenditures.--Section 174 is amended by adding at
the end the following new subsection:
``(e) Suspension of Application to Domestic Research and
Experimental Expenditures.--In the case of any domestic
research or experimental expenditures (as defined in section
174A(b)), this section shall not apply to such expenditures
paid or incurred in taxable years beginning after December 31,
2024, and before January 1, 2030.''.
(b) Reinstatement of Expensing for Domestic Research and
Experimental Expenditures.--Part VI of subchapter B of chapter
1 is amended by inserting after section 174 the following new
section:

``SEC. 174A. TEMPORARY RULES FOR DOMESTIC RESEARCH AND EXPERIMENTAL
EXPENDITURES.

``(a) Treatment as Expenses.--Notwithstanding section 263,
there shall be allowed as a deduction any domestic research or
experimental expenditures which are paid or incurred by the
taxpayer during the taxable year.
``(b) Domestic Research or Experimental Expenditures.--For
purposes of this section, the term `domestic research or
experimental expenditures' means research or experimental
expenditures paid or incurred by the taxpayer in connection
with the taxpayer's trade or business other than such
expenditures which are attributable to foreign research (within
the meaning of section 41(d)(4)(F)).
``(c) Amortization of Certain Domestic Research and
Experimental Expenditures.--
``(1) In general.--At the election of the taxpayer,
made in accordance with regulations or other guidance
provided by the Secretary, in the case of domestic
research or experimental expenditures which would (but
for subsection (a)) be chargeable to capital account
but not chargeable to property of a character which is
subject to the allowance under section 167 (relating to
allowance for depreciation, etc.) or section 611
(relating to allowance for depletion), subsection (a)
shall not apply and the taxpayer shall--
``(A) charge such expenditures to capital
account, and
``(B) be allowed an amortization deduction of
such expenditures ratably over such period of
not less than 60 months as may be selected by
the taxpayer (beginning with the midpoint of
the taxable year in which such expenditures are
paid or incurred).
``(2) Time for and scope of election.--The election
provided by paragraph (1) may be made for any taxable
year, but only if made not later than the time
prescribed by law for filing the return for such
taxable year (including extensions thereof). The method
so elected, and the period selected by the taxpayer,
shall be adhered to in computing taxable income for the
taxable year for which the election is made and for all
subsequent taxable years unless, with the approval of
the Secretary, a change to a different method (or to a
different period) is authorized with respect to part or
all of such expenditures. The election shall not apply
to any expenditure paid or incurred during any taxable
year before the taxable year for which the taxpayer
makes the election.
``(d) Special Rules.--
``(1) Land and other property.--This section shall
not apply to any expenditure for the acquisition or
improvement of land, or for the acquisition or
improvement of property to be used in connection with
the research or experimentation and of a character
which is subject to the allowance under section 167
(relating to allowance for depreciation, etc.) or
section 611 (relating to allowance for depletion); but
for purposes of this section allowances under section
167, and allowances under section 611, shall be
considered as expenditures.
``(2) Exploration expenditures.--This section shall
not apply to any expenditure paid or incurred for the
purpose of ascertaining the existence, location,
extent, or quality of any deposit of ore or other
mineral (including oil and gas).
``(3) Software development.--For purposes of this
section, any amount paid or incurred in connection with
the development of any software shall be treated as a
research or experimental expenditure.
``(e) Termination.--
``(1) In general.--This section shall not apply to
amounts paid or incurred in taxable years beginning
after December 31, 2029.
``(2) Change in method of accounting.--In the case of
a taxpayer's first taxable year beginning after
December 31, 2029, paragraph (1) (and the corresponding
application of section 174) shall be treated as a
change in method of accounting for purposes of section
481 and--
``(A) such change shall be treated as
initiated by the taxpayer,
``(B) such change shall be treated as made
with the consent of the Secretary, and
``(C) such change shall be applied only on a
cut-off basis for any domestic research or
experimental expenditures paid or incurred in
taxable years beginning after December 31,
2029, and no adjustment under section 481(a)
shall be made.''.
(c) Treatment of Foreign Research or Experimental
Expenditures Upon Disposition.--Section 174(d) is amended by
inserting ``or reduction to amount realized'' after ``no
deduction''.
(d) Coordination With Certain Other Provisions.--
(1) Research credit.--
(A) Section 41(d)(1)(A) is amended by
inserting ``or domestic research or
experimental expenditures under section 174A''
after ``section 174''.
(B) Section 280C(c) is amended by adding at
the end the following new paragraph:
``(4) Domestic research or experimental
expenditures.--The domestic research or experimental
expenditures otherwise taken into account under section
174A shall be reduced by the amount of the credit
allowed under section 41(a).''.
(C) Section 280C(c) is amended--
(i) in paragraph (1)(B)--
(I) by striking ``a
deduction'' and inserting ``an
amortization deduction'', and
(II) by inserting ``under
section 174'' after ``basic
research expenses'', and
(ii) in paragraph (2)(A)(i), by
striking ``paragraph (1)'' and
inserting ``paragraphs (1) and (4)''.
(2) AMT adjustment.--Section 56(b)(2) is amended--
(A) by striking ``174(a)'' each place it
appears and inserting ``174A(a)'', and
(B) by adding at the end of subparagraph (A)
the following new flush sentence:
``In the case of research and experimental
expenditures charged to capital account and
amortized under section 174 or 174A, such
amounts shall be amortized for purposes of this
subsection as provided in clause (ii).''.
(3) Optional 10-year writeoff.--Section 59(e)(2)(B)
is amended by striking ``section 174(a) (relating to
research and experimental expenditures)'' and inserting
``section 174A(a) (relating to temporary rules for
domestic research and experimental expenditures)''.
(4) Qualified small issue bonds.--Section
144(a)(4)(C)(iv) is amended by inserting ``or 174A(a)''
after ``174(a)''.
(5) Start-up expenditures.--Section 195(c)(1) is
amended by striking ``or 174'' in the last sentence and
inserting ``174, or 174A''.
(6) Capital expenditures.--
(A) Section 263(a)(1)(B) is amended by
inserting `` or 174A'' after ``174''.
(B) Section 263A(c)(2) is amended by
inserting ``or 174A'' after ``174''.
(7) Active business computer software royalties.--
Section 543(d)(4)(A)(i) is amended by inserting
``174A,'' after ``174,''.
(8) Source rules.--Section 864(g)(2) is amended in
the last sentence--
(A) by striking ``treated as deferred
expenses under subsection (b) of section 174''
and inserting ``allowed as an amortization
deduction under section 174(a) or section
174A(c),'', and
(B) by striking ``such subsection'' and
inserting ``such section (as the case may
be)''.
(9) Basis adjustment.--Section 1016(a)(14) is amended
by striking ``deductions as deferred expenses under
section 174(b)(1) (relating to research and
experimental expenditures)'' and inserting ``deductions
under section 174 or 174A(c)''.
(10) Small business stock.--Section 1202(e)(2)(B) is
amended by striking ``research and experimental
expenditures under section 174'' and inserting
``specified research or experimental expenditures under
section 174 or domestic research or experimental
expenditures under section 174A''.
(e) Clerical Amendment.--The table of sections for part VI of
subchapter B of chapter 1 is amended by inserting after the
item relating to section 174 the following new item:

``Sec. 174A. Temporary rules for domestic research and experimental
expenditures.''.

(f) Effective Date and Special Rule.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall
apply to amounts paid or incurred in taxable years
beginning after December 31, 2024.
(2) Treatment of foreign research or experimental
expenditures upon disposition.--The amendment made by
subsection (c) shall apply to property disposed,
retired, or abandoned after May 12, 2025.
(3) Coordination with research credit.--The
amendments made by subparagraphs (B) and (C) of
subsection (d)(1) shall apply to taxable years
beginning after December 31, 2024.
(4) Special rule for short taxable years.--The
Secretary of the Treasury may prescribe such rules as
are necessary or appropriate to provide for the
application of the amendments made by this section in
the case of any taxable year of less than 12 months
that begins after December 31, 2024, and ends before
the date of the enactment of this Act.
(5) Change in method of accounting.--The amendments
made by this section shall be treated as a change in
method of accounting for purposes of section 481 of the
Internal Revenue Code of 1986 and--
(A) such change shall be treated as initiated
by the taxpayer,
(B) such change shall be treated as made with
the consent of the Secretary, and
(C) such change shall be applied only on a
cut-off basis for any research or experimental
expenditures paid or incurred in taxable years
beginning after December 31, 2024, and no
adjustments under section 481(a) shall be made.
(6) No inference.--The amendments made by
subparagraphs (B) and (C) of subsection (d)(1) shall
not be construed to create any inference with respect
to the proper application of section 280C(c) of the
Internal Revenue Code of 1986 with respect to taxable
years beginning before January 1, 2025.

SEC. 111003. MODIFIED CALCULATION OF ADJUSTED TAXABLE INCOME FOR
PURPOSES OF BUSINESS INTEREST DEDUCTION.

(a) In General.--Section 163(j)(8)(A)(v) is amended by
striking ``beginning before January 1, 2022'' and inserting
``beginning after December 31, 2024 and before January 1,
2030''.
(b) Floor Plan Financing Applicable to Certain Trailers and
Campers.--Section 163(j)(9)(C) is amended by adding at the end
the following new flush sentence:
``Such term shall also include any trailer or
camper which is designed to provide temporary
living quarters for recreational, camping, or
seasonal use and is designed to be towed by, or
affixed to, a motor vehicle.''.
(c) Effective Date and Special Rule.--
(1) In general.--The amendments made by this section
shall apply to taxable years beginning after December
31, 2024.
(2) Special rule for short taxable years.--The
Secretary of the Treasury may prescribe such rules as
are necessary or appropriate to provide for the
application of the amendments made by this section in
the case of any taxable year of less than 12 months
that begins after December 31, 2024, and ends before
the date of the enactment of this Act.

SEC. 111004. EXTENSION OF DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE
INCOME AND GLOBAL INTANGIBLE LOW-TAXED INCOME.

(a) In General.--Section 250(a) is amended by striking
paragraph (3).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 111005. EXTENSION OF BASE EROSION MINIMUM TAX AMOUNT.

(a) In General.--Section 59A(b) is amended by striking
paragraph (2) and by redesignating paragraphs (3) and (4) as
paragraphs (2) and (3), respectively.
(b) Conforming Amendments.--
(1) Section 59A(b)(1) is amended by striking ``Except
as provided in paragraphs (2) and (3)'' and inserting
``Except as provided in paragraph (2)''.
(2) Section 59A(b)(2), as redesignated by subsection
(a)(2), is amended by striking ``the percentage
otherwise in effect under paragraphs (1)(A) and (2)(A)
shall each be increased'' and inserting ``the
percentages otherwise in effect under paragraph (1)(A)
shall be increased''.
(3) Section 59A(e)(1)(C) is amended by striking ``in
the case of a taxpayer described in subsection
(b)(3)(B)'' and inserting ``in the case of a taxpayer
described in subsection (b)(2)(B)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

PART 2--ADDITIONAL TAX RELIEF FOR RURAL AMERICA AND MAIN STREET

SEC. 111101. SPECIAL DEPRECIATION ALLOWANCE FOR QUALIFIED PRODUCTION
PROPERTY.

(a) In General.--Section 168 is amended by adding at the end
the following new subsection:
``(n) Special Allowance for Qualified Production Property.--
``(1) In general.--In the case of any qualified
production property--
``(A) the depreciation deduction provided by
section 167(a) for the taxable year in which
such property is placed in service shall
include an allowance equal to 100 percent of
the adjusted basis of the qualified production
property, and
``(B) the adjusted basis of the qualified
production property shall be reduced by the
amount of such deduction before computing the
amount otherwise allowable as a depreciation
deduction under this chapter for such taxable
year and any subsequent taxable year.
``(2) Qualified production property.--For purposes of
this subsection--
``(A) In general.--The term `qualified
production property' means that portion of any
nonresidential real property--
``(i) to which this section applies,
``(ii) which is used by the taxpayer
as an integral part of a qualified
production activity,
``(iii) which is placed in service in
the United States or any possession of
the United States,
``(iv) the original use of which
commences with the taxpayer,
``(v) the construction of which
begins after January 19, 2025, and
before January 1, 2029,
``(vi) with respect to which the
taxpayer has elected the application of
this subsection, and
``(vii) which is placed in service
before January 1, 2033.
``(B) Special rule for certain property not
previously used in qualified production
activities.--
``(i) In general.--In the case of
property acquired by the taxpayer
during the period described in
subparagraph (A)(v), the requirements
of clauses (iv) and (v) of subparagraph
(A) shall be treated as satisfied if
such property was not used in a
qualified production activity
(determined without regard to the
second sentence of subparagraph (D)) by
any person at any time during the
period beginning on January 1, 2021,
and ending on May 12, 2025.
``(ii) Written binding contracts.--
For purposes of determining under
clause (i)--
``(I) whether such property
is acquired before the period
described in subparagraph
(A)(v), such property shall be
treated as acquired not later
than the date on which the
taxpayer enters into a written
binding contract for such
acquisition, and
``(II) whether such property
is acquired after such period,
such property shall be treated
as acquired not earlier than
such date.
``(C) Exclusion of office space, etc.--The
term `qualified production property' shall not
include that portion of any nonresidential real
property which is used for offices,
administrative services, lodging, parking,
sales activities, research activities, software
engineering activities, or other functions
unrelated to manufacturing, production, or
refining of tangible personal property.
``(D) Qualified production activity.--The
term `qualified production activity' means the
manufacturing, production, or refining of a
qualified product. The activities of any
taxpayer do not constitute manufacturing,
production, or refining of a qualified product
unless the activities of such taxpayer result
in a substantial transformation of the property
comprising the product.
``(E) Production.--The term `production'
shall not include activities other than
agricultural production and chemical
production.
``(F) Qualified product.--The term `qualified
product' means any tangible personal property.
``(G) Syndication.--For purposes of
subparagraph (A)(iv), rules similar to the
rules of subsection (k)(2)(E)(iii) shall apply.
``(3) Deduction allowed in computing minimum tax.--
For purposes of determining alternative minimum taxable
income under section 55, the deduction under section
167 for qualified production property shall be
determined under this section without regard to any
adjustment under section 56.
``(4) Coordination with certain other provisions.--
``(A) Other special depreciation
allowances.--The term `qualified production
property' shall not include any property to
which subsection (k), (l), or (m) applies. For
purposes of subsections (k)(7), (l)(3)(D), and
(m)(2)(B)(iii), qualified production property
to which this subsection applies shall be
treated as a separate class of property.
``(B) Alternative depreciation property.--The
term `qualified production property' shall not
include any property to which the alternative
depreciation system under subsection (g)
applies. For purposes of subsection (g)(7)(A),
qualified production property to which this
subsection applies shall be treated as separate
nonresidential real property.
``(5) Recapture.--If, at any time during the 10-year
period beginning on the date that any qualified
production property is placed in service by the
taxpayer, such property ceases to be used as described
in paragraph (2)(A)(ii) and is used by the taxpayer in
a productive use not described in paragraph
(2)(A)(ii)--
``(A) section 1245 shall be applied--
``(i) by treating such property as
having been disposed of by the taxpayer
as of the first time such property is
so used in a productive use not
described in paragraph (2)(A)(ii), and
``(ii) by treating the amount
described in subparagraph (B) of
section 1245(a)(1) with respect to such
disposition as being not less than the
amount described in subparagraph (A) of
such section, and
``(B) the basis of the taxpayer in such
property, and the taxpayer's allowance for
depreciation with respect to such property,
shall be appropriately adjusted to take into
account amounts recognized by reason of
subparagraph (A).
``(6) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this
subsection, including regulations or other guidance--
``(A) regarding what constitutes a
substantial transformation of property, and
``(B) providing for the application of
paragraph (5) with respect to a change in use
described in such paragraph by a transferee
following a fully or partially tax free
transfer of qualified production property.''.
(b) Treatment of Qualified Production Property as Section
1245 Property.--Section 1245(a)(3) is amended by striking
``or'' at the end of subparagraph (E), by striking the period
at the end of subparagraph (F) and inserting ``, or'', and by
adding at the end the following new subparagraph:
``(G) any qualified production property (as
defined in section 168(n)(2)).''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of the
enactment of this Act.

SEC. 111102. RENEWAL AND ENHANCEMENT OF OPPORTUNITY ZONES.

(a) Modification of Low-income Community Definition.--Section
1400Z-1(c)(1) is amended--
(1) by striking ``communities.--The term'' and
inserting the following: ``communities.--
``(A) In general.--The term'', and
(2) by adding at the end the following:
``(B) Modifications.--For purposes of
subparagraph (A), section 45D(e)(1) shall be
applied in subparagraph (B) thereof, by
substituting `70 percent' for `80 percent' each
place it appears.
``(C) Certain census tracts disallowed.--The
term `low-income community' shall not include
any population census tract if--
``(i) in the case of a tract not
located within a metropolitan area, the
median family income for such tract is
at least 125 percent of statewide
median family income, or
``(ii) in the case of a tract located
within a metropolitan area, the median
family income for such tract is at
least 125 percent of the metropolitan
area median family income.''.
(b) New Round of Qualified Opportunity Zone Designations.--
(1) In general.--Section 1400Z-1 is amended by adding
at the end the following new subsection:
``(g) New Round of Qualified Opportunity Zone Designations.--
``(1) In general.--In addition to designations under
subsection (b), and under rules similar to the rules of
such subsection, the Secretary shall designate tracts
nominated by the chief executive officers of States for
purposes of this section.
``(2) Number of designations; proportion of rural
areas designated.--
``(A) In general.--Of the low-income
communities within a State, the Secretary may
designate under this subsection not more than
25 percent as qualified opportunity zones, of
which at least the lesser of the following
shall be qualified opportunity zones which are
comprised entirely of a rural area:
``(i) The applicable percentage of
the total number of qualified
opportunity zone designations which may
be made within the State under this
subsection.
``(ii) All low-income communities
within the State which are comprised
entirely of a rural area.
``(B) Applicable percentage.--For purposes of
this paragraph, the applicable percentage shall
be, for any calendar year during which a
designation is made, the greater of--
``(i) 33 percent, or
``(ii) the percentage of the United
States population living within a rural
area for the preceding calendar year.
``(3) Rural area.--Whether a low-income community is
comprised entirely of a rural area shall be determined
by the Secretary in consultation with the Secretary of
Agriculture. For purposes of this subsection, the term
`rural area' has the meaning given such term by section
343(a)(13)(A) of the Consolidated Farm and Rural
Development Act.
``(4) Period for which designation is in effect.--A
designation as a qualified opportunity zone under this
subsection shall remain in effect for the period
beginning on January 1, 2027, and ending on December
31, 2033.
``(5) Contiguous tracts not eligible.--Subsection (e)
shall not apply to designations made under this
subsection.''.
(2) Election with respect to new round of zones.--
Section 1400Z-2(a)(2)(B) is amended by striking
``December 31, 2026'' and inserting ``December 31,
2033''.
(3) Year of inclusion.--Section 1400Z-2(b)(1)(B) is
amended to read as follows:
``(B)(i) December 31, 2026, in the case of an
amount invested before January 1, 2027, and
``(ii) December 31, 2033, in the case of an
amount invested after December 31, 2026, and
before January 1, 2034.''.
(4) Winding down initial zone designations.--Section
1400Z-1(f) is amended--
(A) by striking ``and ending'' and all that
follows and inserting the following: ``and
ending on December 31, 2026.'', and
(B) by striking ``A designation'' and
inserting ``Except as provided in subsection
(g)(4), a designation''.
(c) Modification of Opportunity Zone Investment Incentives.--
(1) Consolidated basis increases; rural zone basis
increase.--Section 1400Z-2(b)(2)(B) is amended by
adding at the end the following new clauses:
``(v) Consolidated basis increase for
investments after 2026.--In the case of
investments made after December 31,
2026--
``(I) clauses (iii) and (iv)
shall not apply, and
``(II) for any such
investment held by the taxpayer
for at least 5 years, the basis
of such adjustment shall be
increased by an amount equal to
10 percent of the amount of
gain deferred by reason of
subsection (a)(1)(A).
``(vi) Special rule for rural
opportunity funds.--Clause (v) shall be
applied by substituting `30 percent'
for `10 percent' in the case of an
investment in a qualified rural
opportunity fund.
``(vii) Qualified rural opportunity
fund.--For purposes of clause (vi), a
`qualified rural opportunity fund'
means a qualified opportunity fund that
holds at least 90 percent of its assets
in qualified opportunity zone property
which--
``(I) is qualified
opportunity zone business
property substantially all of
the use of which, during
substantially all of the fund's
holding period for such
property, was in a qualified
opportunity zone comprised
entirely of a rural area, or
``(II) is qualified
opportunity zone stock, or a
qualified opportunity zone
partnership interest, in a
qualified opportunity zone
business in which substantially
all of the tangible property
owned or leased is qualified
opportunity zone business
property described in
subsection (d)(3)(A)(i) and
substantially all the use of
which is in a qualified
opportunity zone comprised
entirely of a rural area.
For purposes of the preceding sentence,
property held in the fund shall be
measured under rules similar to the
rules of subsection (d)(1).''.
(2) Limited treatment of ordinary income.--Section
1400Z-2(a) is amended by adding at the end the
following new paragraph:
``(3) Special rule for ordinary income.--In the case
of any ordinary income of the taxpayer for the taxable
year--
``(A) the taxpayer may elect the application
of paragraph (1) with respect to so much of
ordinary income as does not exceed $10,000
(reduced by the amount of any income with
respect to which an election pursuant to this
paragraph has previously been made), and
``(B) subsection (b)(2)(B) shall not apply to
the investment with respect to such
election.''.
(3) Special rule for improvement of existing
structures in rural areas, including for data
centers.--Section 1400Z-2(d)(2)(D)(ii) is amended by
inserting ``(50 percent of such adjusted basis in the
case of property in a qualified opportunity zone
comprised entirely of a rural area)'' after ``the
adjusted basis of such property''.
(d) Information Reporting on Qualified Opportunity Funds and
Qualified Rural Opportunity Funds.--
(1) Filing requirements for funds and investors.--
Subpart A of part III of subchapter A of chapter 61 is
amended by inserting after section 6039J the following
new sections:

``SEC. 6039K. RETURNS WITH RESPECT TO QUALIFIED OPPORTUNITY FUNDS AND
QUALIFIED RURAL OPPORTUNITY FUNDS.

``(a) In General.--Every qualified opportunity fund shall
file an annual return (at such time and in such manner as the
Secretary may prescribe) containing the information described
in subsection (b).
``(b) Information From Qualified Opportunity Funds.--The
information described in this subsection is--
``(1) the name, address, and taxpayer identification
number of the qualified opportunity fund,
``(2) whether the qualified opportunity fund is
organized as a corporation or a partnership,
``(3) the value of the total assets held by the
qualified opportunity fund as of each date described in
section 1400Z-2(d)(1),
``(4) the value of all qualified opportunity zone
property held by the qualified opportunity fund on each
such date,
``(5) with respect to each investment held by the
qualified opportunity fund in qualified opportunity
zone stock or a qualified opportunity zone partnership
interest--
``(A) the name, address, and taxpayer
identification number of the corporation in
which such stock is held or the partnership in
which such interest is held, as the case may
be,
``(B) each North American Industry
Classification System (NAICS) code that applies
to the trades or businesses conducted by such
corporation or partnership,
``(C) the population census tracts in which
the qualified opportunity zone business
property of such corporation or partnership is
located,
``(D) the amount of the investment in such
stock or partnership interest as of each date
described in section 1400Z-2(d)(1),
``(E) the value of tangible property held by
such corporation or partnership on each such
date which is owned by such corporation or
partnership,
``(F) the value of tangible property held by
such corporation or partnership on each such
date which is leased by such corporation or
partnership,
``(G) the approximate number of residential
units (if any) for any real property held by
such corporation or partnership, and
``(H) the approximate average monthly number
of full-time equivalent employees of such
corporation or partnership for the year (within
numerical ranges identified by the Secretary)
or such other indication of the employment
impact of such corporation or partnership as
determined appropriate by the Secretary,
``(6) with respect to the items of qualified
opportunity zone business property held by the
qualified opportunity fund--
``(A) the North American Industry
Classification System (NAICS) code that applies
to the trades or businesses in which such
property is held,
``(B) the population census tract in which
the property is located,
``(C) whether the property is owned or
leased,
``(D) the aggregate value of the items of
qualified opportunity zone property held by the
qualified opportunity fund as of each date
described in section 1400Z-2(d)(1), and
``(E) in the case of real property, number of
residential units (if any),
``(7) the approximate average monthly number of full-
time equivalent employees for the year of the trades or
businesses of the qualified opportunity fund in which
qualified opportunity zone business property is held
(within numerical ranges identified by the Secretary)
or such other indication of the employment impact of
such trades or businesses as determined appropriate by
the Secretary,
``(8) with respect to each person who disposed of an
investment in the qualified opportunity fund during the
year--
``(A) the name and taxpayer identification
number of such person,
``(B) the date or dates on which the
investment disposed was acquired, and
``(C) the date or dates on which any such
investment was disposed and the amount of the
investment disposed, and
``(9) such other information as the Secretary may
require.
``(c) Statement Required to Be Furnished to Investors.--Every
person required to make a return under subsection (a) shall
furnish to each person whose name is required to be set forth
in such return by reason of subsection (b)(8) a written
statement showing--
``(1) the name, address and phone number of the
information contact of the person required to make such
return, and
``(2) the information required to be shown on such
return by reason of subsection (b)(8) with respect to
the person whose name is required to be so set forth.
``(d) Definitions.--For purposes of this section--
``(1) In general.--Any term used in this section
which is also used in subchapter Z of chapter 1 shall
have the meaning given such term under such subchapter.
``(2) Full-time equivalent employees.--The term
`full-time equivalent employees' means, with respect to
any month, the sum of--
``(A) the number of full-time employees (as
defined in section 4980H(c)(4)) for the month,
plus
``(B) the number of employees determined
(under rules similar to the rules of section
4980H(c)(2)(E)) by dividing the aggregate
number of hours of service of employees who are
not full-time employees for the month by 120.
``(e) Application to Qualified Rural Opportunity Funds.--
Every qualified rural opportunity fund (as defined in section
1400Z-2(b)(2)(B)(vii)) shall file the annual return required
under subsection (a), and the statements required under
subsection (c), applied--
``(1) by substituting `qualified rural opportunity'
for `qualified opportunity' each place it appears,
``(2) by substituting `section 1400Z-2(b)(2)(B)(vii)'
for `section 1400Z-2(d)(1)' each place it appears, and
``(3) by treating any reference (after the
application of paragraph (1)) to qualified rural
opportunity zone stock, a qualified rural opportunity
zone partnership interest, a qualified rural
opportunity zone business, or qualified opportunity
zone business property as stock, an interest, a
business, or property, respectively, described in (I)
or (II), as the case may be, of section 1400Z-
2(b)(2)(B)(vii).

``SEC. 6039L. INFORMATION REQUIRED FROM QUALIFIED OPPORTUNITY ZONE
BUSINESSES AND QUALIFIED RURAL OPPORTUNITY ZONE
BUSINESSES.

``(a) In General.--Every applicable qualified opportunity
zone business shall furnish to the qualified opportunity fund
described in subsection (b) a written statement in such manner
and setting forth such information as the Secretary may by
regulations prescribe for purposes of enabling such qualified
opportunity fund to meet the requirements of section
6039K(b)(5).
``(b) Applicable Qualified Opportunity Zone Business.--For
purposes of subsection (a), the term `applicable qualified
opportunity zone business' means any qualified opportunity zone
business--
``(1) which is a trade or business of a qualified
opportunity fund,
``(2) in which a qualified opportunity fund holds
qualified opportunity zone stock, or
``(3) in which a qualified opportunity fund holds a
qualified opportunity zone partnership interest.
``(c) Other Terms.--Any term used in this section which is
also used in subchapter Z of chapter 1 shall have the meaning
given such term under such subchapter.
``(d) Application to Qualified Rural Opportunity
Businesses.--Every applicable qualified rural opportunity zone
business (as defined in subsection (b) determined after
application of the substitutions described in this sentence)
shall furnish the written statement required under subsection
(a), applied--
``(1) by substituting `qualified rural opportunity'
for `qualified opportunity' each place it appears, and
``(2) by treating any reference (after the
application of paragraph (1)) to qualified rural
opportunity zone stock, a qualified rural opportunity
zone partnership interest, or a qualified rural
opportunity zone business as stock, an interest, or a
business, respectively, described in (I) or (II), as
the case may be, of section 1400Z-2(b)(2)(B)(vii).''.
(2) Penalties.--
(A) In general.--Part II of subchapter B of
chapter 68 is amended by inserting after
section 6725 the following new section:

``SEC. 6726. FAILURE TO COMPLY WITH INFORMATION REPORTING REQUIREMENTS
RELATING TO QUALIFIED OPPORTUNITY FUNDS AND
QUALIFIED RURAL OPPORTUNITY FUNDS.

``(a) In General.--In the case of any person required to file
a return under section 6039K fails to file a complete and
correct return under such section in the time and in the manner
prescribed therefor, such person shall pay a penalty of $500
for each day during which such failure continues.
``(b) Limitation.--
``(1) In general.--The maximum penalty under this
section on failures with respect to any 1 return shall
not exceed $10,000.
``(2) Large qualified opportunity funds.--In the case
of any failure described in subsection (a) with respect
to a fund the gross assets of which (determined on the
last day of the taxable year) are in excess of
$10,000,000, paragraph (1) shall be applied by
substituting `$50,000' for `$10,000'.
``(c) Penalty in Cases of Intentional Disregard.--If a
failure described in subsection (a) is due to intentional
disregard, then--
``(1) subsection (a) shall be applied by substituting
`$2,500' for `$500',
``(2) subsection (b)(1) shall be applied by
substituting `$50,000' for `$10,000', and
``(3) subsection (b)(2) shall be applied by
substituting `$250,000' for `$50,000'.
``(d) Inflation Adjustment.--
``(1) In general.--In the case of any failure
relating to a return required to be filed in a calendar
year beginning after 2025, each of the dollar amounts
in subsections (a), (b), and (c) shall be increased by
an amount equal to such dollar amount multiplied by the
cost-of-living adjustment determined under section
1(f)(3) for the calendar year determined by
substituting `calendar year 2024' for `calendar year
2016' in subparagraph (A)(ii) thereof.
``(2) Rounding.--
``(A) In general.--If the $500 dollar amount
in subsection (a) and (c)(1) or the $2,500
amount in subsection (c)(1), after being
increased under paragraph (1), is not a
multiple of $10, such dollar amount shall be
rounded to the next lowest multiple of $10.
``(B) Asset threshold.--If the $10,000,000
dollar amount in subsection (b)(2), after being
increased under paragraph (1), is not a
multiple of $10,000, such dollar amount shall
be rounded to the next lowest multiple of
$10,000.
``(C) Other dollar amounts.--If any dollar
amount in subsection (b) or (c) (other than any
amount to which subparagraph (A) or (B)
applies), after being increased under paragraph
(1), is not a multiple of $1,000, such dollar
amount shall be rounded to the next lowest
multiple of $1,000.''.
(B) Information required to be sent to other
taxpayers.--Section 6724(d)(2) is amended--
(i) by striking ``or'' at the end of
subparagraph (KK),
(ii) by striking the period at the
end of the subparagraph (LL) and
inserting a comma, and
(iii) by inserting after subparagraph
(LL) the following new subparagraphs:
``(MM) section 6039K(c) (relating to
disposition of qualified opportunity fund
investments), or
``(NN) section 6039L (relating to information
required from certain qualified opportunity
zone businesses and qualified rural opportunity
zone businesses).''.
(3) Electronic filing.--Section 6011(e) is amended by
adding at the end the following new paragraph:
``(8) Qualified opportunity funds and qualified rural
opportunity funds.--Notwithstanding paragraphs (1) and
(2), any return filed by a qualified opportunity fund
or qualified rural opportunity fund shall be filed on
magnetic media or other machine-readable form.''.
(4) Clerical amendments.--
(A) The table of sections for subpart A of
part III of subchapter A of chapter 61 is
amended by inserting after the item relating to
section 6039J the following new items:

``Sec. 6039K. Returns with respect to qualified opportunity funds and
qualified rural opportunity funds.
``Sec. 6039L. Information required from qualified opportunity zone
businesses and qualified rural opportunity zone
businesses.''.''.

(B) The table of sections for part II of
subchapter B of chapter 68 is amended by
inserting after the item relating to section
6725 the following new item:

``Sec. 6726. Failure to comply with information reporting requirements
relating to qualified opportunity funds and qualified rural
opportunity funds.''.
(5) Effective date.--The amendments made by this
subsection shall apply to taxable years beginning after
the date of the enactment of this Act.
(e) Secretary Reporting of Data on Opportunity Zone and Rural
Opportunity Zone Tax Incentives.--
(1) In general.--As soon as practical after the date
of the enactment of this Act, and annually thereafter,
the Secretary of the Treasury, or the Secretary's
delegate (referred to in this section as the
``Secretary''), in consultation with the Director of
the Bureau of the Census and such other agencies as the
Secretary determines appropriate, shall make publicly
available a report on qualified opportunity funds.
(2) Information included.--The report required under
paragraph (1) shall include, to the extent available,
the following information:
(A) The number of qualified opportunity
funds.
(B) The aggregate dollar amount of assets
held in qualified opportunity funds.
(C) The aggregate dollar amount of
investments made by qualified opportunity funds
in qualified opportunity fund property, stated
separately for each North American Industry
Classification System (NAICS) code.
(D) The percentage of population census
tracts designated as qualified opportunity
zones that have received qualified opportunity
fund investments.
(E) For each population census tract
designated as a qualified opportunity zone, the
approximate average monthly number of full-time
equivalent employees of the qualified
opportunity zone businesses in such qualified
opportunity zone for the preceding 12-month
period (within numerical ranges identified by
the Secretary) or such other indication of the
employment impact of such qualified opportunity
fund businesses as determined appropriate by
the Secretary.
(F) The percentage of the total amount of
investments made by qualified opportunity funds
in--
(i) qualified opportunity zone
property which is real property; and
(ii) other qualified opportunity zone
property.
(G) For each population census tract, the
aggregate approximate number of residential
units resulting from investments made by
qualified opportunity funds in real property.
(H) The aggregate dollar amount of
investments made by qualified opportunity funds
in each population census tract.
(3) Additional information.--
(A) In general.--Beginning with the report
submitted under paragraph (1) for the 6th year
after the date of the enactment of this Act,
the Secretary shall include in such report the
impacts and outcomes of a designation of a
population census tract as a qualified
opportunity zone as measured by economic
indicators, such as job creation, poverty
reduction, new business starts, and other
metrics as determined by the Secretary.
(B) Semi-decennial information.--
(i) In general.--In the case of any
report submitted under paragraph (1) in
the 6th year or the 11th year after the
date of the enactment of this Act, the
Secretary shall include the following
information:
(I) For population census
tracts designated as a
qualified opportunity zone, a
comparison (based on aggregate
information) of the factors
listed in clause (iii) between
the 5-year period ending on the
date of the enactment of Public
Law 115-97 and the most recent
5-year period for which data is
available.
(II) For population census
tracts designated as a
qualified opportunity zone, a
comparison (based on aggregate
information) of the factors
listed in clause (iii) for the
most recent 5-year period for
which data is available between
such population census tracts
and a similar population census
tracts that were not designated
as a qualified opportunity
zone.
(ii) Control groups.--For purposes of
clause (i), the Secretary may combine
population census tracts into such
groups as the Secretary determines
appropriate for purposes of making
comparisons.
(iii) Factors listed.--The factors
listed in this clause are the
following:
(I) The unemployment rate.
(II) The number of persons
working in the population
census tract, including the
percentage of such persons who
were not residents in the
population census tract in the
preceding year.
(III) Individual, family, and
household poverty rates.
(IV) Median family income of
residents of the population
census tract.
(V) Demographic information
on residents of the population
census tract, including age,
income, education, race, and
employment.
(VI) The average percentage
of income of residents of the
population census tract spent
on rent annually.
(VII) The number of
residences in the population
census tract.
(VIII) The rate of home
ownership in the population
census tract.
(IX) The average value of
residential property in the
population census tract.
(X) The number of affordable
housing units in the population
census tract.
(XI) The number and
percentage of residents in the
population census tract that
were not employed for the
preceding year.
(XII) The number of new
business starts in the
population census tract.
(XIII) The distribution of
employees in the population
census tract by North American
Industry Classification System
(NAICS) code.
(4) Protection of identifiable return information.--
In making reports required under this subsection, the
Secretary--
(A) shall establish appropriate procedures to
ensure that any amounts reported do not
disclose taxpayer return information that can
be associated with any particular taxpayer or
competitive or proprietary information, and
(B) if necessary to protect taxpayer return
information, may combine information required
with respect to individual population census
tracts into larger geographic areas.
(5) Definitions.--Any term used in this subsection
which is also used in subchapter Z of chapter 1 of the
Internal Revenue Code of 1986 shall have the meaning
given such term under such subchapter.
(6) Reports on qualified rural opportunity funds.--
The Secretary shall make publicly available, with
respect to qualified rural opportunity funds, separate
reports as required under this subsection, applied--
(A) by substituting ``qualified rural
opportunity'' for ``qualified opportunity''
each place it appears,
(B) by substituting a reference to this Act
for ``Public Law 115-97'', and
(C) by treating any reference (after the
application of subparagraph (A)) to qualified
rural opportunity zone stock, qualified rural
opportunity zone partnership interest,
qualified rural opportunity zone business, or
qualified opportunity zone business property as
stock, interest, business, or property,
respectively, described in (I) or (II), as the
case may be, of section 1400Z-2(b)(2)(B)(vii)
of the Internal Revenue Code of 1986.

SEC. 111103. INCREASED DOLLAR LIMITATIONS FOR EXPENSING OF CERTAIN
DEPRECIABLE BUSINESS ASSETS.

(a) In General.--Section 179(b) is amended--
(1) in paragraph (1), by striking ``$1,000,000'' and
inserting ``$2,500,000'' , and
(2) in paragraph (2), by striking ``$2,500,000'' and
inserting ``$4,000,000''.
(b) Conforming Amendments.--Section 179(b)(6)(A) is amended--
(1) by inserting ``(2025 in the case of the dollar
amounts in paragraphs (1) and (2))'' after ``In the
case of any taxable year beginning after 2018'', and
(2) in clause (ii), by striking ``determined by
substituting `calendar year 2017' for `calendar year
2016' in subparagraph (A)(ii) thereof.'' and inserting
``determined by substituting in subparagraph (A)(ii)
thereof--
``(I) in the case of amounts
in paragraphs (1) and (2),
`calendar year 2024' for
`calendar year 2016', and
``(II) in the case of the
amount in paragraph (5)(A),
`calendar year 2017' for
`calendar year 2016'.''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service in taxable years
beginning after December 31, 2024.

SEC. 111104. REPEAL OF REVISION TO DE MINIMIS RULES FOR THIRD PARTY
NETWORK TRANSACTIONS.

(a) Reinstatement of Exception for De Minimis Payments as in
Effect Prior to Enactment of American Rescue Plan Act of
2021.--
(1) In general.--Section 6050W(e) is amended to read
as follows:
``(e) Exception for De Minimis Payments by Third Party
Settlement Organizations.--A third party settlement
organization shall be required to report any information under
subsection (a) with respect to third party network transactions
of any participating payee only if--
``(1) the amount which would otherwise be reported
under subsection (a)(2) with respect to such
transactions exceeds $20,000, and
``(2) the aggregate number of such transactions
exceeds 200.''.
(2) Effective date.--The amendment made by this
subsection shall take effect as if included in section
9674 of the American Rescue Plan Act.
(b) Application of De Minimis Rule for Third Party Network
Transactions to Backup Withholding.--
(1) In general.--Section 3406(b) is amended by adding
at the end the following new paragraph:
``(8) Other reportable payments include payments in
settlement of third party network transactions only
where aggregate transactions exceed reporting threshold
for the calendar year.--
``(A) In general.--Any payment in settlement
of a third party network transaction required
to be shown on a return required under section
6050W which is made during any calendar year
shall be treated as a reportable payment only
if--
``(i) the aggregate number of
transactions with respect to the
participating payee during such
calendar year exceeds the number of
transactions specified in section
6050W(e)(2), and
``(ii) the aggregate amount of
transactions with respect to the
participating payee during such
calendar year exceeds the dollar amount
specified in section 6050W(e)(1) at the
time of such payment.
``(B) Exception if third party network
transactions made in prior year were
reportable.--Subparagraph (A) shall not apply
with respect to payments to any participating
payee during any calendar year if one or more
payments in settlement of third party network
transactions made by the payor to the
participating payee during the preceding
calendar year were reportable payments.''.
(2) Effective date.--The amendment made by this
subsection shall apply to calendar years beginning
after December 31, 2024.

SEC. 111105. INCREASE IN THRESHOLD FOR REQUIRING INFORMATION REPORTING
WITH RESPECT TO CERTAIN PAYEES.

(a) In General.--Section 6041(a) is amended by striking
``$600'' and inserting ``$2,000''.
(b) Inflation Adjustment.--Section 6041 is amended by adding
at the end the following new subsection:
``(h) Inflation Adjustment.--In the case of any calendar year
after 2026, the dollar amount in subsection (a) shall be
increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) 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 any increase under the preceding sentence is not a multiple
of $100, such increase shall be rounded to the nearest multiple
of $100.''.
(c) Application to Reporting on Remuneration for Services.--
Section 6041A(a)(2) is amended by striking ``is $600 or more''
and inserting ``equals or exceeds the dollar amount in effect
for such calendar year under section 6041(a)''.
(d) Application to Backup Withholding.--Section 3406(b)(6) is
amended--
(1) by striking ``$600'' in subparagraph (A) and
inserting ``the dollar amount in effect for such
calendar year under section 6041(a)'', and
(2) by striking ``only where aggregate for calendar
year is $600 or more'' in the heading and inserting
``only if in excess of threshold''.
(e) Conforming Amendments.--
(1) The heading of section 6041(a) is amended by
striking ``of $600 or More'' and inserting ``Exceeding
Threshold''.
(2) Section 6041(a) is amended by striking ``taxable
year'' and inserting ``calendar year''.
(f) Effective Date.--The amendments made by this section
shall apply with respect to payments made after December 31,
2025.

SEC. 111106. REPEAL OF EXCISE TAX ON INDOOR TANNING SERVICES.

(a) In General.--Subtitle D is amended by striking chapter 49
and by striking the item relating to such chapter in the table
of chapters of such subtitle.
(b) Effective Date.--The amendments made by this section
shall apply to services performed after the date of the
enactment of this Act.

SEC. 111107. EXCLUSION OF INTEREST ON LOANS SECURED BY RURAL OR
AGRICULTURAL REAL PROPERTY.

(a) In General.--Part III of subchapter B of chapter 1 is
amended by inserting after section 139I the following new
section:

``SEC. 139J. INTEREST ON LOANS SECURED BY RURAL OR AGRICULTURAL REAL
PROPERTY.

``(a) In General.--Gross income shall not include 25 percent
of the interest received by a qualified lender on any qualified
real estate loan.
``(b) Qualified Lender.--For purposes of this section, the
term `qualified lender' means--
``(1) any bank or savings association the deposits of
which are insured under the Federal Deposit Insurance
Act (12 U.S.C. 1811 et seq.),
``(2) any State- or federally-regulated insurance
company,
``(3) any entity wholly owned, directly or
indirectly, by a company that is treated as a bank
holding company for purposes of section 8 of the
International Banking Act of 1978 (12 U.S.C. 3106) if--
``(A) such entity is organized, incorporated,
or established under the laws of the United
States or any State of the United States, and
``(B) the principal place of business of such
entity is in the United States (including any
territory of the United States),
``(4) any entity wholly owned, directly or
indirectly, by a company that is considered an
insurance holding company under the laws of any State
if such entity satisfies the requirements described in
subparagraphs (A) and (B) of paragraph (3), and
``(5) with respect to interest received on a
qualified real estate loan secured by real estate
described in subsection (c)(3)(A), any federally
chartered instrumentality of the United States
established under section 8.1(a) of the Farm Credit Act
of 1971 (12 U.S.C. 2279aa-1(a)).
``(c) Qualified Real Estate Loan.--For purposes of this
section--
``(1) In general.--The term `qualified real estate
loan' means any loan--
``(A) secured by--
``(i) rural or agricultural real
estate, or
``(ii) a leasehold mortgage (with a
status as a lien) on rural or
agricultural real estate,
``(B) made to a person other than a specified
foreign entity (as defined in section
7701(a)(51)), and
``(C) made after the date of the enactment of
this section and before January 1, 2029.
For purposes of the preceding sentence, the
determination of whether property securing such loan is
rural or agricultural real estate shall be made as of
the time the interest income on such loan is accrued.
``(2) Refinancings.--For purposes of subparagraphs
(A) and (C) of paragraph (1), a loan shall not be
treated as made after the date of the enactment of this
section to the extent that the proceeds of such loan
are used to refinance a loan which was made on or
before the date of the enactment of this section (or,
in the case of any series of refinancings, the original
loan was made on or before such date).
``(3) Rural or agricultural real estate.--The term
`rural or agricultural real estate' means--
``(A) any real property which is
substantially used for the production of one or
more agricultural products,
``(B) any real property which is
substantially used in the trade or business of
fishing or seafood processing, and
``(C) any aquaculture facility.
Such term shall not include any property which is not
located in a State or a possession of the United
States.
``(4) Aquaculture facility.--The term `aquaculture
facility' means any land, structure, or other
appurtenance that is used for aquaculture (including
any hatchery, rearing pond, raceway, pen, or
incubator).
``(d) Coordination With Section 265.--Qualified real estate
loans shall be treated as obligations described in section
265(a)(2) the interest on which is wholly exempt from the taxes
imposed by this subtitle.''.
(b) Clerical Amendment.--The table of sections for part III
of subchapter B of chapter 1 is amended by inserting after the
item relating to section 139I the following new item:

``Sec. 139J. Interest on loans secured by rural or agricultural real
property.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.

SEC. 111108. TREATMENT OF CERTAIN QUALIFIED SOUND RECORDING
PRODUCTIONS.

(a) Election To Treat Costs as Expenses.--Section 181(a)(1)
is amended by striking ``qualified film or television
production, and any qualified live theatrical production,'' and
inserting ``qualified film or television production, any
qualified live theatrical production, and any qualified sound
recording production''.
(b) Dollar Limitation.--Section 181(a)(2) is amended by
adding at the end the following new subparagraph:
``(C) Qualified sound recording production.--
Paragraph (1) shall not apply to so much of the
aggregate cost of any qualified sound recording
production, or to so much of the aggregate,
cumulative cost of all such qualified sound
recording productions in the taxable year, as
exceeds $150,000.''.
(c) No Other Deduction or Amortization Deduction Allowable.--
Section 181(b) is amended by striking ``qualified film or
television production or any qualified live theatrical
production'' and inserting ``qualified film or television
production, any qualified live theatrical production, or any
qualified sound recording production''.
(d) Election.--Section 181(c)(1) is amended by striking
``qualified film or television production or any qualified live
theatrical production'' and inserting ``qualified film or
television production, any qualified live theatrical
production, or any qualified sound recording production''.
(e) Qualified Sound Recording Production Defined.--Section
181 is amended by redesignating subsections (f) and (g) as
subsections (g) and (h), respectively, and by inserting after
subsection (e) the following new subsection:
``(f) Qualified Sound Recording Production.--For purposes of
this section, the term `qualified sound recording production'
means a sound recording (as defined in section 101 of title 17,
United States Code) produced and recorded in the United
States.''.
(f) Application of Termination.--Section 181(g) is amended by
striking ``qualified film and television productions or
qualified live theatrical productions'' and inserting
``qualified film and television productions, qualified live
theatrical productions, and qualified sound recording
productions''.
(g) Bonus Depreciation.--
(1) Qualified sound recording production as qualified
property.--Section 168(k)(2)(A)(i), as amended by the
preceding provisions of this Act, is amended--
(A) by striking ``or'' at the end of
subclause (IV), by striking ``and'' and
inserting ``or'' at the end of subclause (V),
and by inserting after subclause (V) the
following:
``(VI) which is a qualified
sound recording production (as
defined in subsection (f) of
section 181) which is placed in
service before January 1, 2029,
for which a deduction would
have been allowable under
section 181 without regard to
subsections (a)(2) and (h) of
such section or this
subsection, and'', and
(B) in subclauses (IV) and (V) (as so
amended) by striking ``without regard to
subsections (a)(2) and (g)'' both places it
appears and inserting ``without regard to
subsections (a)(2) and (h)''.
(2) Production placed in service.--Section
168(k)(2)(H) is amended by striking ``and'' at the end
of clause (i), by striking the period at the end of
clause (ii) and inserting ``, and'', and by adding
after clause (ii) the following:
``(iii) a qualified sound recording
production shall be considered to be
placed in service at the time of
initial release or broadcast.''.
(h) Conforming Amendments.--
(1) The heading for section 181 is amended to read as
follows: ``treatment of certain qualified
productions.''.
(2) The table of sections for part VI of subchapter B
of chapter 1 is amended by striking the item relating
to section 181 and inserting the following new item:

``Sec. 181. Treatment of certain qualified productions.''.
(i) Effective Date.--The amendments made by this section
shall apply to productions commencing in taxable years ending
after the date of the enactment of this Act.

SEC. 111109. MODIFICATIONS TO LOW-INCOME HOUSING CREDIT.

(a) State Housing Credit Ceiling Increase for Low-income
Housing Credit.--
(1) In general.--Section 42(h)(3)(I) is amended--
(A) by striking ``and 2021,'' and inserting
``2021, 2026, 2027, 2028, and 2029,'', and
(B) by striking ``2018, 2019, 2020, and
2021'' in the heading and inserting ``certain
calendar years''.
(2) Effective date.--The amendments made by this
subsection shall apply to calendar years after 2025.
(b) Tax-exempt Bond Financing Requirement.--
(1) In general.--Section 42(h)(4) is amended by
striking subparagraph (B) and inserting the following:
``(B) Special rule where minimum percent of
buildings is financed with tax-exempt bonds
subject to volume cap.--For purposes of
subparagraph (A), paragraph (1) shall not apply
to any portion of the credit allowable under
subsection (a) with respect to a building if--
``(i) 50 percent or more of the
aggregate basis of such building and
the land on which the building is
located is financed by 1 or more
obligations described in subparagraph
(A), or
``(ii)(I) 25 percent or more of the
aggregate basis of such building and
the land on which the building is
located is financed by 1 or more
qualified obligations, and
``(II) 1 or more of such qualified
obligations--
``(aa) are part of an issue
the issue date of which is
after December 31, 2025, and
``(bb) provide the financing
for not less than 5 percent of
the aggregate basis of such
building and the land on which
the building is located.
``(C) Qualified obligation.--For purposes of
subparagraph (B)(ii), the term `qualified
obligation' means an obligation which is
described in subparagraph (A) and which is part
of an issue the issue date of which is before
January 1, 2030.''.
(2) Effective date.--
(A) In general.--The amendment made by this
subsection shall apply to buildings placed in
service in taxable years beginning after
December 31, 2025.
(B) Rehabilitation expenditures treated as
separate new building.--In the case of any
building with respect to which any expenditures
are treated as a separate new building under
section 42(e) of the Internal Revenue Code of
1986, for purposes of subparagraph (A), both
the existing building and the separate new
building shall be treated as having been placed
in service on the date such expenditures are
treated as placed in service under section
42(e)(4) of such Code.
(c) Temporary Inclusion of Indian Areas and Rural Areas as
Difficult Development Areas for Purposes of Certain
Buildings.--
(1) In general.--Section 42(d)(5)(B)(iii)(I) is
amended by inserting before the period the following:
``, and, in the case of buildings placed in service
after December 31, 2025 and before January 1, 2030, any
Indian area or rural area''.
(2) Indian area; rural area.--Section
42(d)(5)(B)(iii) is amended by redesignating subclause
(II) as subclause (IV) and by inserting after subclause
(I) the following new subclauses:
``(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))).
``(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).''.
(3) Eligible buildings.--Section 42(d)(5)(B)(iii), as
amended by paragraph (2), is further amended by adding
at the end the following new subclause:
``(V) 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.''.
(4) Effective date.--The amendments made by this
subsection shall apply to buildings placed in service
after December 31, 2025.

SEC. 111110. INCREASED GROSS RECEIPTS THRESHOLD FOR SMALL MANUFACTURING
BUSINESSES.

(a) In General.--Section 448(c) is amended by redesignating
paragraph (4) as paragraph (5) and by inserting after paragraph
(3) the following new paragraph:
``(4) Gross receipts test for manufacturing
taxpayers.--In the case of a manufacturing taxpayer,
paragraph (1) shall be applied by substituting
`$80,000,000' for `$25,000,000'.''.
(b) Inflation Adjustment.--Section 448(c)(5) (as so
redesignated) is amended by striking ``the dollar amount in
paragraph (1) shall be increased'' and inserting ``the dollar
amounts in paragraphs (1) and (4) shall each be increased''.
(c) Manufacturing Taxpayer Defined.--Section 448(d) is
amended by redesignating paragraph (8) as paragraph (9) and by
inserting after paragraph (7) the following new paragraph:
``(8) Manufacturing taxpayer.--
``(A) In general.--The term `manufacturing
taxpayer' means a corporation or partnership
substantially all the gross receipts of which
during the 3-taxable-year period described in
subsection (c)(1) are derived from the lease,
rental, license, sale, exchange, or other
disposition of qualified products.
``(B) Qualified product.--For purposes of
subparagraph (A), the term `qualified product'
means a product that is both--
``(i) tangible personal property
which is not a food or beverage
prepared in the same building as a
retail establishment in which
substantially similar property is sold
to the public, and
``(ii) produced or manufactured by
the taxpayer in a manner which results
in a substantial transformation (within
the meaning of section 168(n)(2)(D)) of
the property comprising the product.
``(C) Aggregation rule.--Solely for purposes
of determining whether a taxpayer is a
manufacturing taxpayer under subparagraph (A)--
``(i) gross receipts shall be
determined under the rules of
paragraphs (2) and (3) of subsection
(c), and
``(ii) for purposes of subsection
(c)(2), in applying section 52(b), the
term `trade or business' shall include
any activity treated as a trade or
business under paragraph (5) or (6) of
section 469(c) (determined without
regard to the phrase `To the extent
provided in regulations' in such
paragraph (6)).''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 111111. GLOBAL INTANGIBLE LOW-TAXED INCOME DETERMINED WITHOUT
REGARD TO CERTAIN INCOME DERIVED FROM SERVICES
PERFORMED IN THE VIRGIN ISLANDS.

(a) In General.--Section 951A(c)(2)(A)(i) is amended by
striking ``and'' at the end of subclause (IV), by striking the
period at the end of subclause (V) and inserting ``, and'', and
by adding at the end the following new subclause:
``(VI) in the case of any
specified United States
shareholder, any qualified
Virgin Islands services
income.''.
(b) Definitions and Special Rules.--Section 951A(c)(2) is
amended by adding at the end the following new subparagraph:
``(C) Provisions related to qualified virgin
islands services income.--For purposes of
subparagraph (A)(i)(VI)--
``(i) Qualified virgin islands
services income.--The term `qualified
Virgin Islands services income' means
any gross income which satisfies all of
the following requirements:
``(I) Such gross income is
compensation for labor or
personal services performed in
the Virgin Islands by a
corporation formed under the
laws of the Virgin Islands.
``(II) Such gross income is
attributable to services
performed from within the
Virgin Islands by individuals
for the benefit of such
corporation.
``(III) Such gross income is
effectively connected with the
conduct of a trade or business
within the Virgin Islands.
``(ii) Specified united states
shareholder.--The term `specified
United States shareholder' means any
United States shareholder which is--
``(I) an individual, trust,
or estate, or
``(II) a closely held C
corporation (as defined in
section 469(j)(1)) if such
corporation acquired its direct
or indirect equity interest in
the foreign corporation which
derived the qualified Virgin
Islands services income before
December 31, 2023.
``(iii) Regulations.--The Secretary
shall prescribe such regulations or
other guidance as may be necessary or
appropriate to carry out this
subparagraph and subparagraph
(A)(i)(VI), including regulations or
other guidance to prevent the abuse of
such subparagraphs.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations beginning
after the date of the enactment of this Act, and to taxable
years of United States shareholders with or within which such
taxable years of foreign corporations end.

SEC. 111112. EXTENSION AND MODIFICATION OF CLEAN FUEL PRODUCTION
CREDIT.

(a) Prohibition on Foreign Feedstocks.--
(1) In general.--Section 45Z(f)(1)(A) is amended--
(A) in clause (i)(II)(bb), by striking
``and'' at the end,
(B) in clause (ii), by striking the period at
the end and inserting ``, and'', and
(C) by adding at the end the following new
clause:
``(iii) such fuel is exclusively
derived from a feedstock which was
produced or grown in the United States,
Mexico, or Canada.''.
(2) Effective date.--The amendments made by this
subsection shall apply to transportation fuel sold
after December 31, 2025.
(b) Determination of Emissions Rate.--
(1) In general.--Section 45Z(b)(1)(B) is amended by
adding at the end the following new clauses:
``(iv) Exclusion of indirect land use
changes.--Notwithstanding clauses (ii)
and (iii), the lifecycle greenhouse gas
emissions shall be adjusted as
necessary to exclude any emissions
attributed to indirect land use change.
Any such adjustment shall be based on
regulations or methodologies determined
by the Secretary in consultation with
the Administrator of the Environmental
Protection Agency and the Secretary of
Agriculture.
``(v) Animal manures.--For purposes
of the table described in clause (i),
with respect to any transportation
fuels which are derived from animal
manure, a distinct emissions rate shall
be provided with respect to each of the
specific feedstocks used to such
produce such fuel, which shall include
dairy manure, swine manure, poultry
manure, and such other sources as are
determined appropriate by the
Secretary.''.
(2) Conforming amendment.--Section 45Z(b)(1)(B)(i) is
amended by striking ``clauses (ii) and (iii)'' and
inserting ``clauses (ii), (iii), (iv), and (v)''.
(3) Effective date.--The amendments made by this
subsection shall apply to emissions rates published for
taxable years beginning after December 31, 2025.
(c) Extension of Clean Fuel Production Credit.--Section
45Z(g) is amended by striking ``December 31, 2027'' and
inserting ``December 31, 2031''.
(d) Restrictions Relating to Prohibited Foreign Entities.--
(1) In general.--Section 45Z(f) is amended by adding
at the end the following new paragraph:
``(8) Restrictions relating to prohibited foreign
entities.--
``(A) In general.--No credit determined under
subsection (a) shall be allowed under section
38 for any taxable year beginning after the
date of enactment of this paragraph if the
taxpayer is a specified foreign entity (as
defined in section 7701(a)(51)(B)).
``(B) Other prohibited foreign entities.--No
credit determined under subsection (a) shall be
allowed under section 38 for any taxable year
beginning after the date which is 2 years after
the date of enactment of this paragraph if the
taxpayer is a foreign-influenced entity (as
defined in section 7701(a)(51)(D)).''.
(2) Effective date.--The amendment made by this
subsection shall apply to taxable years beginning after
the date of enactment of this Act.

PART 3--INVESTING IN THE HEALTH OF RURAL AMERICA AND MAIN STREET

SEC. 111201. EXPANDING THE DEFINITION OF RURAL EMERGENCY HOSPITAL UNDER
THE MEDICARE PROGRAM.

(a) In General.--Section 1861(kkk) of the Social Security Act
(42 U.S.C. 1395x(kkk)) is amended--
(1) in paragraph (2)--
(A) in subparagraph (A), by striking ``the
detailed transition plan'' and all that follows
through ``such paragraph'' and inserting ``the
detailed transition plan described in clause
(i)(I) of such paragraph or the assessment of
health care needs described in clause (i)(II)
of such paragraph, as applicable,'';
(B) in subparagraph (D)(vi), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following new
subparagraph:
``(E) in the case of a facility described in
paragraph (3)(B)--
``(i) submits an application under section
1866(j) to enroll under this title as a rural
emergency hospital--
``(I) in the case that such facility
is located in a State that, as of
January 1, 2027, provides for the
licensing of rural emergency hospitals
under State or applicable local law (as
described in paragraph (5)(A)), not
later than December 31, 2027; and
``(II) in the case that such facility
is located in a State that, as of
January 1, 2027, does not provide for
the licensing of such rural emergency
hospitals under State or applicable
local law (as so described), not later
than the date that is 1 year after the
date on which such State begins to
provide for such licensing; and
``(ii) in the case that such facility is
located less than 35 miles away from the
nearest hospital, critical access hospital, or
rural emergency hospital as of the date on
which such facility submits an application
under section 1866(j) to enroll under this
title as a rural emergency hospital, beginning
not later than 1 year after the end of the
first full cost reporting period for which the
facility is so enrolled, demonstrates annually,
in a form and manner determined appropriate by
the Secretary, that more than 50 percent of the
services furnished for the most recent cost
reporting period (as determined by the
Secretary) were services described in paragraph
(1)(A)(i), as determined based on discharges of
individuals entitled to benefits under part A
or enrolled under part B during such cost
reporting period.'';
(2) in paragraph (3)--
(A) by redesignating subparagraphs (A) and
(B) as clauses (i) and (ii), respectively, and
adjusting the margins accordingly;
(B) by striking ``A facility'' and inserting:
``(A) In general.--A facility''; and
(C) by adding at the end the following new
subparagraph:
``(B) Additional facilities.--Beginning January 1,
2027, a facility described in this paragraph shall also
include a facility that--
``(i) at any time during the period beginning
January 1, 2014, and ending December 26, 2020--
``(I) was a critical access hospital;
or
``(II) was a subsection (d) hospital
(as defined in section 1886(d)(1)(B))
with not more than 50 beds located in a
county (or equivalent unit of local
government) in a rural area (as defined
in section 1886(d)(2)(D)); and
``(ii) as of December 27, 2020, was not
enrolled in the program under this title under
section 1866(j).''; and
(3) in paragraph (4)--
(A) in subparagraph (A)(i)--
(i) in subclause (IV), by striking
the period at the end and inserting ``;
and'';
(ii) by redesignating subclauses (I)
through (IV) as items (aa) through
(dd), respectively, and adjusting the
margins accordingly;
(iii) by striking ``including a
detailed'' and inserting ``including--
``(I) except in the case of a
facility described in paragraph (3)(B),
a detailed''; and
(iv) by adding at the end the
following new subclause:
``(II) in the case of a facility
described in paragraph (3)(B), an
assessment of the health care needs of
the county (or equivalent unit of local
government) in which such facility is
located, which shall include--
``(aa) a description of the
services furnished by the
facility during the period that
such facility was enrolled in
the program under this title
under section 1866(j);
``(bb) a description of the
reasons that the facility, as
of December 27, 2020, was no
longer so enrolled;
``(cc) the population of such
county (or equivalent unit);
``(dd) the percentage of such
population who are individuals
entitled to benefits under part
A or enrolled under part B; and
``(ee) a description of any
lack of access to health care
services experienced by such
individuals, and an explanation
of how reopening the facility
as a rural emergency hospital
would mitigate such lack of
access.''.
(b) Amendments to Payment Rules.--Section 1834(x) of the
Social Security Act (42 U.S.C. 1395m(x)) is amended--
(1) in paragraph (1), by inserting ``, except that,
in the case of a facility described in section
1861(kkk)(3)(B) that, as of the date on which such
facility submits an application under section 1866(j)
to enroll under this title as a rural emergency
hospital, is located less than 35 miles away from the
nearest hospital, critical access hospital, or rural
emergency hospital, such increase shall not apply''
before the period at the end; and
(2) in paragraph (2)(A), by inserting ``(other than a
facility described in section 1861(kkk)(3)(B) that, as
of the date on which such facility submits an
application under section 1866(j) to enroll under this
title as a rural emergency hospital, is located less
than 10 miles away from the nearest hospital, critical
access hospital, or rural emergency hospital)'' after
``rural emergency hospital''.

Subtitle C--Make America Win Again

PART 1--WORKING FAMILIES OVER ELITES

SEC. 112001. TERMINATION OF PREVIOUSLY-OWNED CLEAN VEHICLE CREDIT.

(a) In General.--Section 25E(g) is amended by striking
``December 31, 2032'' and inserting ``December 31, 2025''.
(b) Effective Date.--The amendment made by this section shall
apply to vehicles acquired after December 31, 2025.

SEC. 112002. TERMINATION OF CLEAN VEHICLE CREDIT.

(a) In General.--Section 30D is amended--
(1) by redesignating subsection (h) as subsection
(i), and
(2) in subsection (i), as so redesignated, by
striking ``December 31, 2032'' and inserting ``December
31, 2026''.
(b) Special Rule for Taxable Year 2026.--Section 30D is
amended by inserting after subsection (g) the following new
subsection:
``(h) Special Rule for Taxable Year 2026.--
``(1) In general.--With respect to any vehicle placed
in service after December 31, 2025, such vehicle shall
not be treated as a new clean vehicle for purposes of
this section if, during the period beginning on
December 31, 2009, and ending on December 31, 2025, the
number of covered vehicles manufactured by the
manufacturer of such vehicle which are sold for use in
the United States is greater than 200,000.
``(2) Covered vehicles.--For purposes of this
subsection, the term `covered vehicles' means--
``(A) with respect to vehicles placed in
service before January 1, 2023, new qualified
plug-in electric drive motor vehicles (as
defined in subsection (d)(1), as in effect on
December 31, 2022), and
``(B) new clean vehicles.
``(3) Controlled groups.--Rules similar to the rules
of section 30B(f)(4) shall apply for purposes of this
subsection.''.
(c) Conforming Amendments.--Section 30D(e) is amended--
(1) in paragraph (1)(B)--
(A) in clause (iii), by inserting ``and''
after the comma at the end,
(B) in clause (iv), by striking ``, and'' and
inserting a period, and
(C) by striking clause (v), and
(2) in paragraph (2)(B)--
(A) in clause (ii), by inserting ``and''
after the comma at the end,
(B) in clause (iii), by striking the comma at
the end and inserting a period, and
(C) by striking clauses (iv) through (vi).
(d) Effective Date.--The amendments made by this section
shall apply to vehicles placed in service after December 31,
2025.

SEC. 112003. TERMINATION OF QUALIFIED COMMERCIAL CLEAN VEHICLES CREDIT.

(a) In General.--Section 45W(g) is amended to read as
follows:
``(g) Termination.--
``(1) In general.--No credit shall be determined
under this section with respect to any vehicle acquired
after December 31, 2025.
``(2) Exception for binding contracts.--Paragraph (1)
shall not apply with respect to vehicles placed in
service before January 1, 2033, and acquired pursuant
to a written binding contract entered into before May
12, 2025.''.
(b) Effective Date.--The amendment made by this section shall
apply to vehicles acquired after December 31, 2025.

SEC. 112004. TERMINATION OF ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY
CREDIT.

(a) In General.--Section 30C(i) is amended by striking
``December 31, 2032'' and inserting ``December 31, 2025''.
(b) Effective Date.--The amendment made by this section shall
apply to property placed in service after December 31, 2025.

SEC. 112005. TERMINATION OF ENERGY EFFICIENT HOME IMPROVEMENT CREDIT.

(a) In General.--Section 25C(i) is amended to read as
follows:
``(i) Termination.--This section shall not apply with respect
to any property placed in service after December 31, 2025.''.
(b) Conforming Amendments.--
(1) Section 25C(d)(2)(C) is amended to read as
follows:
``(C) Any oil furnace or hot water boiler
which is placed in service before January 1,
2026, and--
``(i) meets or exceeds 2021 Energy
Star efficiency criteria, and
``(ii) is rated by the manufacturer
for use with fuel blends at least 20
percent of the volume of which consists
of an eligible fuel.''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2025.

SEC. 112006. TERMINATION OF RESIDENTIAL CLEAN ENERGY CREDIT.

(a) In General.--Section 25D(h) is amended by striking
``December 31, 2034'' and inserting ``December 31, 2025''.
(b) Conforming Amendments.--Section 25D(g) is amended--
(1) in paragraph (2), by inserting ``and'' after the
comma at the end,
(2) in paragraph (3), by striking ``January 1, 2033,
30 percent,'' and inserting ``January 1, 2026, 30
percent.'', and
(3) by striking paragraphs (4) and (5).
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2025.

SEC. 112007. TERMINATION OF NEW ENERGY EFFICIENT HOME CREDIT.

(a) In General.--Section 45L(h) is amended to read as
follows:
``(h) Termination.--This section shall not apply to any
qualified new energy efficient home acquired after December 31,
2025 (December 31, 2026, in the case of any home for which
construction began before May 12, 2025).''.
(b) Effective Date.--The amendment made by this section shall
apply to homes acquired after December 31, 2025.

SEC. 112008. PHASE-OUT AND RESTRICTIONS ON CLEAN ELECTRICITY PRODUCTION
CREDIT.

(a) Phase-out.--Section 45Y(d) is amended--
(1) in paragraph (1), in the matter preceding
subparagraph (A), by striking ``the construction of
which begins during a calendar year described in
paragraph (2)'' and inserting ``which is placed in
service after December 31, 2028,'', and
(2) by striking paragraphs (2) and (3) and inserting
the following new paragraph:
``(2) Phase-out percentage.--The phase-out percentage
under this paragraph is equal to--
``(A) for a facility placed in service during
calendar year 2029, 80 percent,
``(B) for a facility placed in service during
calendar year 2030, 60 percent,
``(C) for a facility placed in service during
calendar year 2031, 40 percent, and
``(D) for a facility placed in service after
December 31, 2031, 0 percent.''.
(b) Restrictions Relating to Prohibited Foreign Entities.--
Section 45Y is amended--
(1) in subsection (b)(1), by adding at the end the
following new subparagraph:
``(E) Material assistance from prohibited
foreign entities.--The term `qualified
facility' shall not include any facility for
which construction begins after the date that
is one year after the date of the enactment of
this subparagraph if the construction of such
facility includes any material assistance from
a prohibited foreign entity (as defined in
section 7701(a)(52)).'', and
(2) in subsection (g), by adding at the end the
following new paragraph:
``(13) Restrictions relating to prohibited foreign
entities.--
``(A) In general.--No credit determined under
subsection (a) shall be allowed under section
38 for any taxable year beginning after the
date of enactment of this paragraph if the
taxpayer is a specified foreign entity (as
defined in section 7701(a)(51)(B)).
``(B) Other prohibited foreign entities.--No
credit determined under subsection (a) shall be
allowed under section 38 for any taxable year
beginning after the date which is 2 years after
the date of enactment of this paragraph if--
``(i) the taxpayer is a foreign-
influenced entity (as defined in
section 7701(a)(51)(D)), or
``(ii) during such taxable year, the
taxpayer--
``(I) makes a payment of
dividends, interest,
compensation for services,
rentals or royalties,
guarantees or any other fixed,
determinable, annual, or
periodic amount to a prohibited
foreign entity (as defined in
section 7701(a)(51)) in an
amount which is equal to or
greater than 5 percent of the
total of such payments made by
such taxpayer during such
taxable year which are related
to the production of
electricity, or
``(II) makes payments
described in subclause (I) to
more than 1 prohibited foreign
entity (as so defined) in an
amount which, in the aggregate,
is equal to or greater than 15
percent of the total of such
payments made by such taxpayer
during such taxable year which
are related to the production
of electricity.''.
(c) Repeal of Transferability.--Section 6418(f)(1) is
amended--
(1) in subparagraph (A), by striking clause (vii),
and
(2) in subparagraph (B), by striking ``(v), or
(vii)'' and inserting ``or (v)''.
(d) Definitions Relating to Prohibited Foreign Entities.--
Section 7701(a) is amended by adding at the end the following
new paragraphs:
``(51) Prohibited foreign entity.--
``(A) In general.--The term `prohibited
foreign entity' means a specified foreign
entity or a foreign-influenced entity.
``(B) Specified foreign entity.--For purposes
of subparagraph (A), the term `specified
foreign entity' means--
``(i) a foreign entity of concern
described in subparagraph (A), (B),
(D), or (E) of section 9901(8) of the
William M. (Mac) Thornberry National
Defense Authorization Act for Fiscal
Year 2021 (Public Law 116-283; 15
U.S.C. 4651),
``(ii) an entity identified as a
Chinese military company operating in
the United States in accordance with
section 1260H of the William M. (Mac)
Thornberry National Defense
Authorization Act for Fiscal Year 2021
(Public Law 116-283; 10 U.S.C. 113
note),
``(iii) an entity included on a list
required by clause (i), (ii), (iv), or
(v) of section 2(d)(2)(B) of Public Law
117-78 (135 Stat. 1527),
``(iv) an entity specified under
section 154(b) of the National Defense
Authorization Act for Fiscal Year 2024
(Public Law 118-31; 10 U.S.C. note
prec. 4651), or
``(v) a foreign-controlled entity.
``(C) Foreign-controlled entity.--For
purposes of subparagraph (B), the term
`foreign-controlled entity' means--
``(i) the government of a covered
nation (as defined in section
4872(f)(2) of title 10, United States
Code),
``(ii) a person who is a citizen,
national, or resident of a covered
nation, provided that such person is
not an individual who is a citizen or
lawful permanent resident of the United
States,
``(iii) an entity or a qualified
business unit (as defined in section
989(a)) incorporated or organized under
the laws of, or having its principal
place of business in, a covered nation,
or
``(iv) an entity (including
subsidiary entities) controlled (as
determined under subparagraph (F)) by
an entity described in clause (i),
(ii), or (iii).
``(D) Foreign-influenced entity.--For
purposes of subparagraph (A), the term
`foreign-influenced entity' means an entity--
``(i) with respect to which, during
the taxable year--
``(I) a specified foreign
entity has the direct or
indirect authority to appoint a
covered officer of such entity,
``(II) a single specified
foreign entity owns at least 10
percent of such entity,
``(III) one or more specified
foreign entities own in the
aggregate at least 25 percent
of such entity, or
``(IV) at least 25 percent of
the debt of such entity is held
in the aggregate by one or more
specified foreign entities, or
``(ii) which, during the previous
taxable year--
``(I) makes a payment of
dividends, interest,
compensation for services,
rentals or royalties,
guarantees or any other fixed,
determinable, annual, or
periodic amount to a specified
foreign entity in an amount
which is equal to or greater
than 10 percent of the total of
such payments made by such
entity during such taxable
year, or
``(II) makes payments
described in subclause (I) to
more than 1 specified foreign
entity in an amount which, in
the aggregate, is equal to or
greater than 25 percent of the
total of such payments made by
such entity during such taxable
year.
Clause (ii) shall not apply unless such
entity makes such payments knowingly
(or has reason to know).
``(E) Covered officer.--For purposes of this
paragraph, the term `covered officer' means,
with respect to an entity--
``(i) a member of the board of
directors, board of supervisors, or
equivalent governing body,
``(ii) an executive-level officer,
including the president, chief
executive officer, chief operating
officer, chief financial officer,
general counsel, or senior vice
president, or
``(iii) an individual having powers
or responsibilities similar to those of
officers or members described in clause
(i) or (ii).
``(F) Determination of control.--For purposes
of subparagraph (C)(iv), the term `control'
means--
``(i) in the case of a corporation,
ownership (by vote or value) of more
than 50 percent of the stock in such
corporation,
``(ii) in the case of a partnership,
ownership of more than 50 percent of
the profits interests or capital
interests in such partnership, or
``(iii) in any other case, ownership
of more than 50 percent of the
beneficial interests in the entity.
``(G) Determination of ownership.--For
purposes of this section, section 318 (relating
to constructive ownership of stock) shall apply
for purposes of determining ownership of stock
in a corporation. Similar principles shall
apply for purposes of determining ownership of
interests in any other entity.
``(H) Regulations and guidance.--The
Secretary may prescribe such regulations and
guidance as may be necessary or appropriate to
carry out the provisions of this paragraph.
``(52) Material assistance from a prohibited foreign
entity.--
``(A) In general.--The term `material
assistance from a prohibited foreign entity'
means, with respect to any property--
``(i) any component, subcomponent, or
applicable critical mineral (as defined
in section 45X(c)(6)) included in such
property that is extracted, processed,
recycled, manufactured, or assembled by
a prohibited foreign entity, and
``(ii) any design of such property
which is based on any copyright or
patent held by a prohibited foreign
entity or any know-how or trade secret
provided by a prohibited foreign
entity.
``(B) Exclusion.--
``(i) In general.--The term `material
assistance from a prohibited foreign
entity' shall not include any assembly
part or constituent material, provided
that such part or material is not
acquired directly from a prohibited
foreign entity.
``(ii) Assembly part.--For purposes
of this subparagraph, the term
`assembly part' means a subcomponent or
collection of subcomponents which is--
``(I) not uniquely designed
for use in the construction of
a qualified facility described
in section 45Y or 48E or an
eligible component described in
section 45X, and
``(II) not exclusively or
predominantly produced by
prohibited foreign entities.
``(iii) Constituent material.--For
purposes of this subparagraph, the term
`constituent material' means any
material which is--
``(I) not uniquely formulated
for use in a qualified facility
described in section 45Y or 48E
or an eligible component
described in section 45X, and
``(II) not exclusively or
predominantly produced,
processed, or extracted by
prohibited foreign entities.
``(iv) Regulations and guidance.--The
Secretary may prescribe such
regulations and guidance as may be
necessary or appropriate to carry out
the provisions of this paragraph.''.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2),
the amendments made by this section shall apply to
taxable years beginning after the date of enactment of
this Act.
(2) Other provisions.--The amendment made by
subsection (c) shall apply to facilities for which
construction begins after the date that is 2 years
after the date of enactment of this Act.

SEC. 112009. PHASE-OUT AND RESTRICTIONS ON CLEAN ELECTRICITY INVESTMENT
CREDIT.

(a) Phase-out.--Section 48E(e) is amended--
(1) in paragraph (1), in the matter preceding
subparagraph (A), by striking ``the construction of
which begins during a calendar year described in
paragraph (2)'' and inserting ``which is placed in
service after December 31, 2028,'', and
(2) by striking paragraphs (2) and (3) and inserting
the following:
``(2) Phase-out percentage.--The phase-out percentage
under this paragraph is equal to--
``(A) for any qualified investment with
respect to any qualified facility or energy
storage technology placed in service during
calendar year 2029, 80 percent,
``(B) for any qualified investment with
respect to any qualified facility or energy
storage technology placed in service during
calendar year 2030, 60 percent,
``(C) for any qualified investment with
respect to any qualified facility or energy
storage technology placed in service during
calendar year 2031, 40 percent, and
``(D) for any qualified investment with
respect to any qualified facility or energy
storage technology placed in service after
December 31, 2031, 0 percent.''.
(b) Restrictions Relating to Prohibited Foreign Entities.--
(1) In general.--Section 48E is amended--
(A) in subsection (b)(3), by adding at the
end the following new subparagraph:
``(D) Material assistance from prohibited
foreign entities.--The term `qualified
facility' shall not include any facility the
construction of which begins after the date
that is one year after the date of the
enactment of this subparagraph if the
construction of such facility includes any
material assistance from a prohibited foreign
entity (as defined in section 7701(a)(52)).'',
and
(B) in subsection (c), by adding at the end
the following new paragraph:
``(3) Material assistance from prohibited foreign
entities.--The term `energy storage technology' shall
not include any property the construction of which
begins after the date that is one year after the date
of the enactment of this paragraph if the construction
of such property includes any material assistance from
a prohibited foreign entity (as defined in section
7701(a)(52)).''.
(2) Restrictions relating to prohibited foreign
entities.--Section 48E(d) is amended by adding at the
end the following new paragraph:
``(6) Restrictions relating to prohibited foreign
entities.--
``(A) In general.--No credit determined under
subsection (a) shall be allowed under section
38 for any taxable year beginning after the
date of enactment of this paragraph if the
taxpayer is a specified foreign entity (as
defined in section 7701(a)(51)(B)).
``(B) Other prohibited foreign entities.--No
credit determined under subsection (a) shall be
allowed under section 38 for any taxable year
beginning after the date which is 2 years after
the date of enactment of this paragraph if--
``(i) the taxpayer is a foreign-
influenced entity (as defined in
section 7701(a)(51)(D)), or
``(ii) during such taxable year, the
taxpayer--
``(I) makes a payment of
dividends, interest,
compensation for services,
rentals or royalties,
guarantees or any other fixed,
determinable, annual, or
periodic amount to a prohibited
foreign entity (as defined in
section 7701(a)(51)) in an
amount which is equal to or
greater than 5 percent of the
total of such payments made by
such taxpayer during such
taxable year which are related
to the production of
electricity or storage of
energy, or
``(II) makes payments
described in subclause (I) to
more than 1 prohibited foreign
entity (as so defined) in an
amount which, in the aggregate,
is equal to or greater than 15
percent of the total of such
payments made by such taxpayer
during such taxable year which
are related to the production
of electricity or storage of
energy.''.
(3) Recapture.--Section 50(a) is amended--
(A) by redesignating paragraphs (4) through
(6) as paragraphs (5) through (7),
respectively,
(B) by inserting after paragraph (3) the
following new paragraph:
``(4) Payments to prohibited foreign entities.--
``(A) In general.--If there is an applicable
payment made by a specified taxpayer before the
close of the 10-year period beginning on the
date such taxpayer placed in service investment
credit property which is eligible for the clean
electricity investment credit under section
48E(a), then the tax under this chapter for the
taxable year in which such applicable payment
occurs shall be increased by 100 percent of the
aggregate decrease in the credits allowed under
section 38 for all prior taxable years which
would have resulted solely from reducing to
zero any credit determined under section 46
which is attributable to the clean electricity
investment credit under section 48E(a) with
respect to such property.
``(B) Applicable payment.--For purposes of
this paragraph, the term `applicable payment'
means, with respect to any taxable year, a
payment or payments described in subclause (I)
or (II) of section 48E(d)(6)(B)(ii).
``(C) Specified taxpayer.--For purposes of
this paragraph, the term `specified taxpayer'
means any taxpayer who has been allowed a
credit under section 48E(a) for any taxable
year beginning after the date which is 2 years
after the date of enactment of this
paragraph.'',
(C) in paragraph (5), as redesignated by
subparagraph (A), by striking ``or any
applicable transaction to which paragraph
(3)(A) applies,'' and inserting ``any
applicable transaction to which paragraph
(3)(A) applies, or any applicable payment to
which paragraph (4)(A) applies,'', and
(D) in paragraph (7), as redesignated by
subparagraph (A), by striking ``or (3)'' and
inserting ``(3), or (4)''.
(c) Repeal of Transferability.--Section 6418, as amended by
section 112008, is amended--
(1) in subsection (f)(1)(A), by striking clause (xi),
and
(2) in subsection (g)(3), by striking ``clauses (ix)
through (xi)'' and inserting ``clause (ix) or (x)''.
(d) Conforming Amendments.--Section 48E(h)(4) is amended--
(1) in subparagraph (C), by striking ``December 31 of
the applicable year (as defined in section 45Y(d)(3))''
and inserting ``December 31, 2031'',
(2) in subparagraph (D), by striking ``the third
calendar year following the applicable year (as defined
in section 45Y(d)(3))'' and inserting ``2031'', and
(3) in subparagraph (E)(i), by striking ``after the
date that is 4 years after the date of the allocation
with respect to the facility of which such property is
a part'' and inserting ``the earlier of--
``(I) the date that is 4
years after the date of the
allocation with respect to the
facility of which such property
is a part, or
``(II) December 31, 2031.''.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2),
the amendments made by this section shall apply to
taxable years beginning after the date of enactment of
this Act.
(2) Other provisions.--The amendments made by
subsection (c) shall apply to facilities and energy
storage technology for which construction begins after
the date that is 2 years after the date of enactment of
this Act.

SEC. 112010. REPEAL OF TRANSFERABILITY OF CLEAN FUEL PRODUCTION CREDIT.

(a) In General.--Section 6418(f)(1)(A), as amended by
sections 112008 and 112009, is amended by striking clause
(viii).
(b) Effective Date.--The amendment made by this section shall
apply to fuel produced after December 31, 2027.

SEC. 112011. RESTRICTIONS ON CARBON OXIDE SEQUESTRATION CREDIT.

(a) Restrictions Relating to Prohibited Foreign Entities.--
Section 45Q(f) is amended by adding at the end the following
new paragraph:
``(10) Restrictions relating to prohibited foreign
entities.--
``(A) In general.--No credit determined under
subsection (a) shall be allowed under section
38 for any taxable year beginning after the
date of enactment of this paragraph if the
taxpayer is a specified foreign entity (as
defined in section 7701(a)(51)(B)).
``(B) Other prohibited foreign entities.--No
credit determined under subsection (a) shall be
allowed under section 38 for any taxable year
beginning after the date which is 2 years after
the date of enactment of this paragraph if the
taxpayer is a foreign-influenced entity (as
defined in section 7701(a)(51)(D)).''.
(b) Repeal of Transferability.--Section 6418(f)(1), as
amended by sections 112008, 112009, and 112010, is amended--
(1) in subparagraph (A), by striking clause (iii),
and
(2) in subparagraph (B)--
(A) in the matter preceding clause (i), by
striking ``clause (ii), (iii), or (v)'' and
inserting ``clause (ii) or (v)'', and
(B) in clause (ii), by striking ``(or, in the
case'' and all that follows through ``at such
facility)''.
(c) Effective Dates.--
(1) Restrictions relating to prohibited foreign
entities.--The amendments made by subsection (a) shall
apply to taxable years beginning after the date of
enactment of this Act.
(2) Repeal of transferability.--The amendments made
by subsection (b) shall apply to carbon capture
equipment the construction of which begins after the
date that is 2 years after the date of enactment of
this Act.

SEC. 112012. PHASE-OUT AND RESTRICTIONS ON ZERO-EMISSION NUCLEAR POWER
PRODUCTION CREDIT.

(a) Phase-out.--Section 45U(e) is amended to read as follows:
``(e) Credit Phase-out.--
``(1) In general.--For any taxable year beginning
after December 31, 2028, the amount of the zero-
emission nuclear power production credit under
subsection (a) for such taxable year 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) for any taxable year beginning in
calendar year 2029, 80 percent,
``(B) for any taxable year beginning in
calendar year 2030, 60 percent,
``(C) for any taxable year beginning in
calendar year 2031, 40 percent, and
``(D) for any taxable year beginning after
December 31, 2031, 0 percent.''.
(b) Restrictions Relating to Prohibited Foreign Entities.--
Section 45U(c) is amended by adding at the end the following
new paragraph:
``(3) Restrictions relating to prohibited foreign
entities.--
``(A) In general.--No credit determined under
subsection (a) shall be allowed under section
38 for any taxable year beginning after the
date of enactment of this paragraph if the
taxpayer is a specified foreign entity (as
defined in section 7701(a)(51)(B)).
``(B) Other prohibited foreign entities.--No
credit determined under subsection (a) shall be
allowed under section 38 for any taxable year
beginning after the date which is 2 years after
the date of enactment of this paragraph if the
taxpayer is a foreign-influenced entity (as
defined in section 7701(a)(51)(D)).''.
(c) Repeal of Transferability.--Section 6418(f)(1)(A), as
amended by section 112008, 112009, 112010, and 112011, is
amended by striking clause (iv).
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2),
the amendments made by this section shall apply to
taxable years beginning after the date of enactment of
this Act.
(2) Repeal of transferability.--The amendment made by
subsection (c) shall apply to electricity produced and
sold after December 31, 2027.

SEC. 112013. TERMINATION OF CLEAN HYDROGEN PRODUCTION CREDIT.

(a) Termination.--Section 45V(c)(3)(C) is amended by striking
``January 1, 2033'' and inserting ``January 1, 2026''.
(b) Effective Date.--The amendment made by this section shall
apply to facilities the construction of which begins after
December 31, 2025.

SEC. 112014. PHASE-OUT AND RESTRICTIONS ON ADVANCED MANUFACTURING
PRODUCTION CREDIT.

(a) Phase-out.--Section 45X(b)(3) is amended--
(1) in subparagraph (B)--
(A) in clause (ii), by adding ``and'' at the
end,
(B) in clause (iii), by striking ``during
calendar year 2032, 25 percent,'' and inserting
``after December 31, 2031, 0 percent.'', and
(C) by striking clause (iv), and
(2) by striking subparagraph (C) and inserting the
following:
``(C) Termination for wind energy
components.--This section shall not apply to
wind energy components sold after December 31,
2027.''.
(b) Restrictions Relating to Prohibited Foreign Entities.--
Section 45X is amended--
(1) in subsection (c)(1), by adding at the end the
following new subparagraph:
``(C) Material assistance from prohibited
foreign entities.--In the case of taxable years
beginning after the date which is 2 years after
the date of enactment of this subparagraph, the
term `eligible component' shall not include any
property which--
``(i) includes any material
assistance from a prohibited foreign
entity (as defined in section
7701(a)(52)), or
``(ii) is produced subject to a
licensing agreement with a prohibited
foreign entity (as defined in section
7701(a)(51)) for which the value of
such agreement is in excess of
$1,000,000.'', and
(2) in subsection (d), by adding at the end the
following new paragraph:
``(5) Restrictions relating to prohibited foreign
entities.--
``(A) In general.--No credit determined under
subsection (a) shall be allowed under section
38 for any taxable year beginning after the
date of enactment of this paragraph if the
taxpayer is a specified foreign entity (as
defined in section 7701(a)(51)(B)).
``(B) Other prohibited foreign entities.--No
credit determined under subsection (a) shall be
allowed under section 38 for any taxable year
beginning after the date which is 2 years after
the date of enactment of this paragraph if the
taxpayer is a foreign-influenced entity (as
defined in section 7701(a)(51)(D)).
``(C) Payments to prohibited foreign
entities.--
``(i) In general.--If, for any
taxable year beginning after the date
that is 2 years after the date of the
enactment of this paragraph, a taxpayer
is described in clause (ii) for such
taxable year with respect to any
eligible component category, no credit
shall be determined under subsection
(a) for eligible components in such
eligible component category for such
taxable year.
``(ii) Taxpayer described.--A
taxpayer is described in this clause
for a taxable year with respect to any
eligible component category if such
taxpayer--
``(I) makes a payment of
dividends, interest,
compensation for services,
rentals or royalties,
guarantees or any other fixed,
determinable, annual, or
periodic amount to a prohibited
foreign entity (as defined in
section 7701(a)(51)) in an
amount which is equal to or
greater than 5 percent of the
total of such payments made by
such taxpayer during such
taxable year which are related
to the production of eligible
components included within such
eligible component category, or
``(II) makes payments
described in subclause (I) to
more than 1 prohibited foreign
entity (as so defined) in an
amount which, in the aggregate,
is equal to or greater than 15
percent of such payments made
by such taxpayer during such
taxable year which are related
to the production of eligible
components included within such
eligible component category.
``(iii) Eligible component
category.--For purposes of this
subparagraph, the term `eligible
component category' means eligible
components which are included within
each respective clause under subsection
(c)(1)(A).''.
(c) Repeal of Transferability.--Section 6418, as amended by
sections 112008, 112009, 112010, 112011, and 112012 is
amended--
(1) in subsection (f)(1)--
(A) in subparagraph (A)--
(i) by striking clause (vi), and
(ii) by redesignating clauses (v),
(ix), and (x) as clauses (iii), (iv),
and (v), respectively, and
(B) in subparagraph (B), by striking ``clause
(ii) or (v)'' and inserting ``clause (ii) or
(iii)'', and
(2) in subsection (g)(3), by striking ``clause (ix)
or (x)'' and inserting ``clause (iv) or (v)''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2),
the amendments made by this section shall apply to
taxable years beginning after the date of enactment of
this Act.
(2) Repeal of transferability.--The amendments made
by subsection (c) shall apply to components sold after
December 31, 2027.

SEC. 112015. PHASE-OUT OF CREDIT FOR CERTAIN ENERGY PROPERTY.

(a) Phase-out.--Section 48(a) is amended--
(1) in paragraph (3)(vii), by striking ``the
construction of which begins before January 1, 2035''
and inserting ``the construction of which begins before
January 1, 2032'', and
(2) by striking paragraph (7) and inserting the
following new paragraph:
``(7) Phase-out for certain energy property.--In the
case of any energy property described in clause (vii)
of paragraph (3)(A), the energy percentage determined
under paragraph (2) shall be equal to--
``(A) in the case of any property the
construction of which begins before January 1,
2030, and which is placed in service after
December 31, 2021, 6 percent,
``(B) in the case of any property the
construction of which begins after December 31,
2029, and before January 1, 2031, 5.2 percent,
and
``(C) in the case of any property the
construction of which begins after December 31,
2030, and before January 1, 2032, 4.4
percent.''.
(b) Restrictions Relating to Prohibited Foreign Entities.--
Section 48(a) is amended by redesignating paragraph (16) as
paragraph (17) and by inserting after paragraph (15) the
following new paragraph:
``(16) Restrictions relating to prohibited foreign
entities.--
``(A) In general.--No credit determined under
this subsection for energy property described
in paragraph (3)(A)(vii) shall be allowed under
section 38 for any taxable year beginning after
the date of enactment of this paragraph if the
taxpayer is a specified foreign entity (as
defined in section 7701(a)(51)(B)).
``(B) Other prohibited foreign entities.--No
credit determined under this subsection for
energy property described in paragraph
(3)(A)(vii) shall be allowed under section 38
for any taxable year beginning after the date
which is 2 years after the date of enactment of
this paragraph if the taxpayer is a foreign-
influenced entity (as defined in section
7701(a)(51)(D)).''.
(c) Repeal of Transferability.--Section 6418(f)(1)(A)(iv), as
redesignated by section 112014, is amended by inserting
``(except so much of the credit as is determined under
paragraph (3)(A)(vii) of such section)'' after ``section 48''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2),
the amendments made by this section shall apply to
taxable years beginning after the date of the enactment
of this Act.
(2) Repeal of transferability.--The amendments made
by subsection (c) shall apply to property the
construction of which begins after the date that is 2
years after the date of enactment of this Act.

SEC. 112016. INCOME FROM HYDROGEN STORAGE, CARBON CAPTURE ADDED TO
QUALIFYING INCOME OF CERTAIN PUBLICLY TRADED
PARTNERSHIPS TREATED AS CORPORATIONS.

(a) In General.--Section 7704(d)(1)(E) is amended--
(1) by striking ``income and gains derived from the
exploration'' and inserting ``income and gains derived
from--
``(i) the exploration'',
(2) by inserting ``or'' before ``industrial source'',
and
(3) by striking ``, or the transportation or
storage'' and all that follows and inserting the
following:
``(ii) the transportation or storage
of--
``(I) any fuel described in
subsection (b), (c), (d), (e),
or (k) of section 6426, or any
alcohol fuel defined in section
6426(b)(4)(A) or any biodiesel
fuel as defined in section
40A(d)(1) or sustainable
aviation fuel as defined in
section 40B(d)(1), or
``(II) liquified hydrogen or
compressed hydrogen, or
``(iii) in the case of a qualified
facility (as defined in section 45Q(d),
without regard to any date by which
construction of the facility is
required to begin) not less than 50
percent of the total carbon oxide
production of which is qualified carbon
oxide (as defined in section 45Q(c))--
``(I) the generation,
availability for such
generation, or storage of
electric power at such
facility, or
``(II) the capture of carbon
dioxide by such facility,''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 112017. LIMITATION ON AMORTIZATION OF CERTAIN SPORTS FRANCHISES.

(a) In General.--Section 197 is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:
``(g) Limitation on Amortization of Certain Sports
Franchises.--
``(1) In general.--In the case of a specified sports
franchise intangible, subsection (a) shall be applied
by substituting `50 percent of the adjusted basis' for
`the adjusted basis'.
``(2) Specified sports franchise intangible.--For
purposes of this subsection, the term `specified sports
franchise intangible' means any amortizable section 197
intangible which is--
``(A) a franchise to engage in professional
football, basketball, baseball, hockey, soccer,
or other professional sport, or
``(B) acquired in connection with such a
franchise.''.
(b) Effective Date.--The amendments made by this section
shall apply to property acquired after the date of the
enactment of this Act.

SEC. 112018. LIMITATION ON INDIVIDUAL DEDUCTIONS FOR CERTAIN STATE AND
LOCAL TAXES, ETC.

(a) In General.--Section 275 is amended by redesignating
subsection (b) as subsection (c) and by inserting after
subsection (a) the following new subsection:
``(b) Limitation on Individual Deductions for Certain State
and Local Taxes, etc.--
``(1) Limitation.--
``(A) In general.--In the case of an
individual, no deduction shall be allowed for--
``(i) any disallowed foreign real
property taxes, and
``(ii) any specified taxes to the
extent that such taxes for such taxable
year in the aggregate exceed--
``(I) $15,000, in the case of
a married individual filing a
separate return, and
``(II) $30,000, in the case
of any other taxpayer.
``(B) Phasedown based on modfied adjusted
gross income.--
``(i) In general.--Except as provided
in clause (ii), the $15,000 amount in
subparagraph (A)(ii)(I) and the $30,000
amount in subparagraph (A)(ii)(II)
shall each be reduced by 20 percent of
the excess (if any) of the taxpayer's
modified adjusted gross income over--
``(I) $200,000, in the case
of a married individual filing
a separate return, and
``(II) $400,000, in the case
of any other taxpayer.
``(ii) Limitation on reduction.--The
reduction under clause (i) shall not
result in--
``(I) the dollar amount in
effect under subparagraph
(A)(ii)(I) being less than
$5,000, or
``(II) the dollar amount in
effect under subparagraph
(A)(ii)(II) being less than
$10,000.
``(C) Modified adjusted gross income.--For
purposes of this paragraph, the term `modified
adjusted gross income' means adjusted gross
income increased by any amount excluded from
gross income under section 911, 931, or 933.
``(2) Disallowed foreign real property tax.--For
purposes of this subsection, the term `disallowed
foreign real property tax' means any tax which--
``(A) is a foreign real property tax
described in section 164(a)(1) or 216(a)(1),
and
``(B) is not an excepted tax.
``(3) Specified tax.--For purposes of this
subsection, the term `specified tax' means--
``(A) any tax which--
``(i) is described in paragraph (1),
(2), or (3) of section 164(a), section
164(b)(5), or section 216(a)(1), and
``(ii) is not an excepted tax or a
disallowed foreign real property tax,
and
``(B) any substitute payment.
``(4) Excepted tax.--For purposes of this
subsection--
``(A) In general.--The term `excepted tax'
means--
``(i) any foreign tax described in
section 164(a)(3),
``(ii) any tax described in section
164(a)(3) which is paid or accrued by a
qualifying entity with respect to
carrying on a qualified trade or
business (as defined in section
199A(d), without regard to section
199A(b)(3)), and
``(iii) any tax described in
paragraph (1) or (2) of section 164(a),
or section 216(a)(1), which is paid or
accrued in carrying on a trade or
business or an activity described in
section 212.
``(B) Qualifying entity.--For purposes of
subparagraph (A), the term `qualifying entity'
means any partnership or S corporation with
gross receipts for the taxable year (within the
meaning of section 448(c)) if at least 75
percent of such gross receipts are derived in a
qualified trade or business (as defined in
section 199A(d), without regard to section
199A(b)(3)). For purposes of the preceding
sentence, the gross receipts of all trades or
businesses which are under common control
(within the meaning of section 52(b)) with any
trade or business of the partnership or S
corporation shall be taken into account as
gross receipts of the entity.
``(5) Substitute payment.--For purposes of this
subsection--
``(A) In general.--The term `substitute
payment' means any amount (other than a tax
described in paragraph (3)(A)) paid, incurred,
or accrued to any entity referred to in section
164(b)(2) if, under the laws of one or more
entities referred to in section 164(b)(2), one
or more persons would (if the assumptions
described in subparagraphs (B) and (C) applied)
be entitled to specified tax benefits the
aggregate dollar value of which equals or
exceeds 25 percent of such amount.
``(B) Assumption regarding dollar value of
tax benefits.--The assumption described in this
subparagraph is that the dollar value of a
specified tax benefit is--
``(i) in the case of a credit or
refund, the amount of such credit or
refund,
``(ii) in the case of a deduction or
exclusion, 15 percent of the amount of
such deduction or exclusion, and
``(iii) in any other case, an amount
determined in such manner as the
Secretary may provide consistent with
the principles of clauses (i) and (ii).
``(C) Assumption regarding status of partners
or shareholders.--The assumption described in
this subparagraph is, in the case of any amount
referred to in subparagraph (A) which is paid,
incurred, or accrued by a partnership or S
corporation, that all of the partners or
shareholders of such partnership or S
corporation, respectively, are individuals who
are residents of the jurisdiction of the entity
or entities providing the specified tax
benefits (and possess such other
characteristics as the laws of such entities
may require for entitlement to such benefits).
``(D) Specified tax benefit.--For purposes of
subparagraph (A), the term `specified tax
benefit' means any benefit which--
``(i) is determined with respect to
the amount referred to in subparagraph
(A), and
``(ii) is allowed against, or
determined by reference to, a tax
described in paragraph (3)(A).
``(E) Exception for non-deductible
payments.--To the extent that a deduction for
an amount described in subparagraph (A) is not
allowed under this chapter (determined without
regard to this subsection, section 170(b)(1),
section 703(a), section 704(d), and section
1363(b)), the term `substitute payment' shall
not include such amount.
``(F) Exception for certain withholding
taxes.--To the extent provided in regulations
issued by the Secretary, the term `substitute
payment' shall not include an amount withheld
on behalf of another person if all of such
amount is included in the gross income of such
person (determined under this chapter).
``(6) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this
subsection, including regulations or other guidance--
``(A) to treat as a tax described in
paragraph (3) of section 164(a) any tax that
is, in substance, based on general tax
principles, described in such paragraph,
``(B) to treat as a substitute payment any
amount that, in substance, substitutes for a
specified tax,
``(C) to provide for the proper allocation,
for purposes of paragraph (4)(A)(ii), of taxes
described in section 164(a)(3) between trades
or business described in section 199A(d)(1) and
trades or business not so described, and
``(D) to otherwise prevent the avoidance of
the purposes of this subsection.''.
(b) State and Local Income Taxes Paid by Partnerships and S
Corporations Taken Into Account Separately by Partners and
Shareholders.--
(1) In general.--Section 702(a)(6) is amended to read
as follows:
``(6)(A) taxes, described in section 901, paid or
accrued to foreign countries,
``(B) taxes, described in section 901, paid or
accrued to possessions of the United States,
``(C) specified taxes (within the meaning of section
275(b)), other than taxes described in subparagraph
(B), and
``(D) taxes described in section 275(b)(2),''.
(2) Treatment of substitute payments.--Section 702 is
amended by redesignating subsection (d) as subsection
(e) and by inserting after subsection (c) the following
new subsection:
``(d) Treatment of Substitute Payments.--Any substitute
payment (as defined in section 275(b)(5)) shall be taken into
account under subsection (a)(6)(C) and not under any other
paragraph of subsection (a).''.
(3) Disallowance of deduction to partnerships.--
Section 703(a)(2)(B) is amended to read as follows:
``(B) any deduction under this chapter with
respect to taxes or payments described in
section 702(a)(6),''.
(4) S corporations.--For corresponding provisions
related to S corporations which apply by reason of the
amendments made by paragraphs (1) through (3), see
sections 1366(a)(1) and 1363(b)(2) of the Internal
Revenue Code of 1986.
(5) Allowable salt deductions taken into account for
purposes of limitation on partnership losses.--Section
704(d)(3) is amended by striking subparagraph (A), by
redesignating subparagraph (B) as subparagraph (C), and
by inserting before subparagraph (C) (as so
redesignated) the following new subparagraphs:
``(A) In general.--In determining the amount
of any loss under paragraph (1), there shall be
taken into account--
``(i) the partner's distributive
share of amounts described in
paragraphs (4) and (6)(A) of section
702(a),
``(ii) if the taxpayer chooses to
take to any extent the benefits of
section 901, the partner's distributive
share of amounts described in section
702(a)(6)(B), and
``(iii) the amount by which the
deductions allowed under this chapter
(determined without regard to this
subsection) to the partner would
decrease if the partner's distributive
share of amounts described in section
702(a)(6)(C) were not taken into
account.
``(B) Treatment of possession taxes in event
partner does not elect the foreign tax
credit.--In the case of a taxpayer not
described in subparagraph (A)(ii), subparagraph
(A)(iii) shall be applied by substituting
`subparagraphs (B) and (C) of section
702(a)(6)' for `section 702(a)(6)(C)'.''.
(6) Conforming amendment.--Section 56(b)(1)(A)(ii) is
amended by inserting ``or for any substitute payment
(as defined in section 275(b)(5))'' before the period
at the end.
(c) Addition to Tax for State and Local Tax Allocation
Mismatch.--
(1) In general.--Part I of subchapter A of chapter 68
is amended by adding at the end the following new
section:

``SEC. 6659. STATE AND LOCAL TAX ALLOCATION MISMATCH.

``(a) In General.--In the case of any covered individual,
there shall be added to the tax imposed under section 1 for the
taxable year an amount equal to the product of--
``(1) the highest rate of tax in effect under such
section for such taxable year, multiplied by
``(2) the sum of the State and local tax allocation
mismatches for such taxable year with respect to each
partnership specified tax payment with respect to which
such individual is a covered individual.
``(b) Covered Individual.--For purposes of this section, the
term `covered individual' means, with respect to any
partnership specified tax payment, any individual (or estate or
trust) who--
``(1) is entitled (directly or indirectly) to one or
more specified tax benefits with respect to such
payment, and
``(2) takes into account (directly or indirectly) any
item of income, gain, deduction, loss, or credit of the
partnership which made such payment.
``(c) State and Local Tax Allocation Mismatch.--For purposes
of this section--
``(1) In general.--The term `State and local tax
allocation mismatch' means, with respect to any
partnership specified tax payment, the excess (if any)
of--
``(A) the aggregate dollar value of the
specified tax benefits of the covered
individual with respect to such payment, over
``(B) the amount of such payment taken into
account by such individual under section 702(a)
(without regard to sections 275(b) and 704(d)).
``(2) Taxable year of individual in which mismatch
taken into account.--In the case of any partnership
specified tax payment paid, incurred, or accrued in any
taxable year of the partnership, the State and local
tax allocation mismatch determined under paragraph (1)
with respect to such payment shall be taken into
account under subsection (a) by the covered individual
for the taxable year of such individual in which such
individual takes into account the items referred to in
subsection (b)(2) which are determined with respect to
such partnership taxable year.
``(d) Determination of Dollar Value of Specified Tax
Benefits.--
``(1) In general.--Except in the case of a covered
individual who elects the application of paragraph (3)
for any taxable year, the dollar value of any specified
tax benefit shall be the sum of--
``(A) the aggregate increase in tax liability
(and reduction in credit or refund) for taxes
described in section 275(b)(3)(A) for the
taxable year and all prior taxable years that
would result if such specified tax benefit were
not taken into account with respect to such
taxes, plus
``(B) the deemed value of any carryforward of
such specified tax benefit (including any tax
attribute derived from such benefit) to any
subsequent taxable year.
``(2) Deemed value of carryforwards.--For purposes of
paragraph (1), the deemed value of any carryforward
is--
``(A) in the case of a credit or refund, the
amount of such credit or refund,
``(B) in the case of a deduction or
exclusion, the product of--
``(i) the highest rate of tax which
may be imposed on individuals under the
tax referred to in subsection (e)(3)(B)
with respect to the specified tax
benefit, multiplied by
``(ii) the amount of such deduction
or exclusion, and
``(C) in any other case, an amount determined
in such manner as the Secretary may provide
consistent with the principles of subparagraphs
(A) and (B).
``(3) Election of simplified method.--In the case of
a covered individual who elects the application of this
paragraph for any taxable year, the dollar value of any
specified tax benefit shall be determined under the
assumptions described in section 275(b)(5)(B).
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Partnership specified tax payment.--The term
`partnership specified tax payment' means any specified
tax paid, incurred, or accrued by a partnership.
``(2) Specified tax.--The term `specified tax' has
the meaning given such term by section 275(b)(3).
``(3) Specified tax benefit.--The term `specified tax
benefit' means any benefit which--
``(A) is determined with respect to a
partnership specified tax payment, and
``(B) is allowed against, or determined by
reference to, a tax described in section
275(b)(3)(A).
``(f) 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 preventing avoidance of
the addition to tax prescribed by this section through
partnership allocations that achieve similar tax reductions as
a State and local tax allocation mismatch.''.
(2) Clerical amendment.--The table of sections for
part I of subchapter A of chapter 68 is amended by
adding at the end the following new item:

``Sec. 6659. State and local tax allocation mismatch.''.
(d) Limitation on Capitalization of Specified Taxes.--Section
275, as amended by the preceding provisions of this section, is
amended by redesignating subsection (c) as subsection (d) and
by inserting after subsection (b) the following new subsection:
``(c) Limitations on Capitalization of Specified Taxes.--
Notwithstanding any other provision of this chapter, in the
case of an individual, specified taxes (as defined in
subsection (b)) shall not be treated as chargeable to capital
account.''.
(e) Reporting by Partnerships and S Corporations With Respect
to Specified Service Trade or Business Income.--
(1) Partnerships.--Section 6031 is amended by adding
at the end the following new subsection:
``(g) Specified Service Trade or Business Income.--Returns
required under subsection (a), and copies required to be
furnished under subsection (b), shall include a statement of
whether or not the partnership had any gross receipts (within
the meaning of section 448(c)) from a trade or business
described in subsection 199A(d)(2).''.
(2) S corporations.--Section 6037 is amended by
adding at the end the following new subsection:
``(d) Specified Service Trade or Business Income.--Returns
required under subsection (a), and copies required to be
furnished under subsection (b), shall include a statement of
whether or not the S corporation had any gross receipts (within
the meaning of section 448(c)) from a trade or business
described in subsection 199A(d)(2).''.
(f) Conforming Amendment.--Section 164(b) is amended by
striking paragraph (6).
(g) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 112019. EXCESSIVE EMPLOYEE REMUNERATION FROM CONTROLLED GROUP
MEMBERS AND ALLOCATION OF DEDUCTION.

(a) Application of Aggregation Rules.--Section 162(m) is
amended by adding at the end the following new paragraph:
``(7) Remuneration from controlled group members.--
``(A) In general.--In the case of any
publicly held corporation which is a member of
a controlled group--
``(i) paragraph (1) shall be applied
by substituting `specified covered
employee' for `covered employee', and
``(ii) if any person which is a
member of such controlled group (other
than such publicly held corporation)
provides applicable employee
remuneration to an individual who is a
specified covered employee of such
controlled group and the aggregate
amount described in subparagraph
(B)(ii) with respect to such specified
covered employee exceeds $1,000,000--
``(I) paragraph (1) shall
apply to such person with
respect to such remuneration,
and
``(II) paragraph (1) shall
apply to such publicly held
corporation and to each such
related person by substituting
`the allocable limitation
amount' for `$1,000,000'.
``(B) Allocable limitation amount.--For
purposes of this paragraph, the term `allocable
limitation amount' means, with respect to any
member of the controlled group referred to in
subparagraph (A) with respect to any specified
covered employee of such controlled group, the
amount which bears the same ratio to $1,000,000
as--
``(i) the amount of applicable
employee remuneration provided by such
member with respect to such specified
covered employee, bears to
``(ii) the aggregate amount of
applicable employee remuneration
provided by all such members with
respect to such specified covered
employee.
``(C) Specified covered employee.--For
purposes of this paragraph, the term `specified
covered employee' means, with respect to any
controlled group--
``(i) any employee described in
subparagraph (A), (B), or (D) of
paragraph (3), with respect to the
publicly held corporation which is a
member of such controlled group, and
``(ii) any employee who would be
described in subparagraph (C) of
paragraph (3) if such subparagraph were
applied by taking into account the
employees of all members of the
controlled group.
``(D) Controlled group.--For purposes of this
paragraph, the term `controlled group' means
any group treated as a single employer under
subsection (b), (c), (m), or (o) of section
414.''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2025.

SEC. 112020. EXPANDING APPLICATION OF TAX ON EXCESS COMPENSATION WITHIN
TAX-EXEMPT ORGANIZATIONS.

(a) In General.--Section 4960(c)(2) is amended to read as
follows:
``(2) Covered employee.--For purposes of this
section, the term `covered employee' means any employee
(including any former employee) of an applicable tax-
exempt organization or any related person or
governmental entity.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 2025.

SEC. 112021. MODIFICATION OF EXCISE TAX ON INVESTMENT INCOME OF CERTAIN
PRIVATE COLLEGES AND UNIVERSITIES.

(a) In General.--Section 4968 is amended to read as follows:

``SEC. 4968. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES
AND UNIVERSITIES.

``(a) Tax Imposed.--There is hereby imposed on each
applicable educational institution for the taxable year a tax
equal to the applicable percentage of the net investment income
of such institution for the taxable year.
``(b) Applicable Percentage.--For purposes of this section,
the term `applicable percentage' means--
``(1) 1.4 percent in the case of an institution with
a student adjusted endowment in excess of $500,000, and
not in excess of $750,000,
``(2) 7 percent in the case of an institution with a
student adjusted endowment in excess of $750,000, and
not in excess of $1,250,000,
``(3) 14 percent in the case of an institution with a
student adjusted endowment in excess of $1,250,000, and
not in excess of $2,000,000, and
``(4) 21 percent in the case of an institution with a
student adjusted endowment in excess of $2,000,000.
``(c) Applicable Educational Institution.--For purposes of
this subchapter--
``(1) In general.--The term `applicable educational
institution' means an eligible educational institution
(as defined in section 25A(f)(2))--
``(A) which had at least 500 tuition-paying
students during the preceding taxable year,
``(B) more than 50 percent of the tuition-
paying students of which are located in the
United States,
``(C) which is not--
``(i) described in the first sentence
of section 511(a)(2)(B) (relating to
State colleges and universities), or
``(ii) a qualified religious
institution, and
``(D) the student adjusted endowment of which
is at least $500,000.
``(2) Qualified religious institution.--For purposes
of this subsection, the term `qualified religious
institution' means any institution--
``(A) established after July 4, 1776,
``(B) that was established by or in
association with and has continuously
maintained an affiliation with an organization
described in section 170(b)(1)(A)(i), and
``(C) which maintains a published
institutional mission that is approved by the
governing body of such institution and that
includes, refers to, or is predicated upon
religious tenets, beliefs, or teachings.
``(d) Student Adjusted Endowment.--For purposes of this
section--
``(1) In general.--The term `student adjusted
endowment' means, with respect to any institution for
any taxable year--
``(A) the aggregate fair market value of the
assets of such institution (determined as of
the end of the preceding taxable year), other
than those assets which are used directly in
carrying out the institution's exempt purpose,
divided by
``(B) the number of eligible students of such
institution.
``(2) Eligible student.--For purposes of this
subsection, the term `eligible student' means a student
of the institution that meets the student eligibility
requirements under section 484(a)(5) of the Higher
Education Act of 1965.
``(e) Determination of Number of Students.--For purposes of
subsections (c)(1) and (d), the number of students of an
institution (including for purposes of determining the number
of students at a particular location) shall be based on the
daily average number of full-time students attending such
institution (with part-time students taken into account on a
full-time student equivalent basis).
``(f) Net Investment Income.--For purposes of this section--
``(1) In general.--Net investment income shall be
determined under rules similar to the rules of section
4940(c).
``(2) Override of certain regulatory exceptions.--
``(A) Student loan interest.--Net investment
income shall be determined by taking into
account any interest income from a student loan
made by the applicable educational institution
(or any related organization) as gross
investment income.
``(B) Federally-subsidized royalty income.--
``(i) In general.--Net investment
income shall be determined by taking
into account any Federally-subsidized
royalty income as gross investment
income.
``(ii) Federally-subsidized royalty
income.--For purposes of this
subparagraph--
``(I) In general.--The term
`Federally-subsidized royalty
income' means any otherwise-
regulatory-exempt royalty
income if any Federal funds
were used in the research,
development, or creation of the
patent, copyright, or other
intellectual or intangible
property from which such
royalty income is derived.
``(II) Otherwise-regulatory-
exempt royalty income.--For
purposes of this subparagraph,
the term `otherwise-regulatory-
exempt royalty income' means
royalty income which (but for
this subparagraph) would not be
taken into account as gross
investment income by reason of
being derived from patents,
copyrights, or other
intellectual or intangible
property which resulted from
the work of students or faculty
members in their capacities as
such with the applicable
educational institution.
``(III) Federal funds.--The
term `Federal funds' includes
any grant made by, and any
payment made under any contract
with, any Federal agency to the
applicable educational
institution, any related
organization, or any student or
faculty member referred to in
subclause (II).
``(g) Assets and Net Invstement Income of Related
Organizations.--
``(1) In general.--For purposes of subsections (d)
and (f), assets and net investment income of any
related organization with respect to an educational
institution shall be treated as assets and net
investment income, respectively, of the educational
institution, except that--
``(A) no such amount shall be taken into
account with respect to more than 1 educational
institution, and
``(B) unless such organization is controlled
by such institution or is described in section
509(a)(3) with respect to such institution for
the taxable year, assets and net investment
income which are not intended or available for
the use or benefit of the educational
institution shall not be taken into account.
``(2) Related organization.--For purposes of this
subsection, the term `related organization' means, with
respect to an educational institution, any organization
which--
``(A) controls, or is controlled by, such
institution,
``(B) is controlled by 1 or more persons
which also control such institution, or
``(C) is a supported organization (as defined
in section 509(f)(3)), or an organization
described in section 509(a)(3), during the
taxable year with respect to such institution.
``(h) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary to prevent
avoidance of the tax under this section, including regulations
or other guidance to prevent avoidance of such tax through the
restructuring of endowment funds or other arrangements designed
to reduce or eliminate the value of net investment income or
assets subject to the tax imposed by this section.''.
(b) Requirement to Report Certain Information With Respect to
Application of Excise Tax Based on Investment Income of Private
Colleges and Universities.--Section 6033 is amended by
redesignating subsection (o) as subsection (p) and by inserting
after subsection (n) the following new subsection:
``(o) Requirement to Report Certain Information With Respect
to Excise Tax Based on Investment Income of Private Colleges
and Universities.--Each applicable educational institution
described in section 4968(c) which is subject to the
requirements of subsection (a) shall include on the return
required under subsection (a)--
``(1) the number of eligible students taken into
account under section 4968(c)(1)(D), and
``(2) the number of students of such institution
(determined after application of section 4968(e)).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 112022. INCREASE IN RATE OF TAX ON NET INVESTMENT INCOME OF
CERTAIN PRIVATE FOUNDATIONS.

(a) In General.--Section 4940(a) is amended by striking
``1.39 percent'' and inserting ``the applicable percentage''.
(b) Applicable Percentage.--Section 4940(a) is amended--
(1) by striking ``There is hereby'' and inserting the
following:
``(1) Imposition of tax.--There is hereby'', and
(2) by adding at the end the following new
paragraphs:
``(2) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means,
with respect to any taxable year--
``(A) in the case of a private foundation
with assets of less than $50,000,000, 1.39
percent,
``(B) in the case of a private foundation
with assets of at least $50,000,000, and less
than $250,000,000, 2.78 percent,
``(C) in the case of a private foundation
with assets of at least $250,000,000, and less
than $5,000,000,000, 5 percent, and
``(D) in the case of a private foundation
with assets of at least $5,000,000,000, 10
percent.
``(3) Assets.--For purposes of this subsection, the
assets of any private foundation shall be determined
with respect to any taxable year as being the aggregate
fair market value of all assets of such private
foundation, as determined as of the close of such
taxable year. The preceding sentence shall be applied
without reduction for any liabilities.
``(4) Aggregation.--
``(A) In general.--For purposes of paragraphs
(2) and (3), assets of any related organization
with respect to a private foundation shall be
treated as assets of the private foundation,
except that--
``(i) no such assets shall be taken
into account with respect to more than
1 private foundation, and
``(ii) unless such organization is
controlled by such private foundation,
assets which are not intended or
available for the use or benefit of the
private foundation shall not be taken
into account.
``(B) Related organization.--For purposes of
this paragraph, the term `related organization'
means, with respect to a private foundation,
any organization which--
``(i) controls, or is controlled by,
such private foundation, or
``(ii) is controlled by 1 or more
persons which also control such private
foundation.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.

SEC. 112023. CERTAIN PURCHASES OF EMPLOYEE-OWNED STOCK DISREGARDED FOR
PURPOSES OF FOUNDATION TAX ON EXCESS BUSINESS
HOLDINGS.

(a) In General.--Section 4943(c)(4)(A) is amended by adding
at the end the following new clauses:
``(v) For purposes of clause (i),
subparagraph (D), and paragraph (2), any voting
stock which--
``(I) is not readily tradable on an
established securities market,
``(II) is purchased by the business
enterprise on or after January 1, 2020,
from an employee stock ownership plan
(as defined in section 4975(e)(7)) in
which employees of such business
enterprise participate, in connection
with a distribution from such plan, and
``(III) is held by the business
enterprise as treasury stock,
cancelled, or retired,
shall be treated as outstanding voting stock,
but only to the extent so treating such stock
would not result in permitted holdings
exceeding 49 percent (determined without regard
to this clause). The preceding sentence shall
not apply with respect to the purchase of stock
from a plan during the 10-year period beginning
on the date the plan is established.
``(vi) Section 4943(c)(4)(A)(ii) shall not
apply with respect to any decrease in the
percentage of holdings in a business enterprise
by reason of the application of clause (v).''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years ending after the date of the enactment
of this Act and to purchases by a business enterprise of voting
stock in taxable years beginning after December 31, 2019.

SEC. 112024. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY AMOUNT OF
CERTAIN FRINGE BENEFIT EXPENSES FOR WHICH DEDUCTION
IS DISALLOWED.

(a) In General.--Section 512(a) is amended by adding at the
end the following new paragraph:
``(7) Increase in unrelated business taxable income
by disallowed fringe.--
``(A) In general.--Unrelated business taxable
income of an organization shall be increased by
any amount--
``(i) which is paid or incurred by
such organization for any qualified
transportation fringe (as defined in
section 132(f)) or any parking facility
used in connection with qualified
parking (as defined in section
132(f)(5)(C)),
``(ii) which is not directly
connected with an unrelated trade or
business which is regularly carried on
by the organization, and
``(iii) for which a deduction is not
allowable under this chapter by reason
of section 274.
``(B) Exception for church organizations.--
Subparagraph (A) shall not apply to--
``(i) any organization to which
section 6033(a)(1) does not apply by
reason of clause (i) or (iii) of
section 6033(a)(3)(A), and
``(ii) any church-affiliated
organization described in section
501(c) which is not required to file an
annual return under section 6033(a)(1)
by reason of section 6033(a)(3)(B).
``(C) Treatment as income from separate trade
or business.--For purposes of paragraph (6),
any increase under subparagraph (A) shall be
treated as unrelated business taxable income
with respect to an unrelated trade or business
separate from any other unrelated trade or
business of the organization.
``(D) Regulations.-- The Secretary shall
issue such regulations or other guidance as may
be necessary or appropriate to carry out the
purposes of this paragraph, including
regulations or other guidance providing for the
appropriate allocation of costs with respect to
facilities used for parking.''.
(b) Effective Date.--The amendment made by this section shall
apply to amounts paid or incurred after December 31, 2025.

SEC. 112025. NAME AND LOGO ROYALTIES TREATED AS UNRELATED BUSINESS
TAXABLE INCOME.

(a) In General.--Section 513 is amended by adding at the end
the following new subsection:
``(k) Name and Logo Royalties.--Any sale or licensing by an
organization of any name or logo of the organization (including
any trademark or copyright relating to such name or logo) shall
be treated as an unrelated trade or business regularly carried
on by such organization.''.
(b) Calculation of Unrelated Business Taxable Income.--
Section 512(b) is amended by adding at the end the following
new paragraph:
``(20) Special rule for name and logo royalties.--
Notwithstanding any other paragraph of this subsection,
any income derived from any sale or licensing described
in section 513(k) shall be included as an item of gross
income derived from an unrelated trade or business.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 112026. EXCLUSION OF RESEARCH INCOME LIMITED TO PUBLICLY AVAILABLE
RESEARCH.

(a) In General.--Section 512(b)(9) is amended by striking
``from research'' and inserting ``from such research''.
(b) Effective Date.--The amendment made by this section shall
apply to amounts received or accrued after December 31, 2025.

SEC. 112027. LIMITATION ON EXCESS BUSINESS LOSSES OF NONCORPORATE
TAXPAYERS.

(a) Rule Made Permanent.--Section 461(l)(1) is amended by
striking ``and before January 1, 2029,'' each place it appears.
(b) Certain Net Operating Loss Carryover Taken Into
Account.--Section 461(l)(3) is amended--
(1) by inserting ``(except as provided in
subparagraph (B))'' after ``section 172'',
(2) by redesignating subparagraphs (B) and (C) as
subparagraphs (C) and (D), respectively, and
(3) by inserting after subparagraph (A) the following
new subparagraph:
``(B) Certain net operating loss carryover
taken into account.--
``(i) In general.--For purposes of
subparagraph (A)(i), the aggregate
deductions of the taxpayer shall be
increased by so much of the net
operating loss carried to the taxable
year as is attributable to the
treatment of a specified loss as a net
operating loss under paragraph (2).
``(ii) Specified loss.--For purposes
of this subparagraph, the term
`specified loss' means a loss which is
disallowed under paragraph (1) for a
taxable year beginning after December
31, 2024.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 112028. 1-PERCENT FLOOR ON DEDUCTION OF CHARITABLE CONTRIBUTIONS
MADE BY CORPORATIONS.

(a) In General.--Section 170(b)(2)(A) is amended to read as
follows:
``(A) In general.--Any charitable
contribution (other than any contribution to
which subparagraph (B) or subparagraph (C)
applies or any contribution for which a
deduction is not allowable under this section
without regard to this paragraph) shall be
allowed as a deduction under this subsection
(a) only to the extent that the aggregate of
such contributions--
``(i) exceeds 1 percent of the
taxpayer's taxable income, and
``(ii) does not exceed 10 percent of
the taxpayer's taxable income.''.
(b) Application of Carryforward.--Section 170(d)(2) is
amended to read as follows:
``(2) Corporations.--
``(A) In general.--Any charitable
contribution taken into account under
subsection (b)(2)(A) for any taxable year which
is not allowed as a deduction by reason of
clause (ii) thereof shall be taken into account
as a charitable contribution for the succeeding
taxable year, except that, for purposes of
determining under this subparagraph whether
such contribution is allowed in such succeeding
taxable year, contributions in such succeeding
taxable year (determined without regard to this
paragraph) shall be taken into account under
subsection (b)(2)(A) before any contribution
taken into account by reason of this paragraph.
``(B) 5-year carryforward.--No charitable
contribution may be carried forward under
subparagraph (A) to any taxable year following
the fifth taxable year after the taxable year
in which the charitable contribution was first
taken into account. For purposes of the
preceding sentence, contributions shall be
treated as allowed on a first-in first-out
basis.
``(C) Contributions disallowed by 1-percent
floor carried forward only from years in which
10 percent limitation is exceeded.--In the case
of any taxable year from which a charitable
contribution is carried forward under
subparagraph (A) (determined without regard
this subparagraph), subparagraph (A) shall be
applied by substituting `clause (i) or (ii)'
for `clause (ii)'.
``(D) Special rule for net operating loss
carryovers.--The amount of charitable
contributions carried forward under
subparagraph (A) shall be reduced to the extent
that such carryfoward would (but for this
subparagraph) reduce taxable income (as
computed for purposes of the second sentence of
section 172(b)(2)) and increase a net operating
loss carryover under section 172 to a
succeeding taxable year.''.
(c) Conforming Amendments.--Subparagraph (B)(ii) and (C)(ii)
of section 170(b)(2) are each amended by inserting ``other than
subparagraph (C) thereof'' after ``subsection (d)(2)''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 112029. ENFORCEMENT OF REMEDIES AGAINST UNFAIR FOREIGN TAXES.

(a) In General.--Subpart D of part II of subchapter N of
chapter 1 is amended by adding at the end the following new
section:

``SEC. 899. ENFORCEMENT OF REMEDIES AGAINST UNFAIR FOREIGN TAXES.

``(a) Increased Rates of Tax on Foreign Persons of
Discriminatory Foreign Countries.--
``(1) Taxes other than withholding taxes.--
``(A) In general.--In the case of any
applicable person, each specified rate of tax
(or any rate of tax applicable in lieu of such
statutory rate) shall be increased by the
applicable number of percentage points.
``(B) Specified rate of tax.--For purposes of
this paragraph, the term `specified rate of
tax' means--
``(i) the rates of tax specified in
paragraphs (1) and (2) of section
871(a),
``(ii) in the case of any applicable
person to which section 871(b) applies,
each rate of tax in effect under
section 1,
``(iii) the rate of tax specified in
section 881(a),
``(iv) in the case of any applicable
person to which section 882(a) applies,
the rate of tax specified in section
11(b),
``(v) the rate of tax specified in
section 884(a), and
``(vi) the rate of tax specified in
section 4948(a).
``(C) Application of increased rates to
effectively connected income of nonresident
alien individuals limited to gains on united
states real property interests.--In the case of
any individual to whom subparagraph (A)
applies, the tax imposed under section 1 on
such individual (after application of
subparagraph (A)) shall be reduced (but not
below zero) by the excess of--
``(i) the tax which would be imposed
under such section (after application
of subparagraph (A)) if FIRPTA items
were not taken into account, over
``(ii) the tax which would be imposed
under such section if FIRPTA items were
not taken into account, and
subparagraph (A) did not apply.
For purposes of this clause, the term `FIRPTA
items' means gains and losses taken into
account under section 871(b)(1) by reason of
section 897(a)(1)(A).
``(D) Application of increased rates to
certain foreign governments.--In the case of
any applicable person described in subsection
(b)(1)(A), section 892(a) shall not apply.
``(2) Modification of base erosion and anti-abuse
tax.--In the case of any corporation described in
subsection (b)(1)(E) (applied by substituting
`corporation' for `foreign corporation')--
``(A) such corporation shall be treated as
described in subparagraphs (B) and (C) of
section 59A(e)(1) for purposes of determining
whether such corporation is an applicable
taxpayer,
``(B) section 59A(b)(1) shall be applied by--
``(i) substituting `12.5 percent' for
`10 percent' in subparagraph (A), and
``(ii) by treating the amount
described in section 59A(b)(1)(B)(ii)
as being zero,
``(C) subsections (c)(2)(B), (c)(4)(B)(ii),
and (d)(5) of section 59A shall not apply, and
``(D) if any amount (other than the purchase
price of depreciable or amortizable property or
inventory) would have been a base erosion
payment described in section 59A(d)(1) but for
the fact that the taxpayer capitalizes the
amount, then solely for purposes of calculating
the taxpayer's base erosion payments (within
the meaning of section 59A(d)) and base erosion
tax benefits (within the meaning of section
59A(c)(2)), such amount shall be treated as if
it had been deducted rather than capitalized.
``(3) Withholding taxes.--
``(A) In general.--In the case of any payment
to an applicable person, each rate of tax
specified in section 1441(a) or 1442(a) (or any
rate of tax applicable in lieu of such
statutory rate) shall be increased by the
applicable number of percentage points. The
preceding sentence shall not apply to the 14
percent rate of tax specified in section
1441(a).
``(B) Disposition of united states real
property interests.--In the case of any
disposition of a United States real property
interest (as defined in section 897(c)) by an
applicable person, the rate of tax specified in
section 1445(a) (or any rate of tax applicable
in lieu of such statutory rate) shall be
increased by the applicable number of
percentage points.
``(C) Other dispositions and distributions
related to united states real property
interests.--In the case of any disposition or
distribution described in any paragraph of
section 1445(e), each rate of tax in such
paragraph (or any rate of tax applicable in
lieu of such statutory rate) shall be increased
by the applicable number of percentage points
if--
``(i) in the case of section
1445(e)(1), the foreign person referred
to in subparagraph (A) or (B) of such
section is an applicable person,
``(ii) in the case of section
1445(e)(2), the foreign corporation
referred to in such section is an
applicable person,
``(iii) in the case of section
1445(e)(3), the foreign shareholder
referred to in such section is an
applicable person,
``(iv) in the case of section
1445(e)(4), the foreign person referred
to in such section is an applicable
person,
``(v) in the case of section
1445(e)(5), the Secretary issues
regulations or other guidance providing
for such increase, and
``(vi) in the case of section
1445(e)(6), the nonresident alien
individual or foreign corporation
referred to in such section is an
applicable person.
``(4) Applicable number of percentage points.--For
purposes of this paragraph--
``(A) In general.--The term `applicable
number of percentage points' means, with
respect to any discriminatory foreign country--
``(i) with respect to the 1-year
period beginning on the applicable date
with respect to such foreign country, 5
percentage points, and
``(ii) with respect to any period
after the 1-year period to which clause
(i) applies, the sum of --
``(I) 5 percentage points,
plus
``(II) an additional 5
percentage points for each
annual anniversary of such
applicable date which has
occurred before the beginning
of such period.
``(B) Cap on increase.--Notwithstanding
subparagraph (A), the increase in any rate
under paragraph (1) or (3) shall not result in
such rate exceeding the amount of the statutory
rate (determined without regard to any rate
applicable in lieu of such statutory rate)
increased by 20 percentage points.
``(C) Applicable date.--For purposes of this
section, the term `applicable date' means, with
respect to any discriminatory foreign country,
the first day of the first calendar year
beginning on or after the latest of--
``(i) 90 days after the date of
enactment of this section,
``(ii) 180 days after the date of
enactment of the unfair foreign tax
that causes such country to be treated
as a discriminatory foreign country, or
``(iii) the first date that an unfair
foreign tax of such country begins to
apply.
``(D) Application to taxable years.--For
purposes of paragraph (1), the applicable
number of percentage points is the applicable
number of percentage points in effect for the
discriminatory foreign country during the
taxpayer's taxable year. If more than one
applicable number of percentage points is in
effect for the discriminatory foreign country
during the taxpayer's taxable year, the
applicable number of percentage points shall be
determined by using a weighted average rate
based on each applicable number of percentage
points in effect during such taxable year and
the number of days during which it was in
effect. For purposes of the prior sentence, the
applicable number of percentage points in
effect for the discriminatory foreign country
for the period before the applicable date is
treated as zero, and, if the taxpayer ceases to
be an applicable person during its taxable
year, the applicable number of percentage
points in effect for the discriminatory foreign
country for the period after the taxpayer
ceased to be an applicable person is treated as
zero.
``(E) Application to withholding taxes.--For
purposes of paragraph (3), the applicable
number of percentage points shall be determined
with respect to the date of the payment or
disposition, as the case may be.
``(F) Multiple discriminatory foreign
countries.--For purposes of paragraphs (1) and
(3), if, on any day, the taxpayer is an
applicable person with respect to more than one
discriminatory foreign country, the highest
applicable number of percentage points in
effect shall apply.
``(G) Increase not applicable to
nondiscriminatory foreign countries.--In the
case of any foreign country which is not a
discriminatory foreign country, the applicable
number of percentage points is zero.
``(5) Years to which applicable.--
``(A) Taxable year.--In the case of any
person, paragraphs (1) and (2) shall apply to
each taxable year beginning--
``(i) after the later of--
``(I) 90 days after the date
of enactment of this section,
``(II) 180 days after the
date of enactment of the unfair
foreign tax that causes such
country to be treated as a
discriminatory foreign country,
or
``(III) the first date that
an unfair foreign tax of such
country begins to apply, and
``(ii) before the last date on which
the discriminatory foreign country
imposes an unfair foreign tax.
``(B) Withholding.--In the case of any
person, paragraph (3) shall apply to each
calendar year beginning during the period that
such person is an applicable person.
``(C) Safe harbor for withholding.--Paragraph
(3) shall not apply--
``(i) in the case of any applicable
person to which clause (ii) does not
apply, if the discriminatory foreign
country with respect to which such
person is an applicable person is not
listed by the Secretary as a
discriminatory foreign country, and
``(ii) in the case of any applicable
person described in subparagraph (E) or
(F) of subsection (b)(1), if the
discriminatory foreign country with
respect to which such person is an
applicable person (and such country's
applicable date) has been listed in
such guidance for less than 90 days.
``(D) Temporary safe harbor for withholding
agents.--No penalties or interest shall be
imposed with respect to failures, before
January 1, 2027, to deduct or withhold any
amounts by reason of paragraph (3) if the
person required to deduct or withhold such
amounts demonstrates to the satisfaction of the
Secretary that such person made best efforts to
comply with paragraph (3) in a timely manner.
``(b) Applicable Person.--For purposes of this section--
``(1) In general.--Except as otherwise provided by
the Secretary, the term `applicable person' means--
``(A) any government (within the meaning of
section 892) of any discriminatory foreign
country,
``(B) any individual (other than a citizen or
resident of the United States) who is tax
resident of a discriminatory foreign country,
``(C) any foreign corporation (other than a
United States-owned foreign corporation, as
defined in section 904(h)(6)) which is a tax
resident of a discriminatory foreign country,
``(D) any private foundation (within the
meaning of section 4948) created or organized
in a discriminatory foreign country,
``(E) any foreign corporation (other than a
publicly held corporation) if more than 50
percent of--
``(i) the total combined voting power
of all classes of stock of such
corporation entitled to vote, or
``(ii) the total value of the stock
of such corporation,
is owned (within the meaning of section 958(a))
by persons described in this paragraph,
``(F) any trust the majority of the
beneficial interests of which are held
(directly or indirectly) by persons described
in this paragraph, and
``(G) foreign partnerships, branches, and any
other entity identified with respect to a
discriminatory foreign country by the Secretary
for purposes of this subsection.
``(2) Continuation of treatment during certain
periods.--For purposes of this section, if a person
would cease to be an applicable person for a period of
less than one year, such person shall continue to be
treated as an applicable person during such period.
``(c) Unfair Foreign Tax.--For purposes of this section--
``(1) In general.--The term `unfair foreign tax'
means an undertaxed profits rule (UTPR), digital
services tax, diverted profits tax, and, to the extent
provided by the Secretary, an extraterritorial tax,
discriminatory tax, or any other tax enacted with a
public or stated purpose indicating the tax will be
economically borne, directly or indirectly,
disproportionately by United States persons. Such term
shall not include any tax which neither applies to--
``(A) any United States person (including a
trade or business of a United States person),
nor
``(B) any foreign corporation (including a
trade or business of such foreign corporation)
if the foreign corporation is a controlled
foreign corporation and more than 50 percent of
the total combined voting power of all classes
of stock of such corporation entitled to vote,
or the total value of the stock of such
corporation) is owned (within the meaning of
section 958(a)) by United States persons.
``(2) Extraterritorial tax.--The term
`extraterritorial tax' means any tax imposed by a
foreign country on a corporation (including any trade
or business of such corporation) which is determined by
reference to any income or profits received by any
person (including any trade or business of any person)
by reason of such person being connected to such
corporation through any chain of ownership, determined
without regard to the ownership interests of any
individual, and other than by reason of such
corporation having a direct or indirect ownership
interest in such person.
``(3) Discriminatory tax.--The term `discriminatory
tax' means any tax imposed by a foreign country if--
``(A) such tax applies more than incidentally
to items of income that would not be considered
to be from sources, or effectively connected to
a trade or business, within the foreign country
under the rules of part I of this subchapter if
such part were applied by treating such foreign
country as though it were the United States,
``(B) such tax is imposed on a base other
than net income and is not computed by
permitting recovery of costs and expenses,
``(C) such tax is exclusively or
predominantly applicable, in practice or by its
terms, to nonresident individuals and foreign
corporations or partnerships (as determined
under rules similar to paragraphs (4) and (5)
of section 7701(a) by treating the foreign
country as though it were the United States)
because of the application of revenue
thresholds, exemptions or exclusions for
taxpayers subject to such foreign country's
corporate income tax, or restrictions of scope
that ensure that substantially all residents
(other than foreign corporations and
partnerships (as so determined)) supplying
comparable goods or services are excluded from
the application of such tax, or
``(D) such tax is not treated as an income
tax under the laws of such foreign country or
is otherwise treated by such foreign country as
outside the scope of any agreements that are in
force between such foreign country and one or
more other jurisdictions for the avoidance of
double taxation with respect to taxes on
income.
``(4) Exceptions.--Except as otherwise provided by
the Secretary, the terms `extraterritorial tax' and
`discriminatory tax' shall not include any generally
applicable tax which constitutes--
``(A) an income tax generally imposed on the
income of citizens or residents of the foreign
country, even if the computation of income
includes payments that would be foreign source
income under part I of this subchapter,
``(B) an income tax which would be an unfair
foreign tax (determined without regard to this
subparagraph) solely because it is imposed on
the income of nonresidents attributable to a
trade or business in such foreign country,
``(C) an income tax which would be an unfair
foreign tax (determined without regard to this
subparagraph) solely because it is imposed on
citizens or residents of such foreign country
by reference to the income of a corporate
subsidiary of such person,
``(D) a withholding tax, or other gross basis
tax, on any amount described in section
871(a)(1) or 881(a), other than any withholding
tax, or other gross basis tax, imposed with
respect to services performed by persons other
than individuals,
``(E) a value added tax, goods and services
tax, sales tax, or other similar tax on
consumption,
``(F) a tax imposed with respect to
transactions on a per-unit or per-transaction
basis rather than on an ad valorem basis,
``(G) a tax on real or personal property, an
estate tax, a gift tax, other similar tax,
``(H) a tax which would not be an
extraterritorial tax or discriminatory tax
(determined without regard to this
subparagraph) except by reason of consolidation
or loss sharing rules that generally apply only
with respect to income of tax residents of the
foreign country, or
``(I) any other tax identified by the
Secretary for purposes of this paragraph.
``(d) Other Definitions.--For purposes of this section--
``(1) Discriminatory foreign country.--The term
`discriminatory foreign country' means any foreign
country which has one or more unfair foreign taxes.
``(2) Foreign country.--The term `foreign country'
means a foreign country (or political subdivision
thereof) or a dependent territory or possession of a
foreign country. Such term does not include any
possession of the United States.
``(3) Tax.--The term `tax' includes any increase in
tax whether effectuated by an increase in the rate or
base of a tax, by a denial of deductions or credits, or
otherwise.
``(e) Regulations and Other Guidance.--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 which--
``(1) provide for such adjustments to the application
of this section as are necessary to prevent the
avoidance of the purposes of this section, including
the application of this section (including subsections
(b)(1)(E) and (c)(2)(A)(ii)) with respect to branches,
partnerships, and other entities (whether or not
otherwise disregarded for purposes of this chapter),
``(2) list the discriminatory foreign countries (and
each such country's applicable date) in guidance, and
update such guidance on a quarterly basis,
``(3) provide notice to Congress with respect to
changes to the list under paragraph (2),
``(4) exercise the authority to provide exceptions
under subsections (b)(1), (c)(4), and
``(5) prevent the application of subsection (a)(2)(D)
from resulting in double counting of amounts for
purposes of section 59A(c)(4)(A)(ii).''.
(b) Clerical Amendment.--The table of sections for subpart D
of part II of subchapter N of chapter 1 is amended by adding at
the end the following new item:

``Sec. 899. Enforcement of remedies against unfair foreign taxes.''.

SEC. 112030. REDUCTION OF EXCISE TAX ON FIREARMS SILENCERS.

(a) In General.--Section 5811(a) is amended to read as
follows:
``(a) Rate.--There shall be levied, collected, and paid on
firearms transferred a tax at the rate of--
``(1) $5 for each firearm transferred in the case of
a weapon classified as any other weapon under section
5845(e),
``(2) $0 for each firearm transferred in the case of
a silencer (as defined in section 5845(a)(7)), and
``(3) $200 for any other firearm transferred.''.
(b) Effective Date.--The amendment made by this section shall
apply to transfers after the date of the enactment of this Act.

SEC. 112031. MODIFICATIONS TO DE MINIMIS ENTRY PRIVILEGE FOR COMMERCIAL
SHIPMENTS.

(a) Civil Penalty.--
(1) Additional penalty imposed.--Section 321 of the
Tariff Act of 1930 (19 U.S.C. 1321) is amended by
adding at the end the following new subsection:
``(c) Any person who enters, introduces, facilitates, or
attempts to introduce an article into the United States using
the privilege of this section, the importation of which
violates any other provision of United States law, shall be
assessed, in addition to any other penalty permitted by law, a
civil penalty of up to $5,000 for the first violation and up to
$10,000 for each subsequent violation.''.
(2) Effective date.--The amendment made by paragraph
(1) shall take effect 30 days after the date of the
enactment of this Act.
(b) Repeal of Commercial Shipment Exception.--
(1) Repeal.--Section 321(a)(2)(B) of such Act (19
U.S.C. 1321(a)(2)(B)) is amended by striking ``of this
Act, or'' and all that follows through ``subdivision
(2); and'' and inserting ``of this Act; and''.
(2) Conforming repeal.--Subsection (c) of such
section 321, as added by subsection (a) of this
section, is repealed.
(3) Effective date.--The amendments made by this
subsection shall take effect on July 1, 2027.

SEC. 112032. LIMITATION ON DRAWBACK OF TAXES PAID WITH RESPECT TO
SUBSTITUTED MERCHANDISE.

Effective for claims filed on or after July 1, 2026, for
purposes of drawback of internal revenue tax imposed under
chapter 52 of the Internal Revenue Code of 1986, the amount of
drawback granted under such Code, or the Tariff Act of 1930, on
the export or destruction of substituted merchandise may not
exceed the amount of taxes paid (and not returned by refund,
credit, or drawback) on the substituted merchandise.

PART 2--REMOVING TAXPAYER BENEFITS FOR ILLEGAL IMMIGRANTS

SEC. 112101. PERMITTING PREMIUM TAX CREDIT ONLY FOR CERTAIN
INDIVIDUALS.

(a) In General.--Section 36B(e)(1) is amended by inserting
``or, in the case of aliens who are lawfully present, are not
eligible aliens'' after ``individuals who are not lawfully
present''.
(b) Eligible Aliens.--Section 36B(e)(2) is amended--
(1) by striking ``For purposes of this section, an
individual'' and inserting the following: ``For
purposes of this section--
``(A) In general.--An individual'', and
(2) by adding at the end the following new
subparagraph:
``(B) Eligible aliens.--An individual who is
an alien and lawfully present shall be treated
as an eligible alien if and only if such
individual is, and is reasonably expected to be
for the entire period of enrollment for which
the credit under this section is being
claimed--
``(i) an alien who is lawfully
admitted for permanent residence under
the Immigration and Nationality Act (8
U.S.C. 1101 et seq.),
``(ii) an alien who--
``(I) is a citizen or
national of the Republic of
Cuba,
``(II) is the beneficiary of
an approved petition under
section 203(a) of the
Immigration and Nationality Act
(8 U.S.C. 1153(a)),
``(III) meets all eligibility
requirements for an immigrant
visa but for whom such a visa
is not immediately available,
``(IV) is not otherwise
inadmissible under section
212(a) of such Act (8 U.S.C.
1182(a)), and
``(V) is physically present
in the United States pursuant
to a grant of parole in
furtherance of the commitment
of the United States to the
minimum level of annual legal
migration of Cuban nationals to
the United States specified in
the U.S.-Cuba Joint Communique
on Migration, done at New York
September 9, 1994, and
reaffirmed in the Cuba-United
States: Joint Statement on
Normalization of Migration,
Building on the Agreement of
September 9, 1994, done at New
York May 2, 1995, or
``(iii) an individual who lawfully
resides in the United States in
accordance with a Compact of Free
Association referred to in section
402(b)(2)(G) of the Personal
Responsibility and Work Opportunity
Reconciliation Act of 1996 (8 U.S.C.
1612(b)(2)(G)).''.
(c) Conforming Amendments.--
(1) Verification of information.--Section 1411 of the
Patient Protection and Affordable Care Act (42 U.S.C.
18081) is amended--
(A) in subsection (a)--
(i) in paragraph (1), by striking
``and section 36B(e) of the Internal
Revenue Code of 1986''; and
(ii) in paragraph (2)--
(I) in subparagraph (A), by
striking ``and'' at the end;
(II) in subparagraph (B), by
adding ``and'' at the end; and
(III) by adding at the end
the following new subparagraph:
``(C) in the case such individual is an alien
lawfully present in the United States, whether
such individual is an eligible alien (within
the meaning of section 36B(e)(2) of such
Code);'';
(B) in subsection (b)(3), by adding at the
end the following new subparagraph:
``(D) Immigration status.--In the case the
individual's eligibility is based on an
attestation of the enrollee's immigration
status, an attestation that such individual is
an eligible alien (within the meaning of
36B(e)(2) of the Internal Revenue Code of
1986).''; and
(C) in subsection (c)(2)(B)(ii), by adding at
the end the following new subclause:
``(III) In the case of an
individual described in clause
(i)(I) with respect to whom a
premium tax credit or reduced
cost-sharing under section 36B
of the Internal Revenue Code of
1986 or section 1402 is being
claimed, the attestation that
the individual is an eligible
alien (within the meaning of
section 36B(e)(2) of such
Code).''.
(2) Advance determinations.--Section 1412(d) of the
Patient Protection and Affordable Care Act (42 U.S.C.
18082(d)) is amended by inserting before the period at
the end the following: ``or, in the case of aliens who
are lawfully present, are not eligible aliens (within
the meaning of section 36B(e)(2) of the Internal
Revenue Code of 1986)''.
(3) Cost-sharing reductions.--Section 1402(e) of the
Patient Protection and Affordable Care Act (42 U.S.C.
18071(e)) is amended--
(A) in the header, by inserting ``or Not
Eligible Aliens'' after ``Individuals Not
Lawfully Present'';
(B) in paragraph (1), in the matter preceding
subparagraph (A), by inserting ``or, in the
case of an alien who is lawfully present, is
not an eligible alien (within the meaning of
section 36B(e)(2) of the Internal Revenue Code
of 1986)'' after ``not lawfully present''; and
(C) by amending paragraph (2) to read as
follows:
``(2) Eligible aliens.--For purposes of this section,
an individual shall be treated as an eligible alien
(within the meaning of section 36B(e)(2) of the
Internal Revenue Code of 1986) if, and only if, the
individual is, and for the entire period of enrollment
for which the cost-sharing reduction under this section
is being claimed is reasonably expected to be, such an
alien.''.
(4) Basic health programs.--Section 1331(e)(1) of the
Patient Protection and Affordable Care Act (42 U.S.C.
18051(e)(1)) is amended by inserting before the period
at the end the following: ``or, in the case of an alien
who is lawfully present, an individual who is not an
eligible alien (as defined in section 36B(e)(2) of the
Internal Revenue Code of 1986''.
(5) Effective date.--The amendments made by this
subsection shall apply with respect to plan years
beginning on or after January 1, 2027.
(d) Clerical Amendments.--
(1) The heading for section 36B(e) is amended by
inserting ``and Not Eligible Aliens'' after
``Individuals Not Lawfully Present''.
(2) The heading for section 36B(e)(2) is amended by
inserting ``; eligible aliens'' after ``Lawfully
present''.
(e) Requirement to Maintain Minimum Essential Coverage.--
Section 5000A(d)(3) is amended by striking ``an alien lawfully
present in the United States'' and inserting ``an eligible
alien (within the meaning of section 36B(e)(2))''.
(f) Regulations.--The Secretary of the Treasury and the
Secretary of Health and Human Services may each prescribe such
rules and other guidance as may be necessary or appropriate to
carry out the amendments made by this section.
(g) Effective Date.--The amendments made by this section
(other than the amendments made by subsection (c)) shall apply
to taxable years beginning after December 31, 2026.

SEC. 112102. CERTAIN ALIENS TREATED AS INELIGIBLE FOR PREMIUM TAX
CREDIT.

(a) In General.--Section 36B(e)(2), as amended by the
preceding provisions of this Act, is amended by adding at the
end the following new subparagraph:
``(C) Eligible aliens.--Notwithstanding
subparagraph (B), an individual who is an alien
and lawfully present shall be treated as an
eligible alien if and only if such individual
is not, and is reasonably expected not to be
for the entire period of enrollment for which
the credit under this section is being
claimed--
``(i) an alien granted, or with a
pending application for, asylum under
section 208 of the Immigration and
Nationality Act,
``(ii) an alien granted parole under
section 212(d)(5) or 236(a)(2)(B) of
the Immigration and Nationality Act,
``(iii) an alien granted temporary
protected status under section 244 of
the Immigration and Nationality Act,
``(iv) an alien granted deferred
action or deferred enforced departure,
or
``(v) an alien granted withholding of
removal under section 241(b)(3) of the
Immigration and Nationality Act.''.
(b) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2026.

SEC. 112103. DISALLOWING PREMIUM TAX CREDIT DURING PERIODS OF MEDICAID
INELIGIBILITY DUE TO ALIEN STATUS.

(a) In General.--Section 36B(c)(1) is amended by striking
subparagraph (B) and by redesignating subparagraphs (C), (D),
and (E) as subparagraphs (B), (C), and (D), respectively.
(b) Conforming Amendments.--
(1) Section 36B(g)(4)(A) is amended by striking
``subsection (c)(1)(C)'' and inserting ``subsection
(c)(1)(B)''.
(2) Section 1331(e)(1)(B) of the Patient Protection
and Affordable Care Act (42 U.S.C. 18051(e)(1)(B)) is
amended by striking ``, or, in the case of'' and all
that follows through ``such alien status''.
(3) Section 1402(b) of such Act (42 U.S.C. 18071(b))
is amended by striking the second sentence.
(c) Regulations.--The Secretary of the Treasury and the
Secretary of Health and Human Services may each prescribe such
rules and other guidance as may be necessary or appropriate to
carry out the amendments made by this section.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

SEC. 112104. LIMITING MEDICARE COVERAGE OF CERTAIN INDIVIDUALS.

Title XVIII of the Social Security Act (42 U.S.C. 1395 et
seq.) is amended by adding at the end the following new
section:

``SEC. 1899C. LIMITING MEDICARE COVERAGE OF CERTAIN INDIVIDUALS.

``(a) In General.--Notwithstanding section 226, section 226A,
section 401 of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, or any other provision of this
title, but subject to subsection (b), an individual may be
entitled to, or enrolled for, benefits under this title only if
the individual is--
``(1) a citizen or national of the United States;
``(2) an alien who is lawfully admitted for permanent
residence under the Immigration and Nationality Act;
``(3) an alien who--
``(A) is a citizen or national of the
Republic of Cuba;
``(B) is the beneficiary of an approved
petition under section 203(a) of the
Immigration and Nationality Act;
``(C) meets all eligibility requirements for
an immigrant visa but for whom such a visa is
not immediately available;
``(D) is not otherwise inadmissible under
section 212(a) of such Act; and
``(E) is physically present in the United
States pursuant to a grant of parole in
furtherance of the commitment of the United
States to the minimum level of annual legal
migration of Cuban nationals to the United
States specified in the U.S.-Cuba Joint
Communique on Migration, done at New York
September 9, 1994, and reaffirmed in the Cuba-
United States: Joint Statement on Normalization
of Migration, Building on the Agreement of
September 9, 1994, done at New York May 2,
1995; or
``(4) an individual who lawfully resides in the
United States in accordance with a Compact of Free
Association referred to in section 402(b)(2)(G) of the
Personal Responsibility and Work Opportunity
Reconciliation Act of 1996.
``(b) Application to Individuals Currently Entitled to or
Enrolled for Benefits.--
``(1) In general.--In the case of an individual who
is entitled to, or enrolled for, benefits under this
title as of the date of the enactment of this section,
subsection (a) shall apply beginning on the date that
is 1 year after such date of enactment.
``(2) Review by commissioner of social security.--
``(A) In general.--Not later than 6 months
after the date of the enactment of this
section, the Commissioner of Social Security
shall complete a review of individuals entitled
to, or enrolled for, benefits under this title
as of such date of enactment for purposes of
identifying individuals not described in any of
paragraphs (1) through (4) of subsection (a).
``(B) Notice.--The Commissioner of Social
Security shall notify each individual
identified under the review conducted under
subparagraph (A) that such individual's
entitlement to, or enrollment for, benefits
under this title will be terminated as of the
date that is 1 year after the date of the
enactment of this section. Such notification
shall be made as soon as practicable after such
identification and in a manner designed to
ensure such individual's comprehension of such
notification.''.

SEC. 112105. EXCISE TAX ON REMITTANCE TRANSFERS.

(a) In General.--Chapter 36 is amended by inserting after
subchapter B the following new subchapter:

``Subchapter C--Remittance Transfers

``Sec. 4475. Imposition of tax.

``SEC. 4475. IMPOSITION OF TAX.

``(a) In General.--There is hereby imposed on any remittance
transfer a tax equal to 5 percent of the amount of such
transfer.
``(b) Payment of Tax.--
``(1) In general.--The tax imposed by this section
with respect to any remittance transfer shall be paid
by the sender with respect to such transfer.
``(2) Collection.--The remittance transfer provider
with respect to any remittance transfer shall collect
the amount of the tax imposed under subsection (a) with
respect to such transfer from the sender and remit such
tax quarterly to the Secretary at such time and in such
manner as provided by the Secretary.
``(3) Secondary liability.--Where any tax imposed by
subsection (a) is not paid at the time the transfer is
made, then to the extent that such tax is not
collected, such tax shall be paid by the remittance
transfer provider.
``(c) Exception for Remittance Transfers Sent by Citizens and
Nationals of the United States Through Certain Providers.--
``(1) In general.--Subsection (a) shall not apply to
any remittance transfer with respect to which the
remittance transfer provider is a qualified remittance
transfer provider and the sender is a verified United
States sender.
``(2) Qualified remittance transfer provider.--For
purposes of this subsection, the term `qualified
remittance transfer provider' means any remittance
transfer provider which enters into a written agreement
with the Secretary pursuant to which such provider
agrees to verify the status of senders as citizens or
nationals of the United States in such manner, and in
accordance with such procedures, as the Secretary may
specify.
``(3) Verified united states sender.--For purposes of
this subsection, the term `verified United States
sender' means any sender who is verified by a qualified
remittance transfer provider as being a citizen or
national of the United States pursuant to an agreement
described in paragraph (2).
``(d) Definitions.--For purposes of this section, the terms
`remittance transfer', `remittance transfer provider',
`designated recipient', and `sender' shall each have the
respective meanings given such terms by section 920(g) of the
Electronic Fund Transfer Act (15 U.S.C. 1693o-1; relating to
``Remittance Transfers'').
``(e) Application of Anti-conduit Rules.--For purposes of
section 7701(l) with respect to any multiple-party arrangements
involving the sender, a remittance transfer shall be treated as
a financing transaction.''.
(b) Refundable Income Tax Credit Allowed to Citizens and
Nationals of the United States for Excise Tax on Remittance
Transfers.--Subpart C of part IV of subchapter A of chapter 1
is amended by inserting after section 36B the following new
section:

``SEC. 36C. CREDIT FOR EXCISE TAX ON REMITTANCE TRANSFERS OF CITIZENS
AND NATIONALS OF THE UNITED STATES.

``(a) In General.--In the case of any individual, there shall
be allowed as a credit against the tax imposed by this subtitle
for any taxable year an amount equal to the aggregate amount of
taxes paid by such individual under section 4475 during such
taxable year.
``(b) Social Security Number Requirement.--
``(1) In general.--No credit shall be allowed under
this section unless the taxpayer includes on the return
of tax for the taxable year--
``(A) the individual's social security
number, and
``(B) if the individual is married, the
social security number of such individuals's
spouse.
``(2) Social security number.--For purposes of this
subsection, the term `social security number' has the
meaning given such term in section 24(h)(7).
``(3) Married individuals.--Rules similar to the
rules of section 32(d) shall apply to this section.
``(c) Substantiation Requirements.--No credit shall be
allowed under this section unless the taxpayer demonstrates to
the satisfaction of the Secretary that the tax under section
4475 with respect to which such credit is determined--
``(1) was paid by the taxpayer, and
``(2) is with respect to a remittance transfer with
respect to which the taxpayer provided to the
remittance transfer provider the certification and
information referred to in section 6050AA(a)(2).
``(d) Definitions.--Any term used in this section which is
also used in section 4475 shall have the meaning given such
term in section 4475.
``(e) Application of Anti-conduit Rules.--For rules providing
for the application of the anti-conduit rules of section
7701(l) to remittance transfers, see section 4475(e).''.
(c) Reporting by Remittance Transfer Providers.--
(1) In general.--Subpart B of part III of subchapter
A of chapter 61 is amended by adding at the end the
following new section:

``SEC. 6050AA. RETURNS RELATING TO REMITTANCE TRANSFERS.

``(a) In General.--Each remittance transfer provider shall
make a return at such time as the Secretary may provide setting
forth--
``(1) in the case of a qualified remittance transfer
provider with respect to remittance transfers to which
section 4475(a) does not apply by reason of section
4475(c), the aggregate number and value of such
transfers,
``(2) in the case of any remittance transfer not
described in paragraph (1) and with respect to which
the sender certifies to the remittance transfer
provider an intent to claim the credit under section
36C and provides the information described in paragraph
(1)--
``(A) the name, address, and social security
number of the sender,
``(B) the amount of tax paid by the sender
under section 4475(b)(1), and
``(C) the amount of tax remitted by the
remittance transfer provider under section
4475(b)(2), and
``(3) in the case of any remittance transfer not
included under paragraph (1) or (2)--
``(A) the aggregate amount of tax paid under
section 4475(b)(1) with respect to such
transfers, and
``(B) the aggregate amount of tax remitted
under section 4475(b)(2) with respect to such
transfers.
``(b) Statement to Be Furnished to Named Persons.--Every
person required to make a return under subsection (a) shall
furnish, at such time as the Secretary may provide, to each
person whose name is required to be set forth in such return a
written statement showing--
``(1) the name and address of the information contact
of the required reporting person, and
``(2) the information described in subsection (a)(2)
which relates to such person.
``(c) Definitions.--Any term used in this section which is
also used in section 4475 shall have the meaning given such
term in such section.''.
(2) Penalties.--Section 6724(d), as amended by the
preceding provisions of this Act, is amended--
(A) in paragraph (1)(B), by striking ``or''
at the end of clause (xxvii), by striking
``and'' at the end of clause (xxviii) and
inserting ``or'', and by adding at the end the
following new clause:
``(xxix) section 6050AA(a) (relating
to returns relating to remittance
transfers), and'', and
(B) in paragraph (2), by striking ``or'' at
the end of subparagraph (MM), by striking the
period at the end of subparagraph (NN) and
inserting ``, or'', and by inserting after
subparagraph (NN) the following new
subparagraph:
``(OO) section 6050AA(b) (relating to
statements relating to remittance
transfers).''.
(d) Conforming Amendments.--
(1) Section 6211(b)(4)(A) is amended by inserting
``36C,'' after ``36B,''.
(2) Section 6213(g)(2), as amended by the preceding
provisions of this Act, is amended by striking ``and''
at the end of subparagraph (Z), by the striking the
period at the end of subparagraph (AA) and inserting
``, and'', and by inserting after subparagraph (AA) the
following new subparagraph:
``(BB) an omission of a correct social
security number under section 36C(b) to be
included on a return.''.
(3) Section 1324(b)(2) of title 31, United States
Code, is amended by inserting ``36C,'' after ``36B,''.
(4) 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. Credit for excise tax on remittance transfers of citizens
and nationals of the United States.''.

(5) The table of sections for subpart B of part III
of subchapter A of chapter 61 is amended by adding at
the end the following new item:

``Sec. 6050AA. Returns relating to remittance transfers.''.

(6) The table of subchapters for chapter 36 is
amended by inserting after the item relating to
subchapter B the following new item:

``subchapter c--remittance transfers''.

(e) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall
apply to transfers made after December 31, 2025.
(2) Tax credit.--The amendments made by subsection
(b), and paragraphs (1) through (4) of subsection (d),
shall apply to taxable years ending after December 31,
2025.

SEC. 112106. SOCIAL SECURITY NUMBER REQUIREMENT FOR AMERICAN
OPPORTUNITY AND LIFETIME LEARNING CREDITS.

(a) Social Security Number of Taxpayer Required.--Section
25A(g)(1) is amended to read as follows:
``(1) Identification requirement.--
``(A) Social security number requirement.--No
credit shall be allowed under subsection (a) to
a taxpayer unless the taxpayer includes on the
return of tax for the taxable year--
``(i) such individual's social
security number,
``(ii) if the individual is married,
the social security number of such
individual's spouse, and
``(iii) in the case of a credit with
respect to the qualified tuition and
related expenses of an individual other
than the taxpayer or the taxpayer's
spouse, the name and social security
number of such individual.
``(B) Institution.--No American Opportunity
Tax Credit shall be allowed under this section
unless the taxpayer includes the employer
identification number of any institution to
which the taxpayer paid qualified tuition and
related expenses taken into account under this
section on the return of tax for the taxable
year.
``(C) Social security number defined.--For
purposes of this paragraph, the term `social
security number' shall have the meaning given
such term in section 24(h)(7).''.
(b) Rules Related to Married Individuals.--Section 25A(g)(6)
is amended to read as follows:
``(6) Rules related to married individuals.--Rules
similar to the rules of section 32(d) shall apply to
this section.''.
(c) Omission Treated as Mathematical or Clerical Error.--
Section 6213(g)(2)(J) is amended by striking ``TIN'' and
inserting ``social security number or employer identification
number''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2025.

PART 3--PREVENTING FRAUD, WASTE, AND ABUSE

SEC. 112201. REQUIRING EXCHANGE VERIFICATION OF ELIGIBILITY FOR HEALTH
PLAN.

(a) In General.--Section 36B(c) is amended by adding at the
end the following new paragraphs:
``(5) Exchange enrollment verification requirement.--
``(A) In general.--The term `coverage month'
shall not include, with respect to any
individual covered by a qualified health plan
enrolled in through an Exchange, any month
beginning before the Exchange verifies, using
applicable enrollment information that shall be
provided or verified by the applicant, such
individual's eligibility--
``(i) to enroll in the plan through
the Exchange,
``(ii) for any advance payment under
section 1412 of the Patient Protection
and Affordable Care Act of the credit
allowed under this section, and
``(iii) for any reduced cost-sharing
under section 1402 of such Act.
``(B) Applicable enrollment information.--For
purposes of subparagraph (A), applicable
enrollment information shall at least include
affirmation of the following information (to
the extent relevant in determining eligibility
described in subparagraph (A)):
``(i) Income.
``(ii) Any immigration status.
``(iii) Any health coverage status or
eligibility for coverage.
``(iv) Place of residence.
``(v) Family size.
``(vi) Such other information as may
be determined by the Secretary (in
consultation with the Secretary of
Health and Human Services) as necessary
to the verification prescribed under
subparagraph (A).
``(C) Verification of past months.--In the
case of a month that begins before verification
prescribed by subparagraph (A), such month
shall be treated as a coverage month if, and
only if, the Exchange verifies for such month
(using applicable enrollment information that
shall be provided or verified by the applicant)
such individual's eligibility to have so
enrolled, for any such advance payment, and for
any such reduced cost-sharing.
``(D) Exchange participation; coordination
with other procedures for determining
eligibility.--An individual shall not, solely
by reason of failing to meet the requirements
of this paragraph with respect to a month, be
treated for such month as ineligible to enroll
in a qualified health plan through an Exchange.
``(6) Exchange compliance with filing requirements.--
The term `coverage month' shall not include, with
respect to any individual covered by a qualified health
plan enrolled in through an Exchange, any month for
which the Exchange does not meet the requirements of
section 155.305(f)(4) of title 45, Code of Federal
Regulations (as published in the Federal Register on
March 19, 2025 (90 FR 12942)), with respect to the
individual.''.
(b) Pre-enrollment Verification Process Required.--Section
36B(c)(3)(A) is amended--
(1) by striking ``health plan.--The term'' and
inserting the following: ``health plan.--
``(i) In general.--The term'', and
(2) by adding at the end the following new clause:
``(ii) Pre-enrollment verification
process required.--Such term shall not
include any plan enrolled in through an
Exchange, unless such Exchange provides
a process for pre-enrollment
verification through which any
applicant may, beginning not later than
August 1, verify with the Exchange the
applicant's eligibility for enrollment
in such plan for plan years beginning
in the subsequent year, for any advance
payment of the credit allowed under
this section, and for reduced cost-
sharing under section 1402 of the
Patient Protection and Affordable Care
Act.''.
(c) Regulations.--The Secretary of the Treasury and the
Secretary of Health and Human Services may each prescribe such
rules and other guidance as may be necessary or appropriate to
carry out the amendments made by this section.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2027.

SEC. 112202. DISALLOWING PREMIUM TAX CREDIT IN CASE OF CERTAIN COVERAGE
ENROLLED IN DURING SPECIAL ENROLLMENT PERIOD.

(a) In General.--Section 36B(c)(3)(A), as amended by the
preceding provisions of this Act, is amended by adding at the
end the following new clause:
``(iii) Exception in case of certain
special enrollment periods.--Such term
shall not include any plan enrolled in
during a special enrollment period
provided for by an Exchange--
``(I) on the basis of the
relationship of the
individual's expected household
income to such a percentage of
the poverty line (or such other
amount) as is prescribed by the
Secretary of Health and Human
Services for purposes of such
period, and
``(II) not in connection with
the occurrence of an event or
change in circumstances
specified by the Secretary of
Health and Human Services for
such purposes.''.
(b) Regulations.--The Secretary of Treasury and the Secretary
of Health and Human Services shall prescribe such rules
(including interim final and temporary regulations) and other
guidance as may be necessary to carry out the purposes of the
amendments made by this section.
(c) Effective Date.--The amendments made by this section
shall apply with respect to plans enrolled in during calendar
months beginning after the third calendar month ending after
the date of the enactment of this Act.

SEC. 112203. ELIMINATING LIMITATION ON RECAPTURE OF ADVANCE PAYMENT OF
PREMIUM TAX CREDIT.

(a) In General.--Section 36B(f)(2) is amended by striking
subparagraph (B).
(b) Conforming Amendments.--
(1) Section 36B(f)(2) is amended by striking
``advance payments.--'' and all that follows through
``If the advance payments'' and inserting the
following: ``advance payments.--If the advance
payments''.
(2) Section 35(g)(12)(B)(ii) is amended by striking
``then section 36B(f)(2)(B) shall be applied by
substituting the amount determined under clause (i) for
the amount determined under section 36B(f)(2)(A)'' and
inserting ``then the amount determined under clause (i)
shall be substituted for the amount determined under
section 36B(f)(2)''.
(c) Effective Date.--The amendment made by this section shall
apply to taxable years beginning after December 31, 2025.

SEC. 112204. IMPLEMENTING ARTIFICIAL INTELLIGENCE TOOLS FOR PURPOSES OF
REDUCING AND RECOUPING IMPROPER PAYMENTS UNDER
MEDICARE.

(a) In General.--Part E of title XVIII of the Social Security
Act (42 U.S.C. 1395x et seq.), as amended by the preceding
provisions of this Act, is amended by adding at the end the
following new section:

``SEC. 1899D. IMPLEMENTING ARTIFICIAL INTELLIGENCE TOOLS FOR PURPOSES
OF REDUCING AND RECOUPING IMPROPER PAYMENTS.

``(a) In General.--Not later than January 1, 2027, the
Secretary shall implement such artificial intelligence tools
determined appropriate by the Secretary for purposes of--
``(1) reducing improper payments made under parts A
and B; and
``(2) identifying any such improper payments so made.
``(b) Contracts.--The Secretary shall seek to contract with a
vendor of artificial intelligence tools and with data
scientists for purposes of implementing the artificial
intelligence tools required under subsection (a).
``(c) Recoupment.--The Secretary shall, to the extent
practicable, recoup payments identified using the artificial
intelligence tools implemented under subsection (a).
``(d) Report.--Not later than January 1, 2029, and not less
frequently than annually thereafter, the Secretary shall report
to Congress on the implementation of artificial intelligence
tools under subsection (a) and the recoupment of improper
payments under subsection (c). Such report shall include--
``(1) a description of any opportunities for further
reducing rates of improper payments described in
subsection (a)(1) or further increasing rates of
recoupment of such payments;
``(2) the total dollar amount of improper payments
recouped in the most recent year for which data is
available; and
``(3) in the case that the Secretary fails to reduce
the rate of improper payments by 50 percent in such
most recent year as compared to the year prior to such
most recent year, a description of the reasons for such
failure.''.
(b) Implementation Funding.--
(1) Federal hospital insurance trust fund.--The
Secretary of Health and Human Services shall provide
for the transfer from the Federal Hospital Insurance
Trust Fund established under section 1817 of the Social
Security Act (42 U.S.C. 1395i) to the Centers for
Medicare & Medicaid Services Program Management Account
of $12,500,000 for fiscal year 2025 for purposes of
carrying out the amendment made by this section, to
remain available until expended.
(2) Federal supplementary medical insurance trust
fund.--The Secretary of Health and Human Services shall
provide for the transfer, from the Federal
Supplementary Medical Insurance Trust Fund established
under section 1841 of the Social Security Act (42
U.S.C. 1395t) to the Centers for Medicare & Medicaid
Services Program Management Account of $12,500,000 for
fiscal year 2025 for purposes of carrying out the
amendment made by this section, to remain available
until expended.

SEC. 112205. ENFORCEMENT PROVISIONS WITH RESPECT TO COVID-RELATED
EMPLOYEE RETENTION CREDITS.

(a) Increase in Assessable Penalty on COVID-ERTC Promoters
for Aiding and Abetting Understatements of Tax Liability.--
(1) In general.--If any COVID-ERTC promoter is
subject to penalty under section 6701(a) of the
Internal Revenue Code of 1986 with respect to any
COVID-ERTC document, notwithstanding paragraphs (1) and
(2) of section 6701(b) of such Code, the amount of the
penalty imposed under such section 6701(a) shall be the
greater of--
(A) $200,000 ($10,000, in the case of a
natural person), or
(B) 75 percent of the gross income derived
(or to be derived) by such promoter with
respect to the aid, assistance, or advice
referred to in section 6701(a)(1) of such Code
with respect to such document.
(2) No inference.--Paragraph (1) shall not be
construed to create any inference with respect to the
proper application of the knowledge requirement of
section 6701(a)(3) of the Internal Revenue Code of
1986.
(b) Failure to Comply With Due Diligence Requirements Treated
as Knowledge for Purposes of Assessable Penalty for Aiding and
Abetting Understatement of Tax Liability.--In the case of any
COVID-ERTC promoter, the knowledge requirement of section
6701(a)(3) of the Internal Revenue Code of 1986 shall be
treated as satisfied with respect to any COVID-ERTC document
with respect to which such promoter provided aid, assistance,
or advice, if such promoter fails to comply with the due
diligence requirements referred to in subsection (c)(1).
(c) Assessable Penalty for Failure to Comply With Due
Diligence Requirements.--
(1) In general.--Any COVID-ERTC promoter which
provides aid, assistance, or advice with respect to any
COVID-ERTC document and which fails to comply with due
diligence requirements imposed by the Secretary with
respect to determining eligibility for, or the amount
of, any COVID-related employee retention tax credit,
shall pay a penalty of $1,000 for each such failure.
(2) Due diligence requirements.--Except as otherwise
provided by the Secretary, the due diligence
requirements referred to in paragraph (1) shall be
similar to the due diligence requirements imposed under
section 6695(g) of the Internal Revenue Code of 1986.
(3) Restriction to documents used in connection with
returns or claims for refund.--Paragraph (1) shall not
apply with respect to any COVID-ERTC document unless
such document constitutes, or relates to, a return or
claim for refund.
(4) Treatment as assessable penalty, etc.--For
purposes of the Internal Revenue Code of 1986, the
penalty imposed under paragraph (1) shall be treated in
the same manner as a penalty imposed under section
6695(g) of such Code.
(5) Secretary.--For purposes of this subsection, the
term ``Secretary'' means the Secretary of the Treasury
or the Secretary's delegate.
(d) Assessable Penalties for Failure to Disclose Information,
Maintain Client Lists, etc.--For purposes of sections 6111,
6112, 6707 and 6708 of the Internal Revenue Code of 1986--
(1) any COVID-related employee retention tax credit
(whether or not the taxpayer claims such COVID-related
employee retention tax credit) shall be treated as a
listed transaction (and as a reportable transaction)
with respect to any COVID-ERTC promoter if such
promoter provides any aid, assistance, or advice with
respect to any COVID-ERTC document relating to such
COVID-related employee retention tax credit, and
(2) such COVID-ERTC promoter shall be treated as a
material advisor with respect to such transaction.
(e) COVID-ERTC Promoter.--For purposes of this section--
(1) In general.--The term ``COVID-ERTC promoter''
means, with respect to any COVID-ERTC document, any
person which provides aid, assistance, or advice with
respect to such document if--
(A) such person charges or receives a fee for
such aid, assistance, or advice which is based
on the amount of the refund or credit with
respect to such document and, with respect to
such person's taxable year in which such person
provided such assistance or the preceding
taxable year, the aggregate gross receipts of
such person for aid, assistance, and advice
with respect to all COVID-ERTC documents
exceeds 20 percent of the gross receipts of
such person for such taxable year, or
(B) with respect to such person's taxable
year in which such person provided such
assistance or the preceding taxable year--
(i) the aggregate gross receipts of
such person for aid, assistance, and
advice with respect to all COVID-ERTC
documents exceeds 50 percent of the
gross receipts of such person for such
taxable year, or
(ii) both--
(I) such aggregate gross
receipts exceeds 20 percent of
the gross receipts of such
person for such taxable year,
and
(II) the aggregate gross
receipts of such person for
aid, assistance, and advice
with respect to all COVID-ERTC
documents (determined after
application of paragraph (3))
exceeds $500,000.
(2) Exception for certified professional employer
organizations.--The term ``COVID-ERTC promoter'' shall
not include a certified professional employer
organization (as defined in section 7705 of the
Internal Revenue Code of 1986).
(3) Aggregation rule.--For purposes of paragraph
(1)(B)(ii)(II), all persons treated as a single
employer under subsection (a) or (b) of section 52 of
the Internal Revenue Code of 1986, or subsection (m) or
(o) of section 414 of such Code, shall be treated as 1
person.
(4) Short taxable years.--In the case of any taxable
year of less than 12 months, paragraph (1) shall be
applied with respect to the calendar year in which such
taxable year begins (in addition to applying to such
taxable year).
(f) COVID-ERTC Document.--For purposes of this section, the
term ``COVID-ERTC document'' means any return, affidavit,
claim, or other document related to any COVID-related employee
retention tax credit, including any document related to
eligibility for, or the calculation or determination of any
amount directly related to any COVID-related employee retention
tax credit.
(g) COVID-related Employee Retention Tax Credit.--For
purposes of this section, the term ``COVID-related employee
retention tax credit'' means--
(1) any credit, or advance payment, under section
3134 of the Internal Revenue Code of 1986, and
(2) any credit, or advance payment, under section
2301 of the CARES Act.
(h) Limitation on Credit and Refund of COVID-related Employee
Retention Tax Credits.--Notwithstanding section 6511 of the
Internal Revenue Code of 1986 or any other provision of law, no
credit or refund of any COVID-related employee retention tax
credit shall be allowed or made after the date of the enactment
of this Act, unless a claim for such credit or refund is filed
by the taxpayer on or before January 31, 2024.
(i) Amendments to Extend Limitation on Assessment.--
(1) In general.--Section 3134(l) is amended to read
as follows:
``(l) Extension of Limitation on Assessment.--
``(1) In general.--Notwithstanding section 6501, the
limitation on the time period for the assessment of any
amount attributable to a credit claimed under this
section shall not expire before the date that is 6
years after the latest of--
``(A) the date on which the original return
which includes the calendar quarter with
respect to which such credit is determined is
filed,
``(B) the date on which such return is
treated as filed under section 6501(b)(2), or
``(C) the date on which the claim for credit
or refund with respect to such credit is made.
``(2) Deduction for wages taken into account in
determining improperly claimed credit.--
``(A) In general.--Notwithstanding section
6511, in the case of an assessment attributable
to a credit claimed under this section, the
limitation on the time period for credit or
refund of any amount attributable to a
deduction for improperly claimed ERTC wages
shall not expire before the time period for
such assessment expires under paragraph (1).
``(B) Improperly claimed ertc wages.--For
purposes of this paragraph, the term
`improperly claimed ERTC wages' means, with
respect to an assessment attributable to a
credit claimed under this section, the wages
with respect to which a deduction would not
have been allowed if the portion of the credit
to which such assessment relates had been
properly claimed.''.
(2) Application to cares act credit.--Section 2301 of
the CARES Act is amended by adding at the end the
following new subsection:
``(o) Extension of Limitation on Assessment.--
``(1) In general.--Notwithstanding section 6501 of
the Internal Revenue Code of 1986, the limitation on
the time period for the assessment of any amount
attributable to a credit claimed under this section
shall not expire before the date that is 6 years after
the latest of--
``(A) the date on which the original return
which includes the calendar quarter with
respect to which such credit is determined is
filed,
``(B) the date on which such return is
treated as filed under section 6501(b)(2) of
such Code, or
``(C) the date on which the claim for credit
or refund with respect to such credit is made.
``(2) Deduction for wages taken into account in
determining improperly claimed credit.--
``(A) In general.--Notwithstanding section
6511 of such Code, in the case of an assessment
attributable to a credit claimed under this
section, the limitation on the time period for
credit or refund of any amount attributable to
a deduction for improperly claimed ERTC wages
shall not expire before the time period for
such assessment expires under paragraph (1).
``(B) Improperly claimed ertc wages.--For
purposes of this paragraph, the term
`improperly claimed ERTC wages' means, with
respect to an assessment attributable to a
credit claimed under this section, the wages
with respect to which a deduction would not
have been allowed if the portion of the credit
to which such assessment relates had been
properly claimed.''.
(j) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the provisions of this section shall apply
to aid, assistance, and advice provided after March 12,
2020.
(2) Due diligence requirements.--Subsections (b) and
(c) shall apply to aid, assistance, and advice provided
after the date of the enactment of this Act.
(3) Limitation on credit and refund of covid-related
employee retention tax credits.--Subsection (h) shall
apply to credits and refunds allowed or made after the
date of the enactment of this Act.
(4) Amendments to extend limitation on assessment.--
The amendments made by subsection (i) shall apply to
assessments made after the date of the enactment of
this Act.
(k) Transition Rule With Respect to Requirements to Disclose
Information, Maintain Client Lists, etc.--Any return under
section 6111 of the Internal Revenue Code of 1986, or list
under section 6112 of such Code, required by reason of
subsection (d) of this section to be filed or maintained,
respectively, with respect to any aid, assistance, or advice
provided by a COVID-ERTC promoter with respect to a COVID-ERTC
document before the date of the enactment of this Act, shall
not be required to be so filed or maintained (with respect to
such aid, assistance or advice) before the date which is 90
days after the date of the enactment of this Act.
(l) Provisions Not to Be Construed to Create Negative
Inferences.--
(1) No inference with respect to application of
knowledge requirement to pre-enactment conduct of
covid-ertc promoters, etc.--Subsection (b) shall not be
construed to create any inference with respect to the
proper application of section 6701(a)(3) of the
Internal Revenue Code of 1986 with respect to any aid,
assistance, or advice provided by any COVID-ERTC
promoter on or before the date of the enactment of this
Act (or with respect to any other aid, assistance, or
advice to which such subsection does not apply).
(2) Requirements to disclose information, maintain
client lists, etc.--Subsections (d) and (k) shall not
be construed to create any inference with respect to
whether any COVID-related employee retention tax credit
is (without regard to subsection (d)) a listed
transaction (or reportable transaction) with respect to
any COVID-ERTC promoter; and, for purposes of
subsection (k), a return or list shall not be treated
as required (with respect to such aid, assistance, or
advice) by reason of subsection (d) if such return or
list would be so required without regard to subsection
(d).
(m) Regulations.--The Secretary (as defined in subsection
(c)(5)) shall issue such regulations or other guidance as may
be necessary or appropriate to carry out the purposes of this
section (and the amendments made by this section).

SEC. 112206. EARNED INCOME TAX CREDIT REFORMS.

(a) Earned Income Tax Credit Certification Program.--
(1) Establishment of program.--
(A) In general.--Chapter 77 is amended by
adding at the end the following new section:

``SEC. 7531. EARNED INCOME TAX CREDIT CERTIFICATION PROGRAM.

``(a) In General.--To avoid duplicative and other erroneous
claims under section 32 with respect to a child of the
taxpayer, for taxable years beginning after December 31, 2027,
the Secretary shall establish a program under which, on the
taxpayer's application with respect to the child, the Secretary
shall issue an EITC certificate for purposes of section 32
establishing such child's status as a qualifying child only of
the taxpayer for a taxable year.
``(b) Application Requirements.--
``(1) In general.--The Secretary shall not issue to a
taxpayer an EITC certificate with respect to a child
for a taxable year unless the taxpayer applies under
the program with respect to the child and provides such
information and supporting documentation as the
Secretary shall by regulation prescribe as necessary to
establish such child as a qualifying child only of the
taxpayer for the taxable year.
``(2) Time and manner of application.--Such
application shall be made, and such information and
supporting documentation shall be provided--
``(A) in such manner as may be provided by
the Secretary for purposes of this section
(including establishing an on-line portal), and
``(B) not later than the due date for the
return of tax for the taxable year or (if
later) when the return is filed.
``(3) Competing claims.--In the case of more than 1
taxpayer making an application with respect to a child
under the program for a taxable year beginning during a
calendar year, the Secretary shall not issue an EITC
certificate to any such taxpayer with respect to such
child for such a taxable year unless the Secretary can
establish such child, based on information and
supporting documentation provided under paragraph (1),
as the qualifying child only of one such taxpayer for
such a taxable year.
``(c) Treatment of Credit Without Certification Under
Program.--For taxable years beginning after December 31, 2027--
``(1) In general.--In the case of a taxpayer who
takes into account as a qualifying child under section
32 a child for whom an EITC certificate has not been
issued for the taxable year to the taxpayer--
``(A) the Secretary shall not credit the
portion of any overpayment for such taxable
year that is attributable to the taxpayer
taking into account such child as a qualifying
child, unless the taxpayer obtains, not later
than the due date for the return for the
taxable year, an EITC certificate with respect
to such child for such taxable year, and
``(B) if the taxpayer fails to so obtain an
EITC certificate, such failure shall be
treated--
``(i) as an omission of information
required by section 32 with respect to
such child, and
``(ii) as arising out of a
mathematical or clerical error and
assessed according to section
6213(b)(1).
``(2) Termination of certification.--In the case of a
taxpayer who for a taxable year takes into account as a
qualifying child under section 32 a child for whom an
EITC certificate is terminated for such taxable year,
such termination shall be treated in the same manner as
a failure to obtain an EITC certificate under paragraph
(1)(B).
``(d) Transition Rules for Taxable Years Beginning Before
2028.--
``(1) In general.--If for any taxable year beginning
after December 31, 2023, and before January 1, 2027,
more than 1 taxpayer makes a claim for credit under
section 32 taking into account the same child as a
qualifying child, then the Secretary shall send notice
to each such taxpayer (by certified or registered mail
to the last known address of the taxpayer) detailing
the resultant treatment of such taxpayers under
paragraph (2) with respect to such child for any
subsequent taxable years beginning before 2028.
``(2) Subsequent taxable years beginning before
2028.--In the case of a child with respect to whom
paragraph (1) applied by reason of claims for credit
for a taxable year, for any subsequent taxable years
beginning before January 1, 2028--
``(A) subject to subparagraph (B), the
Secretary shall not credit the portion of any
overpayment for the taxable year that is
attributable to a taxpayer taking into account
such child as a qualifying child under section
32 until the 15th day of October following the
end of the taxable year, and
``(B) if more than one taxpayer makes a claim
for such credit for the taxable year taking
into account such child as a qualifying child,
so taking such child into account shall be
treated--
``(i) as an omission of information
required by section 32 with respect to
such child, and
``(ii) as arising out of a
mathematical or clerical error and
assessed according to section
6213(b)(1).
``(e) Qualifying Child.--For purposes of this section, the
term `qualifying child' has the meaning given such term under
section 32(c)(3).
``(f) Rebuttal of Treatment.--Treatment under subsection (c)
or (d)(2)(B) as having omitted information required by section
32 may be rebutted by providing such information and supporting
documentation as satisfactorily demonstrates the child is a
qualifying child of the taxpayer for the taxable year.
``(g) Restrictions on Taxpayers Who Improperly Use Program.--
``(1) In general.--A taxpayer shall not be permitted
to apply for an EITC certificate under the program for
any taxable year in the disallowance period.
``(2) Disallowance period.--For purposes of paragraph
(1), the disallowance period is--
``(A) the period of 10 taxable years after
the most recent taxable year for which there
was a penalty imposed under 6720D on the
taxpayer (but only if such penalty has been
imposed on such taxpayer more than once, at
least one instance of which was due to fraud
under section 6720D(b)),
``(B) the period of 2 taxable years after the
most recent taxable year for which there was a
penalty imposed under 6720D on the taxpayer
(but only if such penalty has been imposed on
such taxpayer more than once due to reckless or
intentional disregard of rules and regulations
(but not imposed due to fraud)), and
``(C) any disallowance period with respect to
the taxpayer under section 32(k)(1).
``(h) Regulations.--The Secretary shall prescribe such rules
as may be necessary or appropriate to carry out the program and
purposes of this section, including--
``(1) a process for establishing alternating taxable
year treatment of a child as a qualifying child under a
custodial arrangement,
``(2) notwithstanding subsection (d)(2), a process
for--
``(A) establishing the status of a child as a
qualifying child of the taxpayer under section
32 for taxable years to which such subsection
applies, and
``(B) allowing credit or refunds attributable
to such status,
``(3) a simplified process for re-certifying a child
as a qualifying child only of the taxpayer for a
taxable year, and
``(4) a process for terminating EITC certificates in
the case of competing claims with respect to a child or
in cases in which issuance of the certificate is
determined by the Secretary to be erroneous.''.
(B) Conforming amendment.--Section 32 amended
by adding at the end the following new
subsection:
``(o) EITC Certificate With Respect to Qualifying Children.--
For rules relating to EITC certificates with respect to
qualifying children and duplicate claims for the credit allowed
under this section, see section 7531.''.
(C) Clerical amendment.--The table of
sections for chapter 77 is amended by adding at
the end the following new item:

``Sec. 7531. Earned income tax credit certification program.''.
(2) Penalties for improper use of eitc certificate
program.--
(A) In general.--Part I of subchapter B of
chapter 68 is amended by adding at the end the
following new section:

``SEC. 6720D. PENALTIES WITH RESPECT TO EITC CERTIFICATE PROGRAM.

``(a) Reckless or Intentional Disregard.--If--
``(1) any person makes a material misstatement or
inaccurate representation in an application under
section 7531 for an EITC certificate, and
``(2) such misstatement or representation was due to
reckless or intentional disregard of rules and
regulations (but not due to fraud),
such person shall pay a penalty of $100 for each EITC
certificate with respect to which such misstatement or
representation was made.
``(b) Fraud.--If a misstatement or representation described
in subsection (a)(1) is due to fraud on the part of the person
making such misstatement or representation, in addition to any
criminal penalty, such person shall pay a penalty of $500 for
each EITC certificate with respect to which such a misstatement
or representation was made.''.
(B) Clerical amendment.--The table of
sections for part I of subchapter B of chapter
68 is amended by adding at the end the
following new item:

``Sec. 6720D. Penalties with respect to EITC certificate program.''.
(3) Effective date.--The amendments made by this
subsection shall apply to taxable years beginning after
December 31, 2024.
(b) Task Force to Design a Private Data Bouncing System for
Improvements to the Earned Income Tax Credit.--Out of any money
in the Treasury not otherwise appropriated, there is hereby
appropriated $10,000,000 for the fiscal year ending on
September 30, 2026, for necessary expenses of the Department of
the Treasury, to establish, within 90 days following the date
of the enactment of this Act, a task force to provide to the
Secretary of the Treasury a report on the following with
respect to the administration of the earned income tax credit:
(1) Recommendations for improvement of the integrity
of such administration.
(2) The potential use of third-party payroll and
consumption datasets to verify income.
(3) The integration of automated databases to allow
horizontal verification to reduce improper payments,
fraud, and abuse.
(c) Increased Earned Income Tax Credit for Purple Heart
Recipients Whose Social Security Disability Benefits Are
Terminated by Reason of Work Activity.--
(1) In general.--Section 32, as amended by the
preceding provisions of this Act, is amended by adding
at the end the following new subsection:
``(p) Increase in Credit for Purple Heart Recipients Whose
Social Security Disability Benefits Are Terminated by Reason of
Work Activity.--
``(1) In general.--In the case of a specified Purple
Heart recipient, the credit otherwise determined under
subsection (a) for the taxable year shall be increased
(whether or not such specified Purple Heart recipient
is an eligible individual) by the sum of the SSDI
benefit substitution amounts with respect to qualified
benefit termination months during such taxable year.
``(2) Specified purple heart recipient.--For purposes
of this subsection, the term `specified Purple Heart
recipient' means any individual--
``(A) who received the Purple Heart,
``(B) who received disability insurance
benefit payments under section 223(a) of the
Social Security Act, and
``(C) with respect to whom such disability
insurance benefit payments ceased to be payable
by reason of section 223(e)(1) of such Act.
``(3) Qualified benefit termination month.--For
purposes of this subsection--
``(A) In general.--The term `qualified
benefit termination month' means, with respect
to any specified Purple Heart recipient, each
month during the 12-month period beginning with
the first month with respect to which
disability insurance benefit payments described
in paragraph (2)(B) ceased to be payable as
described in paragraph (2)(C).
``(B) Exception for months for which benefits
are reinstated, etc.--Such term shall not
include any month if the specified Purple Heart
recipient receives any benefit payment under
section 223(a) of the Social Security Act with
respect to such month.
``(4) SSDI benefit substitution amount.--For purposes
of this subsection, the term `SSDI benefit substitution
amount' means, with respect to specified Purple Heart
recipient for any qualified benefit termination month,
an amount equal to the disability insurance benefit
payment received by such recipient under section 223(a)
of the Social Security Act for the month immediately
preceding the 12-month period described in paragraph
(3)(A).
``(5) Certain eitc limitations not applicable.--
Subsections (a)(2), (d), (e), (f), and (i) shall not
apply with respect to the increase under paragraph
(1).''.
(2) Effective date.--The amendment made by this
subsection shall apply to taxable years ending after
the date of the enactment of this Act.

SEC. 112207. TASK FORCE ON THE TERMINATION OF DIRECT FILE.

(a) Termination of Direct File.--As soon as practicable, and
not later than 30 days after the date of the enactment of this
Act, the Secretary of the Treasury shall ensure that the
Internal Revenue Service Direct File program has been
terminated.
(b) Appropriation for Task Force to Design a Better Public-
private Partnership Between the IRS and Private Sector Tax
Preparation Services to Provide for Free Tax Filing to Replace
the Existing ``Free File'' Program and Any ``Direct Efile'' Tax
Return System.--Out of any money in the Treasury not otherwise
appropriated, there is hereby appropriated for the fiscal year
ending September 30, 2026, for necessary expenses of the
Department of the Treasury to deliver to Congress, within 90
days following the date of the enactment of this Act, a report
on (1) the cost of a new public-private partnership to provide
for free tax filing for up to 70 percent of all taxpayers
calculated by adjusted gross income to replace free file and
any IRS-run direct file programs; (2) taxpayer opinions and
preferences regarding a taxpayer-funded, government-run service
or a free service provided by the private sector; and (3)
assessment of the feasibility of a new approach, how to make
the options consistent and simple for taxpayers across all
participating providers, how to provide features to address
taxpayer needs, and how much money should be appropriated to
advertise the new option, $15,000,000, to remain available
until September 30, 2026.

SEC. 112208. POSTPONEMENT OF TAX DEADLINES FOR HOSTAGES AND INDIVIDUALS
WRONGFULLY DETAINED ABROAD.

(a) Prospective Relief.--
(1) In general.--Chapter 77 is amended by inserting
after section 7510 the following new section:

``SEC. 7511. TIME FOR PERFORMING CERTAIN ACTS POSTPONED FOR HOSTAGES
AND INDIVIDUALS WRONGFULLY DETAINED ABROAD.

``(a) Time To Be Disregarded.--
``(1) In general.--The period during which an
applicable individual was unlawfully or wrongfully
detained abroad, or held hostage abroad, shall be
disregarded in determining, under the internal revenue
laws, in respect of any tax liability of such
individual--
``(A) whether any of the acts described in
section 7508(a)(1) were performed within the
time prescribed thereof (determined without
regard to extension under any other provision
of this subtitle for periods after the initial
date (as determined by the Secretary) on which
such individual was unlawfully or wrongfully
detained abroad or held hostage abroad),
``(B) the amount of any interest, penalty,
additional amount, or addition to the tax for
periods after such date, and
``(C) the amount of any credit or refund.
``(2) Application to spouse.--The provisions of
paragraph (1) shall apply to the spouse of any
individual entitled to the benefits of such paragraph.
``(b) Applicable Individual.--
``(1) In general.--For purposes of this section, the
term `applicable individual' means any individual who
is--
``(A) a United States national unlawfully or
wrongfully detained abroad, as determined under
section 302 of the Robert Levinson Hostage
Recovery and Hostage-Taking Accountability Act
(22 U.S.C. 1741), or
``(B) a United States national taken hostage
abroad, as determined pursuant to the findings
of the Hostage Recovery Fusion Cell (as
described in section 304 of the Robert Levinson
Hostage Recovery and Hostage-Taking
Accountability Act (22 U.S.C. 1741b)).
``(2) Information provided to treasury.--For purposes
of identifying individuals described in paragraph (1),
not later than January 1, 2026, and annually
thereafter--
``(A) the Secretary of State shall provide
the Secretary with a list of the individuals
described in paragraph (1)(A), as well as any
other information necessary to identify such
individuals, and
``(B) the Attorney General, acting through
the Hostage Recovery Fusion Cell, shall provide
the Secretary with a list of the individuals
described in paragraph (1)(B), as well as any
other information necessary to identify such
individuals.
``(c) Special Rule for Overpayments.--
``(1) In general.--Subsection (a) shall not apply for
purposes of determining the amount of interest on any
overpayment of tax.
``(2) Special rules.--If an individual is entitled to
the benefits of subsection (a) with respect to any
return and such return is timely filed (determined
after the application of such subsection), subsections
(b)(3) and (e) of section 6611 shall not apply.
``(d) Modification of Treasury Databases and Information
Systems.--The Secretary shall ensure that databases and
information systems of the Department of the Treasury are
updated as necessary to ensure that statute expiration dates,
interest and penalty accrual, and collection activities are
suspended consistent with the application of subsection (a).
``(e) Refund and Abatement of Penalties and Fines Imposed
Prior to Identification as Applicable Individual.--In the case
of any applicable individual--
``(1) for whom any interest, penalty, additional
amount, or addition to the tax in respect to any tax
liability for any taxable year ending during the period
described in subsection (a)(1) was assessed or
collected, and
``(2) who was, subsequent to such assessment or
collection, determined to be an individual described in
subparagraph (A) or (B) of subsection (b)(1),
the Secretary shall abate any such assessment and refund any
amount collected to such applicable individual in the same
manner as any refund of an overpayment of tax under section
6402.''.
(2) Clerical amendment.--The table of sections for
chapter 77 is amended by inserting after the item
relating to section 7510 the following new item:

``Sec. 7511. Time for performing certain acts postponed for hostages and
individuals wrongfully detained abroad.''.

(3) Effective date.--The amendments made by this
subsection shall apply to taxable years ending after
the date of enactment of this Act.
(b) Refund and Abatement of Penalties and Fines Paid by
Eligible Individuals.--
(1) In general.--Section 7511, as added by subsection
(a), is amended by adding at the end the following new
subsection:
``(f) Refund and Abatement of Penalties and Fines Paid by
Eligible Individuals With Respect to Periods Prior to Date of
Enactment of This Section.--
``(1) In general.--
``(A) Establishment.--Not later than January
1, 2026, the Secretary (in consultation with
the Secretary of State and the Attorney
General) shall establish a program to allow any
eligible individual (or the spouse or any
dependent (as defined in section 152) of such
individual) to apply for a refund or an
abatement of any amount described in paragraph
(2) (including interest) to the extent such
amount was attributable to the applicable
period.
``(B) Identification of individuals.--Not
later than January 1, 2026, the Secretary of
State and the Attorney General, acting through
the Hostage Recovery Fusion Cell (as described
in section 304 of the Robert Levinson Hostage
Recovery and Hostage-Taking Accountability Act
(22 U.S.C. 1741b)), shall--
``(i) compile a list, based on such
information as is available, of
individuals who were applicable
individuals during the applicable
period, and
``(ii) provide the list described in
clause (i) to the Secretary.
``(C) Notice.--For purposes of carrying out
the program described in subparagraph (A), the
Secretary (in consultation with the Secretary
of State and the Attorney General) shall, with
respect to any individual identified under
subparagraph (B), provide notice to such
individual--
``(i) in the case of an individual
who has been released on or before the
date of enactment of this subsection,
not later than 90 days after the date
of enactment of this subsection, or
``(ii) in the case of an individual
who is released after the date of
enactment of this subsection, not later
than 90 days after the date on which
such individual is released,
that such individual may be eligible for a
refund or an abatement of any amount described
in paragraph (2) pursuant to the program
described in subparagraph (A).
``(D) Authorization.--
``(i) In general.--Subject to clause
(ii), in the case of any refund
described in subparagraph (A), the
Secretary shall issue such refund to
the eligible individual in the same
manner as any refund of an overpayment
of tax.
``(ii) Extension of limitation on
time for refund.--With respect to any
refund under subparagraph (A)--
``(I) the 3-year period of
limitation prescribed by
section 6511(a) shall be
extended until the end of the
1-year period beginning on the
date that the notice described
in subparagraph (C) is provided
to the eligible individual, and
``(II) any limitation under
section 6511(b)(2) shall not
apply.
``(2) Eligible individual.--For purposes of this
subsection, the term `eligible individual' means any
applicable individual who, for any taxable year ending
during the applicable period, paid or incurred any
interest, penalty, additional amount, or addition to
the tax in respect to any tax liability for such year
of such individual based on a determination that an act
described in section 7508(a)(1) which was not performed
by the time prescribed therefor (without regard to any
extensions).
``(3) Applicable period.--For purposes of this
subsection, the term `applicable period' means the
period--
``(A) beginning on January 1, 2021, and
``(B) ending on the date of enactment of this
subsection.''.
(2) Effective date.--The amendment made by this
section shall apply to taxable years ending on or
before the date of enactment of this Act.

SEC. 112209. TERMINATION OF TAX-EXEMPT STATUS OF TERRORIST SUPPORTING
ORGANIZATIONS.

(a) In General.--Section 501(p) is amended by adding at the
end the following new paragraph:
``(8) Application to terrorist supporting
organizations.--
``(A) In general.--For purposes of this
subsection, in the case of any terrorist
supporting organization--
``(i) such organization (and the
designation of such organization under
subparagraph (B)) shall be treated as
described in paragraph (2), and
``(ii) the period of suspension
described in paragraph (3) with respect
to such organization shall be treated
as beginning on the date that the
Secretary designates such organization
under subparagraph (B) and ending on
the date that the Secretary rescinds
such designation under subparagraph
(D).
``(B) Terrorist supporting organization.--For
purposes of this paragraph--
``(i) In general.--the term
`terrorist supporting organization'
means any organization which is
designated by the Secretary as having
provided, during the 3-year period
ending on the date of such designation,
material support or resources to an
organization described in paragraph (2)
(determined after the application of
this paragraph to such organization) in
excess of a de minimis amount.
``(ii) Material support or
resources.--The term `material support
or resources' has the meaning given
such term in subsection (g)(4) of
section 2339B of title 18, United
States Code, except that such term
shall not include--
``(I) support or resources
that were approved by the
Secretary of State with the
concurrence of the Attorney
General for purposes of
subsection (j) of such section,
or
``(II) humanitarian aid
provided with the approval of
the Office of Foreign Assets
Control.
``(C) Designation procedure.--
``(i) Notice requirement.--Prior to
designating any organization as a
terrorist supporting organization under
subparagraph (B), the Secretary shall
mail to the most recent mailing address
provided by such organization on the
organization's annual return or notice
under section 6033 (or subsequent form
indicating a change of address) a
written notice which includes--
``(I) a statement that the
Secretary will designate such
organization as a terrorist
supporting organization unless
the organization satisfies the
requirements of subclause (I)
or (II) of clause (ii),
``(II) the name of the
organization or organizations
with respect to which the
Secretary has determined such
organization provided material
support or sources as described
in subparagraph (B),
``(III) a description of such
material support or resources
except to the extent that the
Secretary determines that
disclosure of such description
would be inconsistent with
national security or law
enforcement interests, and
``(IV) if the Secretary makes
the determination described in
subclause (III), a statement
that the Secretary has made
such determination and that all
or part of the description of
such material support or
resources is not included in
such notice by reason of such
determination.
``(ii) Opportunity to cure.--In the
case of any notice provided to an
organization under clause (i), the
Secretary shall, at the close of the
90-day period beginning on the date
that such notice was sent, designate
such organization as a terrorist
supporting organization under
subparagraph (B) if (and only if) such
organization has not (during such
period)--
``(I) demonstrated to the
satisfaction of the Secretary
that such organization did not
provide the material support or
resources referred to in
subparagraph (B),
``(II) made reasonable
efforts to have such support or
resources returned to such
organization and certified in
writing to the Secretary that
such organization will not
provide any further support or
resources to organizations
described in paragraph (2), or
``(III) if such notice
included a statement described
in clause (i)(IV), filed a
complaint with a United States
district court of competent
jurisdiction alleging that
Secretary's determination under
clause (i)(III) is erroneous.
A certification under subclause (II)
shall not be treated as valid if the
organization making such certification
has provided any other such
certification during the preceding 5
years.
``(iii) Application of opportunity to
cure following complaint regarding
determination to withhold description
of material support or resources.--In
the case of a final judgment of a court
of competent jurisdiction that the
Secretary's determination under clause
(i)(III) was not erroneous, clause (ii)
shall be applied without regard to
subclause (III) thereof and as though
the notice referred to in such clause
was sent on the first date that all
rights of appeal with respect to such
final judgement have concluded.
``(D) Rescission.--The Secretary shall
rescind a designation under subparagraph (B) if
(and only if)--
``(i) the Secretary determines that
such designation was erroneous,
``(ii) after the Secretary receives a
written certification from an
organization that such organization did
not receive the notice described in
subparagraph (C)(i)--
``(I) the Secretary
determines that it is
reasonable to believe that such
organization did not receive
such notice, and
``(II) such organization
satisfies the requirements of
subclause (I) or (II) of
subparagraph (C)(ii)
(determined after taking into
account the last sentence
thereof), or
``(iii) the Secretary determines,
with respect to all organizations to
which the material support or resources
referred to in subparagraph (B) were
provided, the periods of suspension
under paragraph (3) have ended.
A certification described in the matter
preceding subclause (I) of clause (ii) shall
not be treated as valid if the organization
making such certification has provided any
other such certification during the preceding 5
years.
``(E) Administrative review by internal
revenue service independent office of
appeals.--In the case of the designation of an
organization by the Secretary as a terrorist
supporting organization under subparagraph (B),
a dispute regarding such designation shall be
subject to resolution by the Internal Revenue
Service Independent Office of Appeals under
section 7803(e) in the same manner as if such
designation were made by the Internal Revenue
Service and paragraph (5) of this subsection
did not apply.
``(F) Jurisdiction of united states courts.--
Notwithstanding paragraph (5), the United
States district courts shall have exclusive
jurisdiction to review any determination of the
Secretary under subparagraph (C)(i)(III) and
any final determination with respect to an
organization's designation as a terrorist
supporting organization under subparagraph (B).
In the case of any such determination which was
based on classified information (as defined in
section 1(a) of the Classified Information
Procedures Act), such information may be
submitted to the reviewing court ex parte and
in camera. For purposes of this subparagraph, a
determination with respect to an organization's
designation as a terrorist supporting
organization shall not fail to be treated as a
final determination merely because such
organization fails to utilize the dispute
resolution process of the Internal Revenue
Service Independent Office of Appeals provided
under subparagraph (E).
``(G) Classified information.--The Secretary
shall establish policies and procedures for
purposes of this paragraph that ensure that
employees of the Department of the Treasury
comply with all laws regarding the handling and
review of classified information (as defined in
section 1(a) of the Classified Information
Procedures Act).''.
(b) Effective Date.--The amendment made by this section shall
apply to designations made after the date of the enactment of
this Act in taxable years ending after such date.

SEC. 112210. INCREASE IN PENALTIES FOR UNAUTHORIZED DISCLOSURES OF
TAXPAYER INFORMATION.

(a) In General.--Paragraphs (1), (2), (3), (4), and (5) of
section 7213(a) are each amended by striking ``$5,000, or
imprisonment of not more than 5 years'' and inserting
``$250,000, or imprisonment of not more than 10 years''.
(b) Disclosures of Return Information of Multiple Taxpayers
Treated as Multiple Violations.--Section 7213(a) is amended by
adding at the end the following new paragraph:
``(6) Disclosures of return information of multiple
taxpayers treated as multiple violations.--For purposes
of this subsection, a separate violation occurs with
respect to each taxpayer whose return or return
information is disclosed in violation of this
subsection.''.
(c) Effective Date.--The amendments made by this section
shall apply to disclosures made after the date of the enactment
of this Act.

SEC. 112211. RESTRICTION ON REGULATION OF CONTINGENCY FEES WITH RESPECT
TO TAX RETURNS, ETC.

The Secretary of the Treasury may not regulate, prohibit, or
restrict the use of a contingent fee in connection with tax
returns, claims for refund, or documents in connection with tax
returns or claims for refund prepared on behalf of a taxpayer.

Subtitle D--Increase in Debt Limit

SEC. 113001. MODIFICATION OF LIMITATION ON THE PUBLIC DEBT.

The limitation under section 3101(b) of title 31, United
States Code, as most recently increased by section 401(b) of
Public Law 118-5 (31 U.S.C. 3101 note), is increased by
$4,000,000,000,000.

I. EXPLANATION OF THE BILL

SUBTITLE A--MAKE AMERICAN FAMILIES AND WORKERS THRIVE AGAIN

PART I--PERMANENTLY PREVENTING TAX HIKES ON AMERICAN FAMILIES AND
WORKERS

Extension of Modification of Rates (sec. 110001 of the bill and sec. 1
of the Code)

PRESENT LAW

In general

To determine regular tax liability, individual, estate, and
trust taxpayers generally must apply the tax rate schedules (or
the tax tables) to their regular taxable income.\1\ The rate
schedules are broken into several ranges of income, known as
income brackets, and the marginal tax rate increases as a
taxpayer's income bracket increases.
---------------------------------------------------------------------------
\1\Sec. 1.
---------------------------------------------------------------------------

Tax rate schedules

Separate rate schedules apply based on an individual's
filing status. Public Law 115-97 changed the rate schedules for
taxable years beginning after December 31, 2017, and beginning
before January 1, 2026. For 2025, the regular individual,
estate, and trust income tax rate schedules are as follows:

TABLE 1.--FEDERAL INDIVIDUAL, ESTATE, AND TRUST INCOME TAX RATES FOR
2025*
------------------------------------------------------------------------
If taxable income is: Then income tax equals:
------------------------------------------------------------------------
SINGLE INDIVIDUALS

Not over $11,925.......................... 10% of the taxable income
Over $11,925 but not over $48,475......... $1,192.50 plus 12% of the
excess over $11,925
Over $48,475 but not over $103,350........ $5,578.50 plus 22% of the
excess over $48,475
Over $103,350 but not over $197,300....... $17,651 plus 24% of the
excess over $103,350
Over $197,300 but not over $250,525....... $40,199 plus 32% of the
excess over $197,300
Over $250,525 but not over $626,350....... $57,231 plus 35% of the
excess over $250,525
Over $626,350............................. $188,769.75 plus 37% of the
excess over $626,350

HEADS OF HOUSEHOLDS

Not over $17,000.......................... 10% of the taxable income
Over $17,000 but not over $64,850......... $1,700 plus 12% of the
excess over $17,000
Over $64,850 but not over $103,350........ $7,442 plus 22% of the
excess over $64,850
Over $103,350 but not over $197,300....... $15,912 plus 24% of the
excess over $103,350
Over $197,300 but not over $250,500....... $38,460 plus 32% of the
excess over $197,300
Over $250,500 but not over $626,350....... $55,484 plus 35% of the
excess over $250,500
Over $626,350............................. $187,031.50 plus 37% of the
excess over $626,350

MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES

Not over $23,850.......................... 10% of the taxable income
Over $23,850 but not over $96,950......... $2,385 plus 12% of the
excess over $23,850
Over $96,950 but not over $206,700........ $11,157 plus 22% of the
excess over $96,950
Over $206,700 but not over $394,600....... $35,302 plus 24% of the
excess over $206,700
Over $394,600 but not over $501,050....... $80,398 plus 32% of the
excess over $394,600
Over $501,050 but not over $751,600....... $114,462 plus 35% of the
excess over $501,050
Over $751,600............................. $202,154.50 plus 37% of the
excess over $751,600

MARRIED INDIVIDUALS FILING SEPARATE RETURNS

Not over $11,925.......................... 10% of the taxable income
Over $11,925 but not over $48,475......... $1,192.50 plus 12% of the
excess over $11,925
Over $48,475 but not over $103,350........ $5,578.50 plus 22% of the
excess over $48,475
Over $103,350 but not over $197,300....... $17,651 plus 24% of the
excess over $103,350
Over $197,300 but not over $250,525....... $40,199 plus 32% of the
excess over $197,300
Over $250,525 but not over $375,800....... $57,231 plus 35% of the
excess over $250,525
Over $375,800............................. $101,077.25 plus 37% of the
excess over $375,800

ESTATES AND TRUSTS

Not over $3,150........................... 10% of the taxable income
Over $3,150 but not over $11,450.......... $315 plus 24% of the excess
over $3,150
Over $11,450 but not over $15,650......... $2,307 plus 35% of the
excess over $11,450
Over $15,650.............................. $3,777 plus 37% of the
excess over $15,650
------------------------------------------------------------------------
*Rev. Proc. 2024-40, 2024-45 I.R.B. 1100, November 4, 2024.

For taxable years beginning after December 31, 2025, the
changes made to the rate schedules by Public Law 115-97 no
longer apply. For 2026, the regular individual, estate, and
trust income tax rate schedules are projected to be as follows:

TABLE 2.--FEDERAL INDIVIDUAL, ESTATE, AND TRUST INCOME TAX RATES FOR
2026*
------------------------------------------------------------------------
If taxable income is: Then income tax equals:
------------------------------------------------------------------------
SINGLE INDIVIDUALS

Not over $12,150.......................... 10% of the taxable income
Over $12,150 but not over $49,300......... $1,215 plus 15% of the
excess over $12,150
Over $49,300 but not over $119,400........ $6,787.50 plus 25% of the
excess over $49,300
Over $119,400 but not over $249,100....... $24,312.50 plus 28% of the
excess over $119,400
Over $249,100 but not over $541,550....... $60,628.50 plus 33% of the
excess over $249,100
Over $541,550 but not over $543,800....... $157,137 plus 35% of the
excess over $541,550
Over $543,800............................. $157,924.50 plus 39.6% of
the excess over $543,800

HEADS OF HOUSEHOLDS

Not over $17,350.......................... 10% of the taxable income
Over $17,350 but not over $66,050......... $1,735 plus 15% of the
excess over $17,350
Over $66,050 but not over $170,550........ $9,040 plus 25% of the
excess over $66,050
Over $170,550 but not over $276,200....... $35,165 plus 28% of the
excess over $170,550
Over $276,200 but not over $541,550....... $64,747 plus 33% of the
excess over $276,200
Over $541,550 but not over $577,750....... $152,312.50 plus 35% of the
excess over $541,550
Over $577,750............................. $164,982.50 plus 39.6% of
the excess over $577,750

MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES

Not over $24,300.......................... 10% of the taxable income
Over $24,300 but not over $98,600......... $2,430 plus 15% of the
excess over $24,300
Over $98,600 but not over $199,000........ $13,575 plus 25% of the
excess over $98,600
Over $199,000 but not over $303,250....... $38,675 plus 28% of the
excess over $199,000
Over $303,250 but not over $541,550....... $67,865 plus 33% of the
excess over $303,250
Over $541,550 but not over $611,750....... $146,504 plus 35% of the
excess over $541,550
Over $611,750............................. $171,074 plus 39.6% of the
excess over $611,750

MARRIED INDIVIDUALS FILING SEPARATE RETURNS

Not over $12,150.......................... 10% of the taxable income
Over $12,150 but not over $49,300......... $1,215 plus 15% of the
excess over $12,150
Over $49,300 but not over $99,500......... $6,787.50 plus 25% of the
excess over $49,300
Over $99,500 but not over $151,625........ $19,337.50 plus 28% of the
excess over $99,500
Over $151,625 but not over $270,775....... $33,932.50 plus 33% of the
excess over $151,625
Over $270,775 but not over $305,875....... $73,252 plus 35% of the
excess over $270,775
Over $305,875............................. $85,537 plus 39.6% of the
excess over $305,875

ESTATES AND TRUSTS

Not over $3,300........................... 15% of the taxable income
Over $3,300 but not over $7,800........... $495 plus 25% of the excess
over $3,300
Over $7,800 but not over $11,900.......... $1,620 plus 28% of the
excess over $7,800
Over $11,900 but not over $16,200......... $2,768 plus 33% of the
excess over $11,900
Over $16,200.............................. $4,187 plus 39.6% of the
excess over $16,200
------------------------------------------------------------------------
*Joint Committee on Taxation staff projections.

Indexing for inflation

The income bracket thresholds, the amounts where a higher
rate bracket begins and a lower rate bracket ends, are indexed
for inflation using a cost-of-living adjustment.\2\ The cost-
of- living adjustment for the regular income tax brackets for
2025 is the percentage by which the Chained Consumer Price
Index for all Urban Consumers (``chained CPI'') for 2024
exceeds the chained CPI for 2017.\3\
---------------------------------------------------------------------------
\2\Sec. 1(f).
\3\Sec. 1(j)(3). In general, provisions in the Code that are
inflation adjusted using the Consumer Price Index calculate the
inflation adjustment for a given calendar year by comparing the price
index in the preceding calendar year to the price index in a ``base
year.''
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that making permanent a simpler and
fairer Federal income tax will support hardworking Americans
and their families. Additionally, the Committee believes that a
tax system with lower rates will allow taxpayers to keep more
of their earnings to spend on family needs and will contribute
to economic growth. The Committee extends this tax relief
further by providing an additional inflation adjustment on the
rate brackets for all but the highest income taxpayers.

EXPLANATION OF PROVISION

The provision makes permanent the regular income tax rate
schedules for individuals, estates, and trusts enacted by
Public Law 115-97.
The provision generally modifies the indexing for inflation
for bracket thresholds by providing one additional year of
inflation in the cost-of-living adjustment. Under the
provision, the cost-of-living adjustment for the regular income
tax brackets for 2026 is generally the percentage by which the
chained CPI for 2025 exceeds the chained CPI for 2016.\4\ The
result is that the bracket thresholds are larger than they
would otherwise be absent this additional year of inflation.
---------------------------------------------------------------------------
\4\Absent this modification, the cost-of-living adjustment for this
purpose for 2026 is the percentage by which the chained CPI for 2025
exceeds the chained CPI for 2017.
---------------------------------------------------------------------------
However, the dollar amount at which the 37-percent rate
bracket begins and the 35-percent rate bracket ends (the ``37-
percent rate bracket threshold'') is not provided this
additional year of inflation in the cost-of-living adjustment.
Thus, the cost-of-living adjustment for the 37-percent rate
bracket threshold for 2026 is the percentage by which chained
CPI for 2025 exceeds the chained CPI for 2017.
Under the provision, for 2026, the regular individual
income tax rate schedules are projected to be as follows:

TABLE 3.--FEDERAL INDIVIDUAL, ESTATE, AND TRUST INCOME TAX RATES FOR
2026 UNDER THE PROVISION*
------------------------------------------------------------------------
If taxable income is: Then income tax equals:
------------------------------------------------------------------------
SINGLE INDIVIDUALS

Not over $12,375.......................... 10% of the taxable income
Over $12,375 but not over $50,275......... $1,237.50 plus 12% of the
excess over $12,375
Over $50,275 but not over $107,200........ $5,785.50 plus 22% of the
excess over $50,275
Over $107,200 but not over $204,700....... $18,309 plus 24% of the
excess over $107,200
Over $204,700 but not over $259,925....... $41,709 plus 32% of the
excess over $204,700
Over $259,925 but not over $639,275....... $59,381 plus 35% of the
excess over $259,925
Over $639,275............................. $192,153.50 plus 37.0% of
the excess over $639,275

HEADS OF HOUSEHOLDS

Not over $17,650.......................... 10% of the taxable income
Over $17,650 but not over $67,300......... $1,765 plus 12% of the
excess over $17,650
Over $67,300 but not over $107,200........ $7,723 plus 22% of the
excess over $67,300
Over $107,200 but not over $204,700....... $16,501 plus 24% of the
excess over $107,200
Over $204,700 but not over $259,900....... $39,901 plus 32% of the
excess over $204,700
Over $259,900 but not over $639,250....... $57,565 plus 35% of the
excess over $259,900
Over $639,250............................. $190,337.50 plus 37.0% of
the excess over $639,250

MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES

Not over $24,750.......................... 10% of the taxable income
Over $24,750 but not over $100,550........ $2,475 plus 12% of the
excess over $24,750
Over $100,550 but not over $214,400....... $11,571 plus 22% of the
excess over $100,550
Over $214,400 but not over $409,400....... $36,618 plus 24% of the
excess over $214,400
Over $409,400 but not over $519,850....... $83,418 plus 32% of the
excess over $409,400
Over $519,850 but not over $767,150....... $118,762 plus 35% of the
excess over $519,850
Over $767,150............................. $205,317 plus 37.0% of the
excess over $767,150

MARRIED INDIVIDUALS FILING SEPARATE RETURNS

Not over $12,375.......................... 10% of the taxable income
Over $12,375 but not over $50,275......... $1,237.50 plus 12% of the
excess over $12,375
Over $50,275 but not over $107,200........ $5,785.50 plus 22% of the
excess over $50,275
Over $107,200 but not over $204,700....... $18,309 plus 24% of the
excess over $107,200
Over $204,700 but not over $259,925....... $41,709 plus 32% of the
excess over $204,700
Over $259,925 but not over $383,575....... $59,381 plus 35% of the
excess over $259,925
Over $383,575............................. $102,658.50 plus 37.0% of
the excess over $383,575

ESTATES AND TRUSTS

Not over $3,300........................... 10% of the taxable income
Over $3,300 but not over $11,850.......... $330 plus 24% of the excess
over $3,300
Over $11,850 but not over $15,950......... $2,382 plus 35% of the
excess over $11,850
Over $15,950.............................. $3,817 plus 37% of the
excess over $15,950
------------------------------------------------------------------------
*JCT staff calculations.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Increased Standard Deduction and Temporary Enhancement
(sec. 110002 of the bill and sec. 63 of the Code)

PRESENT LAW

An individual who does not elect to itemize deductions
reduces adjusted gross income (``AGI'') by the amount of the
applicable standard deduction in arriving at taxable income.
The standard deduction is the sum of the basic standard
deduction and, if applicable, the additional standard
deduction.\5\ The basic standard deduction varies depending
upon a taxpayer's filing status. For taxable years beginning in
2025, the amount of the basic standard deduction is $15,000 for
an unmarried individual (other than a head of household or a
surviving spouse) and a married individual filing a separate
return,\6\ $22,500 for a head of household, and $30,000 for
married individuals filing a joint return and a surviving
spouse.\7\
---------------------------------------------------------------------------
\5\Sec. 63(c)(1).
\6\In the case of a married individual filing a separate return
where either spouse itemizes deductions, the standard deduction is
zero. Sec. 63(c)(6).
\7\Rev. Proc. 2024-40, 2024-45 I.R.B. 1100.
---------------------------------------------------------------------------
An additional standard deduction is allowed to an
individual who has attained age 65 before the close of the
taxable year or is blind at the close of the taxable year.\8\
For 2025, the additional amount is $1,600 for a married
taxpayer (for each spouse meeting the applicable criteria in
the case of a joint return) and a surviving spouse. The
additional amount for a single individual and head of household
is $2,000. An individual who is both blind and has attained age
65 is entitled to two additional standard deductions, for a
total additional amount (for 2025) of $3,200 or $4,000, as
applicable.
---------------------------------------------------------------------------
\8\Sec. 63(f).
---------------------------------------------------------------------------
In the case of a dependent for whom a deduction for a
personal exemption\9\ is allowable to another taxpayer, the
standard deduction may not exceed the greater of (i) $1,350 (in
2025) or (ii) the sum of $450 (in 2025) plus the dependent's
earned income.\10\ The standard deduction for an estate or
trust is zero.\11\ The amounts of the basic and additional
standard deduction are indexed annually for inflation.\12\
---------------------------------------------------------------------------
\9\For taxable years beginning in 2018 through 2025, the personal
exemption amount is reduced to zero. Sec. 151(d)(5). This reduction is
not taken into account in determining the limitation on the standard
deduction for dependents. See sec. 151(d)(5).
\10\Sec. 63(c)(5).
\11\Sec. 63(f).
\12\*Sec. 63(c)(4) and (c)(7)(B).
---------------------------------------------------------------------------
Public law 115-97 temporarily increases the basic standard
deduction for tax years beginning after December 31, 2017, and
before January 1, 2026. Under present law, relative to taxable
years beginning in 2025, the standard deduction will decrease
for taxable years beginning in 2026, with the amount of the
basic standard deduction being $8,300 for an unmarried
individual (other than a head of household or a surviving
spouse) and a married individual filing a separate return,\13\
$12,150 for a head of household, and $16,600 for married
individuals filing a joint return and a surviving spouse.\14\
The additional standard deduction was not modified by Public
Law 115-97.
---------------------------------------------------------------------------
\13\In the case of a married individual filing a separate return
where either spouse itemizes deductions, the standard deduction is
zero. Sec. 63(c)(6).
\14\Joint Committee on Taxation staff projections.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes consolidating certain tax benefits
into a larger standard deduction simplifies the tax code while
allowing a minimum level of income to be exempt from Federal
income taxation. The Committee wishes to enhance this larger
standard deduction with an additional amount and an additional
inflation adjustment to provide further tax relief.

EXPLANATION OF PROVISION

The provision strikes the expiration date of the temporary
increases to the standard deduction enacted by Public Law 115-
97.
The provision modifies the indexing for inflation of the
standard deduction amount by providing one additional year of
inflation in the cost-of-living adjustment starting in taxable
years beginning after December 31, 2025. Under the provision,
the cost-of-living adjustment for the standard deduction amount
for 2026 is the percentage by which the chained CPI for 2025
exceeds the chained CPI for 2016.\15\ The result is that the
standard deduction amount is larger than it would otherwise be
absent this additional year of inflation.
---------------------------------------------------------------------------
\15\Absent this modification, the cost-of-living adjustment for
this purpose for 2026 is the percentage by which the chained CPI for
2025 exceeds the chained CPI for 2017.
---------------------------------------------------------------------------
In addition, the provision temporarily increases the amount
of the standard deduction by $2,000 in the case of married
individuals filing a joint return and a surviving spouse,
$1,500 in the case of a head of household, and $1,000 in any
other case for taxable years beginning after December 31, 2024,
and before January 1, 2029. These temporary amounts are not
indexed for inflation.
As a result, the amount of the basic standard deduction for
taxable years beginning in 2025 will increase to $16,000 for an
unmarried individual (other than a head of household or a
surviving spouse) and a married individual filing a separate
return, $24,000 for a head of household, and $32,000 for
married individuals filing a joint return and a surviving
spouse. For taxable years in beginning in 2026 the standard
deduction is projected to be $16,550 for an unmarried
individual (other than a head of household or a surviving
spouse) and a married individual filing a separate return,
$24,850 for a head of household, and $33,100 for married
individuals filing a joint return and a surviving spouse.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2024.

Termination of Deduction for Personal Exemptions (sec. 110003 of the
bill and sec. 151 of the Code)

PRESENT LAW

In general

In determining taxable income, an individual reduces
adjusted gross income by any personal exemption deductions and
either the applicable standard deduction or their itemized
deductions. Personal exemptions generally are allowed for the
taxpayer (both taxpayers in the case of a joint return) and any
dependents of the taxpayer.\16\ Public Law 115-97 temporarily
reduced the amount of the personal exemption to $0 for taxable
years 2018 through 2025.\17\
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\16\Sec. 151(b) and (c). In addition, a married taxpayer filing a
separate return may claim a personal exemption deduction for a spouse
if the spouse has no gross income and is not a dependent of another
taxpayer.
\17\Sec. 151(d)(5).
---------------------------------------------------------------------------
For 2026, the amount deductible for each personal exemption
is projected to be $5,300.\18\ The personal exemption amount is
phased out in the case of an individual with AGI in excess of
$407,850 for married taxpayers filing jointly, $373,850 for
heads of household, $203,925 for married taxpayers filing
separately, and $339,850 for all other filers.\19\ The amounts
of the personal exemption and phaseout thresholds are indexed
annually for inflation. In addition, no deduction for a
personal exemption is allowed to a dependent if a personal
exemption deduction for the dependent is allowable to another
taxpayer or if an individual's taxpayer identification number
is not included on the return claiming the exemption.
---------------------------------------------------------------------------
\18\Joint Committee on Taxation staff projection.
\19\Sec. 151(d)(3).
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Trusts and estates

In lieu of the deduction for personal exemptions, an estate
is allowed a deduction of $600.\20\ A trust is allowed a
deduction of $100; $300 if required to distribute all its
income currently; and an amount equal to the personal exemption
of an individual, or for years in which the personal exemption
is zero, an indexed value ($5,100 for 2025), in the case of a
qualified disability trust.\21\
---------------------------------------------------------------------------
\20\Sec. 642(b)(1).
\21\Sec. 642(b)(2).
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REASONS FOR CHANGE

The Committee believes consolidating certain tax benefits
into a larger standard deduction simplifies the tax code while
allowing a minimum level of income to be exempt from Federal
income taxation.

EXPLANATION OF PROVISION

The provision permanently reduces the amount of the
personal exemption to $0.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Increased Child Tax Credit and Temporary Enhancement (sec.
110004 of the bill and sec. 24 of the Code)

PRESENT LAW

Child tax credit

In general
Taxpayers are allowed a child tax credit of $2,000 for each
qualifying child.\22\ The aggregate amount of otherwise
allowable child tax credit is phased out for taxpayers with
income over a threshold amount of $400,000 for taxpayers filing
jointly and $200,000 for all other taxpayers.\23\ The otherwise
allowable child tax credit amount is reduced by $50 for each
$1,000 (or fraction thereof) of modified adjusted gross income
(``modified AGI'') over the applicable threshold amount. For
purposes of this limitation, modified AGI means AGI increased
by any amount excluded from gross income under section 911
(foreign earned income exclusion), 931 (exclusion of income for
a bona fide resident of American Samoa), or 933 (exclusion of
income for a bona fide resident of Puerto Rico).\24\
---------------------------------------------------------------------------
\22\Sec. 24(a), (h)(2). For taxable years beginning after December
31, 2025, the amount of the credit is $1,000 for each qualifying child.
See below for descriptions of other changes to the child tax credit for
taxable years beginning after December 31, 2025.
\23\Sec. 24(b), (h)(3). For taxable years beginning after December
31, 2025, the modified AGI threshold amounts at which the credit begins
to phase out are $75,000 for individuals who are not married, $110,000
for married individuals filing joint returns, and $55,000 for married
individuals filing separate returns.
\24\Sec. 24(b)(1).
---------------------------------------------------------------------------
Generally, for purposes of the child tax credit, a
qualifying child is a qualifying child as defined in section
152(c) who is under the age of 17.\25\ Only a child who is a
U.S. citizen, national, or resident may be a qualifying child;
citizens of contiguous countries are ineligible under the child
tax credit definition of qualifying child.\26\
---------------------------------------------------------------------------
\25\Sec. 24(c)(1).
\26\Sec. 24(c)(2).
---------------------------------------------------------------------------
The name and Social Security number (``SSN'') of the
qualifying child must appear on the return, and the SSN must be
issued before the due date for filing the return.\27\ The SSN
also must be issued to a citizen or national of the United
States or pursuant to a provision of the Social Security Act
relating to the lawful admission for employment in the United
States.\28\ The TIN of the taxpayer must be issued on or before
the due date for filing the return.\29\
---------------------------------------------------------------------------
\27\Sec. 24(h)(7). For taxable years beginning after December 31,
2025, the child tax credit may be claimed if the taxpayer
identification number (``TIN'') of the qualifying child, rather than
the SSN of the child, appears on the return. Sec. 24(e)(1).
\28\See sec. 205(c)(2)(B)(i)(I) (or that portion of subclause (III)
that relates to subclause (I)) of the Social Security Act.
\29\Sec. 24(e)(2).
---------------------------------------------------------------------------
Partial refundability and calculation of additional child
tax credit
The child tax credit is generally a nonrefundable tax
credit taken against income tax liability. The credit is
allowable against both the regular tax and the alternative
minimum tax.\30\
---------------------------------------------------------------------------
\30\Sec. 26(a).
---------------------------------------------------------------------------
In some circumstances, all or a portion of the otherwise
allowable credit is treated as a refundable credit (the
``additional child tax credit'').\31\ The credit is treated as
refundable in an amount equal to 15 percent of earned income in
excess of $2,500 (the ``earned income formula'').\32\ Earned
income generally has the same definition as for purposes of the
earned income tax credit and is defined as the sum of wages,
salaries, tips, and other taxable employee compensation plus
net self-employment earnings.\33\ For purposes of the
additional child tax credit, only items taken into account in
computing taxable income are treated as earned income.\34\
However, combat pay that is excluded from gross income under
section 112 is also taken into account.
---------------------------------------------------------------------------
\31\Sec. 24(d).
\32\Sec. 24(d)(1)(B)(i), (h)(6). For taxable years beginning after
December 31, 2025, the earned income threshold for the refundable child
tax credit is $3,000.
\33\Sec. 32(c)(2).
\34\Sec. 24(d)(1)(B)(i). For example, some ministers' parsonage
allowances are considered self- employment income, see section
1402(a)(8), and thus are considered earned income for purposes of
computing the EITC, but they are excluded from gross income for income
tax purposes and thus are not considered earned income for purposes of
the additional child tax credit.
---------------------------------------------------------------------------
A taxpayer with three or more qualifying children may
determine the additional child tax credit using the
``alternative formula,'' if this formula results in a larger
additional child tax credit than determined under the earned
income formula. Under the alternative formula, the additional
child tax credit equals the amount by which the taxpayer's
Social Security taxes exceed the taxpayer's earned income tax
credit.\35\
---------------------------------------------------------------------------
\35\Sec. 24(d)(1)(B)(ii).
---------------------------------------------------------------------------
The maximum amount of the additional child tax credit per
qualifying child ($1,700 for 2025)\36\ is indexed for
inflation, although the amount may not exceed the $2,000 amount
of the nonrefundable child tax credit.\37\ The inflation
adjustment is the percentage by which the Chained Consumer
Price Index for all Urban Consumers (``chained CPI'') for the
preceding calendar year exceeds the chained CPI for 2017.
---------------------------------------------------------------------------
\36\Rev. Proc. 2024-40, 2024-45 I.R.B. 1100.
\37\Sec. 24(h)(5). The nonrefundable portion of the child tax
credit is not adjusted for inflation. For taxable years beginning after
December 31, 2025, there is no separately stated maximum amount of the
additional child tax credit; however, the refundable credit may not
exceed the total amount of the credit of $1,000 for taxable years
beginning after December 31, 2025.
---------------------------------------------------------------------------
Withholding
Chapter 24 of the Code provides rules for employers to
deduct and withhold amounts from employee wages for the payment
of income tax. Under rules determined by the Secretary, an
employee may be permitted one or more withholding allowances
that reduces the amount of income tax withholding. A taxpayer's
withholding allowances may take into account the number of
children in respect of whom it is reasonably expected that the
taxpayer is eligible for a child tax credit.\38\
---------------------------------------------------------------------------
\38\Sec. 3402(f)(1)(C).
---------------------------------------------------------------------------
Credit for other dependents
An individual is allowed a $500 nonrefundable credit for
each dependent of the taxpayer as defined in section 152, other
than a qualifying child as defined for purposes of the child
tax credit.\39\
---------------------------------------------------------------------------
\39\An individual who is a qualifying child for purposes of the
dependent rules under section 152, but not a qualifying child for
purposes of the child tax credit (e.g., a child who is age 17 or 18, a
full-time student under age 24, or a child without a valid SSN) is
eligible to be a qualifying dependent for purposes of the $500
nonrefundable credit for other dependents. For taxable years beginning
after December 31, 2025, there is no tax credit for other dependents.
---------------------------------------------------------------------------
Application of the child tax credit in the territories of
the United States
The three mirror Code territories (Guam, the Commonwealth
of the Northern Mariana Islands, and the U.S. Virgin Islands)
have, under their mirror Codes, a child tax credit identical to
that in the Internal Revenue Code. A resident of one of these
territories claims the child tax credit on the income tax
return filed with the territory's revenue authority.
Mirror Code territories
The Secretary is directed to make payments to each of Guam,
the Commonwealth of the Northern Mariana Islands, and the U.S.
Virgin Islands in an amount equal to the loss in revenue by
reason of the application of the child tax credit to the
territory's mirror Code for the taxable year.\40\ This amount
is determined by the Secretary based on information provided by
the government of the territory.
---------------------------------------------------------------------------
\40\Sec. 24(k)(1).
---------------------------------------------------------------------------
No child tax credit under the Internal Revenue Code is
permitted for any resident of a mirror Code territory with
respect to whom a child tax credit is allowed against income
taxes of the territory.\41\
---------------------------------------------------------------------------
\41\Sec. 24(k)(2).
---------------------------------------------------------------------------
Puerto Rico
Bona fide residents of Puerto Rico may claim an additional
child tax credit up to the maximum amount\42\ from the U.S.
Treasury under the alternative formula, but determined without
regard to the three-child limitation, by filing a return with
the Internal Revenue Service (``IRS'').\43\
---------------------------------------------------------------------------
\42\This amount is $1,700 for taxable years beginning in 2025. Rev.
Proc. 2024-40, 2024-45 I.R.B. 1100.
\43\Sec. 24(k)(2)(B).
---------------------------------------------------------------------------
Residents of Puerto Rico claim the additional child tax
credit under the alternative formula by filing a Form 1040-SS
or Form 1040-PR with the IRS.
American Samoa
The Secretary is directed to make payments to American
Samoa in an amount estimated by the Secretary as being equal to
the aggregate benefits that would have been provided to
residents of American Samoa if the U.S. child tax credit had
been in effect in American Samoa (and had been applied as if
American Samoa were the United States) in that taxable
year.\44\
---------------------------------------------------------------------------
\44\Sec. 24(k)(3).
---------------------------------------------------------------------------
The provision prohibits the Secretary from making these
payments unless American Samoa has a plan approved by the
Secretary to promptly distribute the payments to its residents.
For years with respect to which American Samoa has an approved
plan, no child tax credit under the Internal Revenue Code is
permitted for any person who is eligible for a payment under
the plan. If American Samoa does not have a plan in place for a
taxable year, a bona fide resident of American Samoa may claim
a child tax credit by filing a return with the IRS under rules
similar to those for Puerto Rico, described above.

Tax exemption for certain organizations

Section 501(a) exempts certain organizations from Federal
income tax. Such organizations include: (1) tax-exempt
organizations described in section 501(c) (including, among
others, 501(c)(3) charitable organizations and section
501(c)(4) social welfare organizations); (2) religious and
apostolic organizations described in section 501(d); and (3)
trusts forming part of a pension, profit-sharing, or stock
bonus plan of an employer described in section 401(a).
A religious and apostolic organization is described in
section 501(d) if the organization has a common treasury or
community treasury. The organization may engage in business for
the common benefit of its members, but only if the members
include their entire pro rata shares of the taxable income of
the organization for the year in their gross income (at the
time of filing their returns), regardless of whether such
shares are distributed. Any amount included in the gross income
of a member is treated as a dividend.\45\
---------------------------------------------------------------------------
\45\Sec. 501(d).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that it is important to provide an
increased tax benefit for families raising children. The
Committee believes that making current child tax credit policy
permanent and providing a temporary expansion of the child tax
credit is the best way to achieve this goal.
The Committee believes that requiring taxpayers and
qualifying children to provide Social Security numbers to claim
the child tax credit is important in ensuring that the credits
go only to American families who are in full compliance with
tax and immigration laws.

EXPLANATION OF PROVISION

The provision temporarily increases the maximum child tax
credit to $2,500 for taxable years beginning after December 31,
2024, and before December 31, 2028.
For taxable years beginning after December 31, 2028, the
maximum child tax credit will revert to a permanent amount of
$2,000. This amount is indexed for inflation in taxable years
beginning after 2028. The inflation adjustment is the
percentage by which chained CPI for the preceding calendar year
exceeds the chained CPI for 2024.
The provision makes permanent the maximum amount of the
additional child tax credit per qualifying child of $1,400
adjusted for inflation ($1,700 in 2025).\46\ The provision also
makes permanent the earned income threshold of $2,500 for
purposes of the earned income formula. The provision treats any
amount treated as a dividend received under section 501(d) as
earned income which is taken into account in computing taxable
income for the taxable year.
---------------------------------------------------------------------------
\46\The inflation adjustment is the percentage by which the chained
CPI for the preceding calendar year exceeds the chained CPI for 2017.
---------------------------------------------------------------------------
The provision makes permanent the income phaseout threshold
amounts of $400,000 for taxpayers filing jointly and $200,000
for all other taxpayers.
Under the provision, the $500 nonrefundable credit for each
dependent of the taxpayer other than a qualifying child is
permanent. This credit is not adjusted for inflation.
Under the provision, the SSN of the taxpayer, the
taxpayer's spouse (if married filing jointly), and the
qualifying child must appear on the return. The SSN for each
individual must be issued before the due date of the return.
Each SSN also must be issued to a citizen or national of the
United States or pursuant to a provision of the Social Security
Act relating to the lawful admission for employment in the
United States.\47\
---------------------------------------------------------------------------
\47\See sec. 205(c)(2)(B)(i)(I) (or that portion of subclause (III)
that relates to subclause (I)) of the Social Security Act.
---------------------------------------------------------------------------
The provision applies rules similar to the rules of section
32(d), meaning married individuals must file a joint return in
order to receive the child tax credit. Marital status is
determined under section 7703(a).\48\ Under the provision, an
individual is not treated as married if the individual (1) is
married and does not file a joint return for the taxable year,
(2) resides with a qualifying child for more than one-half of
the taxable year, and (3) either does not have the same
principal place of abode as their spouse during the last six
months of the taxable year or has a decree, instrument, or
agreement (other than a decree of divorce) described in section
121(d)(3)(C) with respect to their spouse and is not a member
of the same household of their spouse by the end of the taxable
year.\49\
---------------------------------------------------------------------------
\48\Sec. 32(d)(2)(A).
\49\Sec. 32(d)(2)(B).
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2024.

Extension of Deduction for Qualified Business Income and Permanent
Enhancement (sec. 110005 of the bill and sec. 199A of the Code)

PRESENT LAW

In general

For taxable years beginning after December 31, 2017, and
before January 1, 2026, certain individuals, trusts, and
estates may deduct 20 percent of qualified business income from
a partnership, S corporation, or sole proprietorship, as well
as 20 percent of aggregate qualified real estate investment
trust (``REIT'') dividends and qualified publicly traded
partnership income.\50\ Special rules apply to determine the
deduction attributable to domestic production activities of
specified agricultural or horticultural cooperatives.\51\
---------------------------------------------------------------------------
\50\Sec. 199A(b)(2) and (b)(1)(B). See also Treas. Reg. secs.
1.199A-1 through 1.199A-7.
\51\For taxable years beginning after December 31, 2017, and before
January 1, 2026, a specified agricultural or horticultural cooperative
generally may deduct nine percent of the lesser of the cooperative's
qualified production activities income or taxable income (determined
without regard to the cooperative's section 199A(g) deduction and
reduced by certain payments or allocations to patrons) for the taxable
year. The deduction is limited to 50 percent of W-2 wages that are paid
by the cooperative during the calendar year that ends in such taxable
year and are properly allocable to domestic production gross receipts.
Sec. 199A(g). See also Treas. Reg. secs. 1.199A-8 through 1.199A-12.
---------------------------------------------------------------------------
The qualified business income deduction is subject to
several limitations. The deduction may not exceed 20 percent of
taxable income (reduced by net capital gain).\52\ Limitations
based on W-2 wages and capital investment phase in over a range
of income above threshold amount of taxable income.\53\ A
disallowance of the deduction for income of specified service
trades or businesses\54\ also phases in over a range of income
above the threshold amount of taxable income. Both the W-2 and
capital investment and specified service trade or business
limits are subject to the threshold amounts and phase-in ranges
below for 2025.\55\
---------------------------------------------------------------------------
\52\Sec. 199A(a)(2). For this purpose, taxable income is computed
without regard to the deduction allowable under the provision. Sec.
199A(e)(1).
\53\For a taxpayer with taxable income above the threshold, the
taxpayer is allowed a deductible amount for each qualified trade or
business equal to the lesser of (1) 20 percent of the qualified
business income with respect to such trade or business, or (2) the
greater of (a) 50 percent of the W-2 wages paid with respect to the
qualified trade or business, or (b) the sum of 25 percent of the W-2
wages paid with respect to the qualified trade or business plus 2.5
percent of the unadjusted basis immediately after acquisition of all
qualified property of the qualified trade or business. Sec. 199A(b)(2).
\54\A specified service trade or business means any trade or
business involving the performance of services in the fields of health,
law, accounting, actuarial science, performing arts, consulting,
athletics, financial services, brokerage services, or any trade or
business where the principal asset of such trade or business is the
reputation or skill of one or more of its employees or owners, or which
involves the performance of services that consist of investing and
investment management, trading, or dealing in securities, partnership
interests, or commodities. Sec. 199A(d)(2).
\55\Sec. 199A(b)(3) and (d)(3).
\56\Sec. 2.27 of Rev. Proc. 2024-40, 2024-45 I.R.B., November 4,
2024. The threshold amount is adjusted for inflation in taxable years
beginning after 2018. Sec. 199A(e)(2).

------------------------------------------------------------------------
2025 Threshold 2025 Phase-in
3Filing Status Amount56 Range Amount
------------------------------------------------------------------------
Married filing jointly.......... $394,600.......... $494,600
Married filing separately....... $197,300.......... $247,300
Other returns................... $197,300.......... $247,300
------------------------------------------------------------------------

The taxpayer's deduction for qualified business income is
not allowed in computing adjusted gross income; instead, the
deduction is allowed in computing taxable income.\57\ The
deduction is available to individuals regardless of whether
they itemize their deductions.\58\
---------------------------------------------------------------------------
\57\Sec. 62(a).
\58\Sec. 63(b) and (d).
---------------------------------------------------------------------------

Qualified business income

In general
Qualified business income is determined for each qualified
trade or business of the taxpayer. For any taxable year,
qualified business income is the net amount of qualified items
of income, gain, deduction, and loss attributable to the
qualified trade or business of the taxpayer.\59\ A taxpayer
includes qualified items of income, gain, deduction, and loss
only to the extent those items are included or allowed to
determine taxable income for the taxable year.\60\ Items are
treated as qualified items of income, gain, deduction, and loss
only to the extent they are effectively connected with the
conduct of a trade or business within the United States.\61\
---------------------------------------------------------------------------
\59\Qualified business income excludes qualified REIT dividends and
qualified publicly traded partnership income. Sec. 199A(c)(1).
\60\Sec. 199A(c)(3)(A)(ii).
\61\For this purpose, section 864(c) is applied by substituting
``qualified trade or business (within the meaning of section 199A)''
for ``nonresident alien individual or a foreign corporation'' or for
``a foreign corporation,'' each place they appear. Sec. 199A(c)(3)(A).
In the case of an individual with qualified business income from
sources within the Commonwealth of Puerto Rico, if all such income for
the taxable year is taxable under section 1 (income tax rates for
individuals), then the term ``United States'' is considered to include
Puerto Rico for purposes of determining the individual's qualified
business income. Sec. 199A(f)(1)(C).
---------------------------------------------------------------------------
Qualified items of income, gain, deduction, and loss
exclude:
1. any item taken into account in determining net
capital gain or net capital loss,
2. dividends, income equivalent to a dividend, or
payments in lieu of dividends,
3. interest income other than that which is properly
allocable to a trade or business,
4. the excess of gain over loss from certain
commodities transactions,\62\
---------------------------------------------------------------------------
\62\The exclusion does not apply to commodities transactions
entered into in the normal course of the trade or business or with
respect to stock in trade or property held primarily for sale to
customers in the ordinary course of the trade or business, property
used in the trade or business, or supplies regularly used or consumed
in the trade or business.
---------------------------------------------------------------------------
5. the excess of foreign currency gains over foreign
currency losses from section 988 transactions other
than transactions directly related to the business
needs of the business activity,
6. net income from notional principal contracts other
than clearly identified hedging transactions that are
treated as ordinary (i.e., not treated as capital
assets),
7. any amount received from an annuity that is not
received in connection with the trade or business, and
8. any item of deduction or loss properly allocable
to any of the preceding items.\63\
---------------------------------------------------------------------------
\63\Sec. 199A(c)(3)(B).
---------------------------------------------------------------------------
Qualified business income also does not include any amount
paid by an S corporation that is treated as reasonable
compensation of the taxpayer.\64\ Similarly, qualified business
income does not include any guaranteed payment for services
rendered with respect to the trade or business,\65\ and, to the
extent provided in regulations, does not include any amount
paid or incurred by a partnership to a partner, acting other
than in his or her capacity as a partner, for services.\66\
---------------------------------------------------------------------------
\64\Sec. 199A(c)(4).
\65\Described in sec. 707(c).
\66\Described in sec. 707(a).
---------------------------------------------------------------------------
If the net amount of qualified business income from all
qualified trades or businesses during the taxable year is a
loss, then such loss is carried forward and in the next taxable
year is treated as a loss from a qualified trade or
business.\67\ Any deduction that would otherwise be allowed in
a subsequent taxable year with respect to the taxpayer's
qualified trades or businesses is reduced by 20 percent of any
carryover qualified business loss.
---------------------------------------------------------------------------
\67\Sec. 199A(c)(2).
---------------------------------------------------------------------------
Qualified trade or business
A qualified trade or business means any trade or business
other than a specified service trade or business and other than
the trade or business of performing services as an
employee.\68\
---------------------------------------------------------------------------
\68\Sec. 199A(d)(1).
---------------------------------------------------------------------------
Partnerships and S corporations
In the case of a partnership or S corporation, the section
199A deduction is determined at the partner or shareholder
level.\69\ Each partner in a partnership takes into account the
partner's allocable share of each qualified item of income,
gain, deduction, and loss, and for purposes of the limitation
described above, is treated as having W-2 wages and unadjusted
basis of qualified property for the taxable year equal to the
partner's allocable share of W-2 wages and unadjusted basis of
qualified property of the partnership. The partner's allocable
share of W-2 wages and unadjusted basis of qualified property
are determined in the same manner as the partner's allocable
share of wage expenses and depreciation, respectively.
Similarly, each shareholder of an S corporation takes into
account the shareholder's pro rata share of each qualified item
of income, gain, deduction, and loss of the S corporation, and
is treated as having W-2 wages and unadjusted basis of
qualified property for the taxable year equal to the
shareholder's pro rata share of W-2 wages and unadjusted basis
of qualified property of the S corporation.
---------------------------------------------------------------------------
\69\Sec. 199A(f)(1).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee strongly believes in supporting small
business owners in the United States, most of whom conduct
their businesses in the form of partnerships, S corporations,
or sole proprietorships. Furthermore, the Committee believes
that the section 199A deduction is necessary to ensure that
closely held businesses are competitive with publicly traded
corporations. The Committee believes that making the section
199A deduction permanent would give businesses increased
certainty, leading to greater overall investment and
employment.
Under current law, the phase-in of the W-2 and capital
investment limit and the specified service trade or business
limit can result in marginal tax rates of close to 70 percent
for taxpayers with incomes in the phase-in range.[ ] The
Committee believes that these limitations should be modified so
as not to result in such high marginal tax rates.
---------------------------------------------------------------------------
[ ]See Libin Zhang, Marginal Income Tax Rates of the Passthrough
Business Deduction, 159 Tax Notes 1139 (May 21, 2018).
---------------------------------------------------------------------------
The Committee believes that the exclusion of regulated
investment company dividends from the section 199A deduction
places business development companies that have elected to be
treated as regulated investment companies at a competitive
disadvantage relative to S corporations with a trade or
business of making loans.

EXPLANATION OF PROVISION

The provision makes five modifications to the deduction for
qualified business income.
The first modification makes permanent the deduction for
qualified business income (including the deduction for REIT
dividends and qualified publicly traded partnership income) and
the deduction for income attributable to the domestic
production activities of specified agricultural or
horticultural cooperatives.
The second modification increases three percentages used to
calculate the deduction for qualified business income from 20
percent to 23 percent. The provision increases the percentage
of the excess of taxable income over net capital gain used in
determining the maximum allowable deduction for qualified
business income from 20 percent to 23 percent. The provision
increases the percentage of the aggregate amount of the
taxpayer's qualified REIT dividends and qualified publicly
traded partnership income for the taxable year used to
calculate the combined qualified business income amount from 20
percent to 23 percent. Finally, the provision increases the
deductible amount for each qualified trade or business from 20
percent to 23 percent of the taxpayer's qualified business
income with respect to that trade or business, before applying
any applicable modifications.
The third modification replaces the existing phase-in of W-
2 wages, capital investment, and specified service trades or
businesses with a two-step process for taxpayers whose taxable
income exceeds the threshold amount. Similar to current law,
step one requires a taxpayer to limit the deductible amount for
each qualified trade or business (i.e., 23 percent of qualified
business income) to the greater of W-2 wages or W-2 wages and
capital investment for each trade or business. Unlike current
law, however, there is no phase in of the W-2 wages and capital
investment limitation over a fixed dollar phase-in range.
Rather, the taxpayer compares the sum of the deductible amounts
for each qualified trade or business in step one to a new
phase-in rule in step two. Under step two, the taxpayer (1)
takes 23 percent of qualified business income from all trades
or businesses (including specified service trades or
businesses) without regard to the W-2 wages and capital
limitation and (2) reduces the amount in (1) by a limitation
phase-in amount equal to 75 percent of the excess of taxable
income over the threshold amount. The taxpayer then compares
the aggregate deductible amounts under steps one and two, and
includes the greater of the two amounts in combined qualified
business income.\70\
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\70\For example, assume that a taxpayer's (1) taxable income is
$483,900, (2) threshold amount is $383,900, (3) and qualified business
income from one specified service trade or business is $700,000. Under
step one, the taxpayer's aggregate deduction is $0 because the taxpayer
does not receive any qualified business income from a qualified trade
or business. Under step two, the taxpayer's aggregate deduction is
$86,000 [($700,000 qualified business income * 23 percent) - (75
percent * ($483,900 taxable income - $383,900 threshold amount))]. The
taxpayer compares the aggregate deductible amounts under step one ($0)
to step two ($86,000) and applies the larger of the two amounts (in
this case $86,000).
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The fourth modification allows a taxpayer to include
qualified BDC interest dividends in the aggregated qualified
REIT dividends and qualified publicly-traded partnership income
used to calculate the combined qualified business amount. The
provision defines a qualified BDC interest dividend as any
dividend received from a business development company\71\ that
has elected to be treated as a regulated investment
company,\72\ to the extent that the dividend is attributable to
that company's net interest income derived from a qualifying
trade or business. The provision also excludes qualified BDC
interest dividends from the calculation of qualified business
income for a qualified trade or business.
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\71\As defined in section 2(a) of the Investment Company Act of
1940.
\72\Sec. 851(a).
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The fifth modification indexes the threshold amounts for
inflation for taxable years beginning after 2025.

EFFECTIVE DATE

The five modifications in this provision apply to taxable
years beginning after December 31, 2025.

Extension of Increased Estate and Gift Tax Exemption Amounts and
Permanent Enhancement (sec. 110006 of the bill and sec. 2010 of the
Code)

PRESENT LAW

Gift, estate, and generation-skipping transfer taxes

A gift tax generally is imposed on any transfer of property
by gift by a U.S. citizen or resident,\73\ and an estate tax
generally is imposed on the taxable estate of any person who is
a U.S. citizen or resident at the time of death.\74\
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\73\Sec. 2501.
\74\Sec. 2001.
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The estate and gift taxes are unified with a top tax rate
of 40 percent and, under a temporary provision enacted as part
of Public Law 115-97, a $10 million inflation-indexed lifetime
exemption for decedents dying and gifts made after December 31,
2017, and before January 1, 2026.\75\ Accordingly, the first
$10 million (plus inflation) of the aggregate of taxable gifts
and the gross estate is not subject to gift or estate tax. The
inflation adjustment is determined using a base year of 2010.
For 2025, the exemption amount is $13.99 million.
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\75\The exemption is granted by means of a credit equivalent to a
$10 million exemption. See sec. 2010(c)(1).
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For decedents dying and gifts made after 2025, the estate
and gift tax exemption is an inflation-indexed $5 million
(again with a base year of 2010).\76\ For 2026, the projected
exemption amount is $7.14 million.
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\76\If the exemption amount in effect at a decedent's death is less
than the exemption amount in effect during one or more years of the
decedent's life, generally there is no ``clawback'' of the higher
exemption amount used during life to offset gift tax. See Treas. Reg.
sec. 20.2010-1(c).
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Exemption amounts used during life to offset gift tax
reduce the amount of exemption that remains at death to offset
the decedent's estate tax. Surviving spouses generally are
permitted to use the unused portion of a predeceased spouse's
estate and gift tax exemption (sometimes referred to as
exemption portability).\77\
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\77\Sec. 2010(c)(2)(B).
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A separate transfer tax is imposed on generation-skipping
transfers in addition to any estate or gift tax imposed on such
transfers.\78\ This tax generally is imposed on transfers,
whether made directly or by trust or similar arrangement, to a
beneficiary more than one generation below that of the
transferor. The generation-skipping transfer tax is computed
using a flat rate equal to the top tax rate applied to
estates\79\ and an exemption equal to the estate and gift tax
exemption in effect for the taxable year, reduced by amounts of
exemption allocated by the transferor to generation-skipping
transfers in prior taxable years.\80\ There is no spousal
exemption portability for the generation-skipping transfer tax
exemption.
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\78\Sec. 2601.
\79\Sec. 2641.
\80\Sec. 2631 and Treas. Reg. sec. 26.2632-1.
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REASONS FOR CHANGE

The Committee believes the Federal gift, estate, and
generation-skipping transfer taxes generally harm taxpayers and
the economy and therefore should apply neither often nor to
many taxpayers. A tax on capital, such as the estate tax,
motivates wealth holders to reduce savings and increase
spending during life, rather than passing it to the next
generation, ultimately increasing the consumption gap between
the wealthy and the poor. A tax on capital also causes
investors to provide less capital to workers, thereby reducing
wages in the long run.
The Committee is particularly concerned about the effect of
the estate tax on the owners of farms and family businesses,
which create jobs and support our economy. The estate tax hits
such entrepreneurs especially hard, forcing families of
deceased owners to make the difficult decision to sell all or
part of the farm or business or take out costly loans to
satisfy the estate tax liability.

EXPLANATION OF PROVISION

The provision permanently increases the unified estate and
gift tax exemption to an inflation-indexed $15 million for
taxable years beginning after December 31, 2025.
Accordingly, the generation-skipping transfer tax exemption
is also permanently increased to an inflation-indexed $15
million. The $15 million exemption amount is indexed for
inflation with a base year of 2025. Accordingly, the exemption
amount is $15 million for decedents dying and gifts made in
calendar year 2026 and increases with inflation thereafter.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Increased Alternative Minimum Tax Exemption and Phase-Out
Thresholds (sec. 110007 of the bill and sec. 55 of the Code)

PRESENT LAW

Individual alternative minimum tax

In general
An alternative minimum tax (``AMT'') is imposed on an
individual, an estate, or a trust in an amount by which the
tentative minimum tax exceeds the regular income tax for the
taxable year. For taxable years beginning in 2025, the
tentative minimum tax is the sum of (1) 26 percent of so much
of the taxable excess as does not exceed $239,100 ($119,550 in
the case of a married individual filing a separate return), and
(2) 28 percent of the remaining taxable excess. The breakpoints
are indexed for inflation. The taxable excess is so much of the
alternative minimum taxable income (``AMTI'') as exceeds the
exemption amount. The maximum tax rates on net capital gain and
dividends used in computing the regular tax are used in
computing the tentative minimum tax. AMTI is taxable income
adjusted to take account of specified tax preferences and
adjustments.
The exemption amounts for taxable years beginning in 2025
are: (1) $137,000 in the case of married individuals filing a
joint return and surviving spouses; (2) $88,100 in the case of
unmarried individuals (other than surviving spouses); (3)
$68,500 in the case of married individuals filing separate
returns; and (4) $30,700 in the case of an estate or a trust.
For taxable years beginning in 2025, the exemption amounts are
phased out by an amount equal to 25 percent of the amount by
which the individual's AMTI exceeds (1) $1,252,700 in the case
of married individuals filing a joint return and surviving
spouses, (2) $626,350 in the case of married individuals filing
separate returns and unmarried individuals (other than
surviving spouses), and (3) $102,500 in the case of an estate
or a trust. The amounts are indexed for inflation.
AMTI is the taxpayer's taxable income increased by certain
preference items and adjusted by determining the tax treatment
of certain items in a manner that negates the deferral of
income resulting from the regular tax treatment of those items.
Exemption amounts and exemption phase-out thresholds after
2025
The AMT exemption amounts and phase-out thresholds for
individuals, which were increased starting in 2018 by Public
Law 115-97, decrease for taxable years beginning after December
31, 2025. In 2026 exemption amounts for individuals are
projected to be (1) $109,800 in the case of married individuals
filing a joint return and surviving spouses; (2) $70,600 in the
case of unmarried individuals (other than surviving spouses);
and (3) $54,900 in the case of married individuals filing
separate returns. For 2026 the exemption amount phase-out
thresholds for individuals are projected to be (1) $209,200 in
the case of married individuals filing a joint return and
surviving spouses, (2) $156,900 in the case of unmarried
individuals (other than surviving spouses), and (3) $104,600 in
the case of married individuals filing a separate return.
Preference items in computing AMTI
The minimum tax preference items are:
1. The excess of the deduction for percentage
depletion over the adjusted basis of each mineral
property (other than oil and gas properties) at the end
of the taxable year.
2. The amount by which excess intangible drilling
costs (that is, expenses in excess the amount that
would have been allowable if amortized over a 10-year
period) exceed 65 percent of the net income from oil,
gas, and geothermal properties. This preference applies
to independent producers only to the extent it reduces
the producer's AMTI (determined without regard to this
preference and the net operating loss deduction) by
more than 40 percent.
3. Tax-exempt interest income on private activity
bonds (other than qualified 501(c)(3) bonds, certain
housing bonds, and bonds issued in 2009 and 2010)
issued after August 7, 1986.
4. Accelerated depreciation or amortization on
certain property placed in service before January 1,
1987.
5. Seven percent of the amount excluded from income
under section 1202 (relating to gains on the sale of
certain small business stock).
In addition, losses from any tax shelter farm activity or
passive activities are not taken into account in computing
AMTI.
Adjustments in computing AMTI
The adjustments that individuals must make to compute AMTI
are:
6. Depreciation on property placed in service after
1986 and before January 1, 1999, is computed by using
the generally longer class lives prescribed by the
alternative depreciation system of section 168(g) and
either (a) the straight-line method in the case of
property subject to the straight-line method under the
regular tax or (b) the 150-percent declining balance
method in the case of other property. Depreciation on
property placed in service after December 31, 1998, is
computed by using the regular tax recovery periods and
the AMT methods described in the previous sentence.
Depreciation on property acquired after September 10,
2001, which is allowed an additional allowance under
section 168(k) for the regular tax is computed without
regard to any AMT adjustments.
7. Mining exploration and development costs are
capitalized and amortized over a 10-year period.
8. Taxable income from a long-term contract (other
than a home construction contract) is computed using
the percentage of completion method of accounting.
9. The amortization deduction allowed for pollution
control facilities placed in service before January 1,
1999 (generally determined using 60-month amortization
for a portion of the cost of the facility under the
regular tax), is calculated under the alternative
depreciation system (generally, using longer class
lives and the straight-line method). The amortization
deduction allowed for pollution control facilities
placed in service after December 31, 1998, is
calculated using the regular tax recovery periods and
the straight-line method.
10. Miscellaneous itemized deductions (which are
suspended through 2025) are not allowed.
11. Itemized deductions for State, local, and foreign
real property taxes; State and local personal property
taxes; State, local, and foreign income, war profits,
and excess profits taxes; and State and local sales
taxes are not allowed.
12. Deductions for interest on home equity loans are
not allowed.
13. The standard deduction and the deduction for
personal exemptions (which deduction is suspended
through 2025) are not allowed.
14. The amount allowable as a deduction for
circulation expenditures is capitalized and amortized
over a three-year period.
15. The amount allowable as a deduction for research
and experimentation expenditures from passive
activities is capitalized and amortized over a 10-year
period.
16. The regular tax rules relating to incentive stock
options do not apply.
Other rules
The taxpayer's net operating loss deduction generally
cannot reduce the taxpayer's AMTI by more than 90 percent of
the AMTI (determined without the net operating loss deduction).
The alternative minimum tax foreign tax credit reduces the
tentative minimum tax.
The various nonrefundable business credits allowed under
the regular tax generally are not allowed against the AMT.
Certain exceptions apply.
If an individual is subject to AMT in any year, the amount
of tax exceeding the taxpayer's regular tax liability is
allowed as a credit (the ``AMT credit'') in any subsequent
taxable year to the extent the taxpayer's regular tax liability
exceeds his or her tentative minimum tax liability in such
subsequent year. The AMT credit is allowed only to the extent
that the taxpayer's AMT liability is the result of adjustments
that are timing in nature. The individual AMT adjustments
relating to itemized deductions and personal exemptions are not
timing in nature, and no minimum tax credit is allowed with
respect to these items.
An individual may elect to write off certain expenditures
paid or incurred with respect of circulation expenses, research
and experimental expenses, intangible drilling and development
expenditures, development expenditures, and mining exploration
expenditures over a specified period (three years in the case
of circulation expenses, 60 months in the case of intangible
drilling and development expenditures, and 10 years in case of
other expenditures). The election applies for purposes of both
the regular tax and the alternative minimum tax.

REASONS FOR CHANGE

The Committee believes that the requirement that taxpayers
compute their income for purposes of both the regular income
tax and the AMT is one of the most far-reaching complexities of
the Code. The AMT is particularly burdensome for individuals
with small businesses, because they often do not know whether
they will be affected until they file their taxes and therefore
must maintain reserves that cannot be used to invest in their
businesses. Allowing the AMT exemption amounts and phase-out
thresholds to decrease to their 2017 levels would ensnare
millions of individuals and small-business owners in the AMT.

EXPLANATION OF PROVISION

The provision repeals the expiration of the Public Law 115-
97 increase in the AMT exemption amounts and phase-out
thresholds.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Limitation on Deduction for Qualified Residence Interest
(sec. 110008 of the bill and sec. 163 of the Code)

PRESENT LAW

Deductibility of home mortgage interest
As a general matter, personal interest is not
deductible.\81\ Qualified residence interest is not treated as
personal interest and is allowed as an itemized deduction,
subject to limitations.\82\ For taxable years beginning after
December 31, 2017, and before January 1, 2026, qualified
residence interest means interest paid or accrued during the
taxable year on acquisition indebtedness with respect to a
qualified residence. For taxable years beginning after December
31, 2025, qualified residence interest means interest paid or
accrued during the taxable year on acquisition indebtedness or
home equity indebtedness with respect to a qualified residence.
A qualified residence is the taxpayer's principal residence and
one other residence of the taxpayer selected to be a qualified
residence. A qualified residence may be a house, apartment,
condominium, mobile home, boat, or similar property.
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\81\Sec. 163(h)(1).
\82\Sec. 163(h)(2)(D) and (h)(3).
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Acquisition indebtedness
Acquisition indebtedness is indebtedness which is incurred
in acquiring, constructing, or substantially improving a
qualified residence of the taxpayer and which secures the
residence. In the case of a taxable year beginning after
December 31, 2017, and before January 1, 2026, a taxpayer may
treat no more than $750,000 of indebtedness as acquisition
indebtedness ($375,000 in the case of a married individual
filing separately). In the case of indebtedness incurred on or
before December 15, 2017, this limitation is $1,000,000
($500,000 in the case of a married individual filing
separately).\83\ For taxable years beginning after December 31,
2025, a taxpayer may treat up to $1,000,000 ($500,000 in the
case of a married individual filing separately) of indebtedness
as acquisition indebtedness, regardless of when the
indebtedness was incurred.
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\83\Special rules apply in the case of indebtedness from
refinancing existing acquisition indebtedness. Specifically, the
$1,000,000 ($500,000 in the case of a married taxpayer filing
separately) limitation continues to apply to any indebtedness incurred
on or after December 15, 2017, to refinance qualified residence
indebtedness incurred before that date to the extent the amount of the
indebtedness resulting from the refinancing does not exceed the amount
of the refinanced indebtedness.
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Acquisition indebtedness also includes indebtedness from
the refinancing of other acquisition indebtedness, but only to
the extent of the balance of the refinanced indebtedness. For
example, if the taxpayer incurs $200,000 of acquisition
indebtedness to acquire a principal residence and pays down the
debt to $150,000, a refinancing cannot increase the taxpayer's
acquisition indebtedness with respect to the residence above
$150,000.
Interest on acquisition indebtedness is deductible in
computing alternative minimum taxable income.\84\ However, in
the case of a second residence, the acquisition indebtedness
may only be incurred with respect to a house, an apartment, a
condominium, or a mobile home that is not used on a transient
basis.
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\84\Sec. 56(b)(1)(B)(i) and (e).
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Home equity indebtedness
Home equity indebtedness is indebtedness (other than
acquisition indebtedness) secured by a qualified residence. For
taxable years beginning after December 31, 2025, a taxpayer may
treat up to $100,000 ($50,000 in the case of a married
individual filing separately) of indebtedness as home equity
indebtedness. However, the amount of home equity indebtedness
with respect to a qualified residence may not exceed the fair
market value of the residence reduced by the acquisition
indebtedness with respect to it.
Interest on home equity indebtedness is not deductible in
computing alternative minimum taxable income.
For taxable years beginning after December 31, 2025,
interest on qualifying home equity indebtedness is deductible
(up to the specified limit) regardless of how the proceeds of
the indebtedness are used. For example, the proceeds may be
applied towards health costs and education expenses for the
taxpayer's family members or any other personal expenses such
as vacations, furniture, or automobiles. A taxpayer and a
mortgage company may contract for the home equity indebtedness
loan proceeds to be transferred to the taxpayer in a lump sum
payment (e.g., a traditional mortgage) or a series of payments
(e.g., a reverse mortgage); or, the lender may extend the
borrower a line of credit up to a fixed limit over the term of
the loan (e.g., a home equity line of credit).
Thus, for taxable years beginning after December 31, 2025,
the aggregate limitation on a taxpayer's acquisition
indebtedness and home equity indebtedness with respect to a
principal residence and a second residence that may give rise
to deductible interest is $1,100,000 ($550,000 for a married
individual filing separately).

REASONS FOR CHANGE

The Committee believes that scaling back many of the
existing tax incentives, including the home mortgage interest
deduction, makes the tax system simpler and fairer for all
families and individuals and allows for lower tax rates. The
Committee further believes that preserving the limitations on
this deduction enacted under Public Law 115-97 is consistent
with streamlining the tax code, broadening the tax base,
lowering rates, and growing the economy.

EXPLANATION OF PROVISION

Under the provision, the $750,000 ($375,000 in the case of
a married individual filing separately) limitation on
acquisition indebtedness is made permanent, and the exclusion
of interest on home equity indebtedness from the definition of
qualified residence interest is made permanent.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Limitation on Casualty Loss Deduction (sec. 110009 of the
bill and sec. 165(h) of the Code)

PRESENT LAW

An individual taxpayer may claim an itemized deduction for
a personal casualty loss.\85\ If the loss is attributable to a
disaster declared by the President under section 401 of the
Robert T. Stafford Disaster Relief and Emergency Assistance Act
(the ``Stafford Act''),\86\ then the loss is deductible only to
the extent of the sum of the individual's personal casualty
gains plus the amount by which aggregate net disaster-related
losses exceed 10 percent of the individual taxpayer's adjusted
gross income.\87\ In any taxable year beginning after December
31, 2017, and before January 1, 2026, all other personal
casualty losses are deductible only to the extent that the
losses do not exceed the individual's personal casualty gains.
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\85\Sec. 165(h).
\86\Sec. 165(h)(5).
\87\Sec. 165(h)(2). Personal casualty gains are reduced for this
purpose by any gain used to offset any personal casualty loss which is
not attributable to a disaster.
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For individual taxpayers, personal casualty losses are
losses of property not connected with a trade or business or a
transaction entered into for profit, if such losses arise from
fire, storm, shipwreck, or other casualty, or from theft.\88\
Personal casualty gains are recognized gains from any
involuntary conversion of property not connected with a trade
or business or a transaction entered into for profit, if such
gains arise from fire, storm, shipwreck, or other casualty, or
from theft.\89\ Personal casualty losses are deductible to the
extent they exceed $100 per casualty.\90\
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\88\Sec. 165(c)(3)(B).
\89\Sec. 165(c)(3)(A).
\90\Sec. 165(h)(1).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the permanent repeal of many
existing tax incentives, including the deduction for personal
casualty and theft losses, except in the case of Presidentially
declared disasters, makes the tax system simpler and fairer for
all families and individuals, and allows for lower tax rates.
The Committee further believes that repeal of this provision is
consistent with streamlining the Code, broadening the tax base,
lowering rates, and growing the economy.

EXPLANATION OF PROVISION

Under the provision, the temporary limitation on personal
casualty losses in section 165(h)(5) is made permanent.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Termination of Miscellaneous Itemized Deduction (sec. 110010 of the
bill and sec. 67 of the Code)

PRESENT LAW

An individual's taxable income is determined by adding
together income from different sources such as personal
services and investment and by subtracting permitted amounts.
All individuals are permitted to deduct from gross income
(which is defined as all income from whatever source derived)
amounts (colloquially referred to as ``above-the-line''
deductions) that are allowable in determining adjusted gross
income.\91\ These amounts include, for example, ordinary and
necessary expenses of a trade or business and certain
reimbursed expenses paid in connection with the performance of
services as an employee.\92\
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\91\Secs. 61, 62.
\92\Secs. 62(a)(1), (a)(2)(A), 162(a).
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In determining taxable income, individuals are also allowed
to deduct other amounts that are sometimes referred to as
``below-the line'' deductions. An individual who does not elect
to itemize deductions is allowed a standard deduction and
deductions for certain other amounts listed in section 63(b)
(sometimes referred to as ``non-itemizer deductions,'' for
example, the deduction for qualified business income).\93\
Instead of taking a standard deduction, an individual may elect
to subtract itemized deductions in computing taxable
income.\94\ Itemized deductions are all deductions allowable
under chapter 1 of subtitle A of the Code other than above-the-
line deductions, the standard deduction, and non-itemizer
deductions.\95\
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\93\Sec. 63(b).
\94\Sec. 63(a), (e).
\95\Sec. 63(d).
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All itemized deductions other than those listed in section
67(b) are ``miscellaneous itemized deductions.'' Deductions
listed in section 67(b) (meaning deductions that are not
miscellaneous itemized deductions) include the deduction for
interest, the deduction for state, local, and foreign taxes,
the charitable contribution deduction, and the deduction for
medical expenses that exceed 7.5 percent of adjusted gross
income. Miscellaneous itemized deductions include, among many
other expenses, investment expenses, legal fees, and
unreimbursed employee business expenses.\96\
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\96\For a detailed description of all miscellaneous itemized
deductions see IRS Publication 529, Miscellaneous Deductions (2020).
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Before 2018, miscellaneous itemized deductions were
allowed, but only to the extent they exceeded two percent of a
taxpayer's adjusted gross income.\97\ Following the 2017
enactment of Public Law 115-97 miscellaneous itemized
deductions are not allowed for taxable years beginning after
December 31, 2017 and before January 1, 2026.
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\97\Sec. 67(a).
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REASONS FOR CHANGE

The Committee believes that the permanent repeal of many
existing complicated tax rules, including miscellaneous
itemized deductions subject to the two-percent floor, makes the
tax system simpler and fairer for all families and individuals,
and allows for lower tax rates. The Committee further believes
that the permanent repeal of miscellaneous itemized deductions
is consistent with lowering rates and growing the economy.

EXPLANATION OF PROVISION

The provision makes permanent the Public Law 115-97
temporary repeal of miscellaneous itemized deductions.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Limitation on Tax Benefit of Itemized Deductions (sec. 110011 of the
bill and sec. 68 of the Code)

PRESENT LAW

For any taxable year beginning after 2017 and before 2026,
there is no overall limitation on the benefit of itemized
deductions.
Before 2018, the total amount of itemized deductions, other
than the deductions for medical expenses, investment interest,
and casualty, theft or gambling losses, was limited for
individual taxpayers whose adjusted gross income exceeded
statutorily prescribed ``applicable amounts.''\98\ The
otherwise allowable amount of an individual taxpayer's itemized
deductions for a taxable year was reduced by the lesser of
three percent of the amount by which the taxpayer's adjusted
gross income exceeded the applicable amount or 80 percent of
the amount of the taxpayer's itemized deductions otherwise
allowable for that year. This itemized deduction limitation was
colloquially referred to as the ``Pease limitation.''
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\98\Sec. 68.
---------------------------------------------------------------------------
For 2017, the applicable amounts were $261,500 for an
unmarried individual other than a head of household or a
surviving spouse, $287,650 for a head of household, $313,800
for married individuals filing a joint return or for a
surviving spouse, and $156,900 for married individuals filing a
separate return. These amounts were indexed for inflation.
The Pease limitation becomes effective again for taxable
years beginning after 2025.
Reasons for Change The Committee believes that the Pease
limitation should not become effective again, because it was
overly complicated and resulted in significantly higher
implicit marginal tax rates for many households. However, the
Committee believes that a simpler overall limitation on the
benefit of itemized deductions is appropriate, in order to
limit the disproportionate benefit that the highest-income
households receive from these deductions.

EXPLANATION OF PROVISION

In place of the Pease limitation, the provision provides a
limitation on the tax benefit of itemized deductions.
Under the provision, the amount of an individual's itemized
deductions otherwise allowable for a taxable year is reduced by
2/37 of the lesser of the amount of itemized deductions
otherwise allowable for the year or so much of the taxable
income of the taxpayer for the year (determined without regard
to the provision and increased by the amount of otherwise
allowable itemized deductions) as exceeds that dollar amount at
which the 37 percent rate bracket under section 1 begins in
respect of the taxpayer.
The provision's limitation on the tax benefit of itemized
deduction applies after the application of any other limitation
on the allowance of any itemized deduction (such as the
adjusted-gross-income-based limitation on the charitable
contribution deduction).

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Termination of Qualified Bicycle Commuting Reimbursement Exclusion
(sec. 110012 of the bill and sec. 132(f)(8) of the Code)

PRESENT LAW

For taxable years beginning before December 31, 2017,
qualified bicycle commuting reimbursements of up to $20 per
qualifying bicycle commuting month in a calendar year are
excludible from an employee's gross income.\99\ A qualifying
bicycle commuting month is any month during which the employee
regularly uses the bicycle for a substantial portion of the
travel between the employee's residence and place of employment
and during which the employee does not receive any qualified
transportation fringe benefit for transportation in a commuter
highway vehicle (in connection with travel between the
employee's residence and place of employment), a transit pass,
or qualified parking.\100\
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\99\Secs. 132(a)(5), 132(f)(1)(D), and 132(f)(5)(F)(ii).
\100\Sec. 132(f)(5)(F)(iii).
---------------------------------------------------------------------------
A qualified bicycle commuting reimbursement for a calendar
year is an employer reimbursement during the 15-month period
beginning with the first day of the calendar year for
reasonable expenses incurred by the employee during such
calendar year for the purchase of a bicycle and bicycle
improvements, repair, and storage, if the bicycle is regularly
used for travel between the employee's residence and place of
employment.\101\
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\101\Sec. 132(f)(5)(F)(i).
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Qualified bicycle commuting reimbursements that are
excludible from gross income for income tax purposes are also
excluded from wages for employment tax purposes.
For taxable years beginning after December 31, 2017, and
before January 1, 2026, the exclusion from gross income and
wages for qualified bicycle commuting reimbursements was
temporarily repealed.\102\
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\102\Pub. L. No. 115-97, sec. 11047, December 22, 2017.
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REASONS FOR CHANGE

The Committee believes that the treatment of the employer's
deduction for amenities provided to an employee that are
primarily personal in nature, such as bicycle commuting
benefits and not directly related to a trade or business,
should be aligned with other similar taxable items.

EXPLANATION OF PROVISION

The provision terminates the exclusion for qualified
bicycle commuting reimbursement for taxable years beginning
after December 31, 2025.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Limitation on Exclusion and Deduction for Moving Expenses
(sec. 110013 of the bill and secs. 132(g) and 217 of the Code)

PRESENT LAW

Deduction for Moving Expenses

Individuals are permitted an above-the-line deduction for
moving expenses paid or incurred during the taxable year in
connection with the commencement of work by the taxpayer as an
employee or as a self-employed individual at a new principal
place of work.\103\ Moving expenses means only the reasonable
expenses of moving household goods and personal effects from
the former residence to the new residence and of traveling
(including lodging) from the former residence to the new place
of residence.\104\ Moving expenses are deductible only if the
move meets certain conditions related to distance from the
taxpayer's former residence and the taxpayer's status as a
full-time employee or as a self-employed individual performing
services on a full-time basis in the new location.\105\
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\103\Secs. 62(a)(15) and 217(a).
\104\Sec. 217(b)(1).
\105\Sec. 217(c).
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Special rules apply under section 217(g) in the case of a
member of the Armed Forces of the United States. In the case of
a member of the Armed Forces on active duty who moves pursuant
to a military order and incident to a permanent change of
station, the limitations related to distance from the
taxpayer's previous residence and status as a full-time
employee (or self-employed individual performing services on a
full-time basis) in the new location do not apply.\106\
Additionally, any moving and storage expenses that are
furnished in kind (or for which reimbursement or an allowance
is provided) to the member of the Armed Forces, their spouse,
or dependents are excluded from gross income.\107\ Rules also
apply to exclude amounts furnished to the spouse and dependents
of a member of the Armed Forces in the event that such
individuals move to a location other than to where the member
of the Armed Forces is moving.\108\
---------------------------------------------------------------------------
\106\Sec. 217(g)(1).
\107\Sec. 217(g)(2).
\108\Sec. 217(g)(3).
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Section 217(k) eliminates the deduction for moving expenses
for taxable years 2018 through 2025. However, during that
period, the subsection retains the deduction for moving
expenses and the rules providing for exclusions of amounts
attributable to in-kind moving and storage expenses (and
reimbursements or allowances for these expenses) for members of
the Armed Forces (or their spouses or dependents) on active
duty who move pursuant to a military order and incident to a
permanent change of station.

EXCLUSION FOR QUALIFIED MOVING EXPENSE REIMBURSEMENT

Qualified moving expense reimbursements are excluded from
an employee's gross income,\109\ and are defined as any amount
received (directly or indirectly) by an individual from an
employer as a payment for (or reimbursement of) expenses which
would be deductible as moving expenses under section 217 if
directly paid or incurred by the individual.\110\ However, any
amount actually deducted by the individual is not eligible for
this exclusion. Qualified moving expense reimbursements that
are excludible from gross income for income tax purposes are
also excluded from wages for employment tax purposes.
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\109\Sec. 132(a)(6) and 132(g).
\110\Sec. 132(g)(1).
---------------------------------------------------------------------------
For taxable years beginning after December 31, 2017, and
before January 1, 2026, section 132(g)(2) repeals the exclusion
from gross income and wages for qualified moving expense
reimbursements except in the case of a member of the Armed
Forces of the United States on active duty who moves pursuant
to a military order and incident to a permanent change of
station.

REASONS FOR CHANGE

The Committee believes that the repeal of many existing tax
incentives, including the deduction for qualified moving
expenses and the exclusion for qualified moving expense
reimbursements, makes the tax system simpler and fairer for all
families and individuals, and allows for lower tax rates. The
Committee further believes that permanent repeal of these tax
incentives is consistent with streamlining the Code, broadening
the tax base, lowering rates, and growing the economy.
However, the Committee recognizes that special
circumstances apply to members of the Armed Forces, and thus
the provision retains present law benefits relating to the
moving expenses and moving expense reimbursements of these
taxpayers.

EXPLANATION OF PROVISION

The provision would permanently repeal the deduction for
moving expenses, except in the case of a member of the Armed
Forces (or their spouse or child) to whom section 217(g)
applies.
The provision would permanently repeal the qualified moving
expense reimbursement exclusion except in the case of a member
of the Armed Forces of the United States on active duty who
moves pursuant to a military order and incident to a permanent
change of station.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Limitation on Wagering Losses (sec. 110014 of the bill and
sec. 165 of the Code)

PRESENT LAW

Losses sustained during the taxable year on wagering
transactions are allowed as a deduction only to the extent of
the gains during the taxable year from such transactions.\111\
For taxable years beginning after December 31, 2017, and before
January 1, 2026, the term ``losses from wagering transactions''
as used in section 165(d) includes any deduction otherwise
allowable under chapter 1 of the Code incurred in carrying on
any wagering transaction. Thus, for such taxable years the
limitation on losses from wagering transactions applies not
only to the actual costs of wagers but also to other expenses
incurred in connection with gambling activity (for instance,
the otherwise deductible costs of travel to and from a casino).
---------------------------------------------------------------------------
\111\Sec. 165(d).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the scope of the limitation on
wagering losses should continue to cover expenses incurred in
the conduct of the individual's gambling activity, so that the
general taxpaying public does not indirectly subsidize the
costs of others' gambling.

EXPLANATION OF PROVISION

Under the provision, the clarification of the term ``losses
from wagering transactions'' as used in section 165(d) is made
permanent. Therefore, in the case of any taxable year beginning
after December 31, 2017, such term includes any deduction
otherwise allowable under chapter 1 of the Code incurred in
carrying on any wagering transaction.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Increased Limitation on Contributions to ABLE Accounts and
Permanent Enhancement (sec. 110015 of the bill and sec. 529A of the
Code)

PRESENT LAW

Qualified ABLE programs
The Code provides for tax-favored savings programs intended
to benefit disabled individuals, known as qualified ABLE
programs.\112\ A qualified ABLE program is a program
established and maintained by a State or agency or
instrumentality thereof. A qualified ABLE program must meet the
following conditions: (1) Under the provisions of the program,
contributions may be made to an account (an ``ABLE account'')
established for the purpose of meeting the qualified disability
expenses of the designated beneficiary of the account; (2) the
program must limit a designated beneficiary to one ABLE
account; and (3) the program must meet certain other
requirements discussed below.
---------------------------------------------------------------------------
\112\Sec. 529A.
---------------------------------------------------------------------------
Designated beneficiaries and eligible individuals
A designated beneficiary of an ABLE account is the owner of
the ABLE account. A designated beneficiary generally must be an
eligible individual (discussed below) at the time the ABLE
account is established. An ABLE account may be transferred to a
successor designated beneficiary who is a member of the same
family as the original designated beneficiary. For this
purpose, a member of the family includes the original
designated beneficiary's brother, sister, stepbrother, or
stepsister. In the case of such a transfer, the successor
designated beneficiary must be an eligible individual at the
time of transfer.
An eligible individual is an individual either (1) for whom
a disability certification has been filed with the Secretary
for the taxable year, or (2) who is entitled to Social Security
Disability Insurance (SSDI) benefits or Supplemental Security
Income (SSI) benefits\113\ based on blindness or disability,
and such blindness or disability occurred before the individual
attained age 26 (or, for taxable years beginning after December
31, 2025, age 46). A disability certification means a
certification to the satisfaction of the Secretary, made by the
eligible individual or the parent or guardian of the eligible
individual, that the individual either (1) has a medically
determinable physical or mental impairment, which results in
marked and severe functional limitations and which can be
expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12
months, or (2) is blind (within the meaning of section
1614(a)(2) of the Social Security Act). Such blindness or
disability must have occurred before the date the individual
attained age 26 (or, for taxable years beginning after December
31, 2025, age 46). The certification must include a copy of the
diagnosis of the individual's impairment and be signed by a
licensed physician.\114\
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\113\These are benefits under Title II and Title XVI, respectively,
of the Social Security Act.
\114\No inference may be drawn from a disability certification
under section 529A for purposes of eligibility for SSDI, SSI, or
Medicaid benefits.
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Tax treatment and additional requirements
A qualified ABLE program is generally exempt from income
tax but is subject to the taxes imposed on the unrelated
business income of tax-exempt organizations.\115\
---------------------------------------------------------------------------
\115\See sec. 511.
---------------------------------------------------------------------------
Contributions to an ABLE account must be made in cash and
are not deductible for Federal income tax purposes. Except in
the case of a rollover contribution from another ABLE account,
an ABLE account must not receive aggregate contributions during
a taxable year in excess of the $10,000 amount under section
2503(b) of the Code (the annual gift tax exclusion), which is
indexed for inflation using a cost-of-living adjustment with a
base year of 1997. For 2025, the annual gift tax exclusion is
$19,000.\116\
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\116\If contributions to an ABLE account exceed the annual limit,
an excise tax in the amount of six percent of the excess contribution
to such account is imposed on the designated beneficiary. Sec. 4973.
Such tax does not apply in the event that the trustee of the account
makes a corrective distribution of the excess amount by the due date
(including extensions) of the designated beneficiary's tax return for
the taxable year of the excess contribution.
---------------------------------------------------------------------------
Until January 1, 2026, if the designated beneficiary is an
employee for whom no contribution during the taxable year is
made to a tax-advantaged defined contribution plan, a section
403(b) plan, or a governmental section 457 plan, the
beneficiary may contribute to his or her ABLE account the
lesser of the beneficiary's compensation included in gross
income or an amount equal to the poverty line for a one-person
household for the preceding calendar year. The beneficiary may
make such a contribution regardless of whether it increases the
total amount contributed (by the beneficiary or others) for the
taxable year above the amount determined under section 2503(b).
In addition to the foregoing contribution limitations, a
qualified ABLE program must provide adequate safeguards to
ensure that ABLE account contributions do not exceed the limit
imposed on accounts under the qualified tuition program of the
State maintaining the qualified ABLE program.\117\
---------------------------------------------------------------------------
\117\See sec. 529(b)(6).
---------------------------------------------------------------------------
A qualified ABLE program may permit a designated
beneficiary to direct (directly or indirectly) the investment
of any contributions (or earnings thereon) no more than two
times in any calendar year and must provide separate accounting
for each designated beneficiary. A qualified ABLE program may
not allow any interest in the program (or any portion thereof)
to be used as security for a loan.
A distribution from an ABLE account is generally includible
in the distributee's income to the extent it consists of
earnings on the account.\118\ However, distributions from an
ABLE account in a taxable year are excludable from income to
the extent they do not exceed the qualified disability expenses
(discussed below) of the designated beneficiary for the taxable
year. If distributions from an ABLE account exceed such
qualified disability expenses, a pro rata portion of the
distributions is excludable from income. The portion of any
distribution that is includible in income is subject to an
additional 10-percent tax unless the distribution is made after
the death of the beneficiary.
---------------------------------------------------------------------------
\118\The rules of section 72 apply in determining the portion of a
distribution that consists of earnings.
---------------------------------------------------------------------------
Amounts in an ABLE account may be rolled over without
income tax liability to another ABLE account for the same
beneficiary \119\ or another ABLE account for the designated
beneficiary's brother, sister, stepbrother, or stepsister who
is also an eligible individual. Once an ABLE account has been
established by a designated beneficiary, no account
subsequently established by such beneficiary shall be treated
as an ABLE account, except in the case of a rollover (in which
case the contributor ABLE account must be closed within 60 days
of the rollover).
---------------------------------------------------------------------------
\119\For instance, if a designated beneficiary were to relocate to
a different State.
---------------------------------------------------------------------------
A contribution to an ABLE account is treated as a completed
gift of a present interest to the designated beneficiary. Such
contributions qualify for the per-donee annual gift tax
exclusion ($19,000 for 2025) and, to the extent of such
exclusion, are also exempt from the generation-skipping
transfer (``GST'') tax. A distribution from an ABLE account to
the designated beneficiary is not subject to gift tax or GST
tax.
Qualified disability expenses
As described above, distributed earnings from an ABLE
account are excluded from income only to the extent total
distributions do not exceed the qualified disability expenses
of the designated beneficiary. For this purpose, qualified
disability expenses are any expenses related to the designated
beneficiary's blindness or disability which are made for the
benefit of the designated beneficiary. Such expenses include
expenses for the following: education, housing, transportation,
employment training and support, assistive technology and
personal support services, health, prevention and wellness,
financial management and administrative services, legal fees,
expenses for oversight and monitoring, funeral and burial
expenses, and other expenses, which are approved by the
Secretary under regulations and consistent with the purposes of
section 529A.
Transfer to State
Upon death of the designated beneficiary, subject to any
outstanding payments due for qualified disability expenses
incurred by the designated beneficiary, a State may file a
claim for payment of amounts remaining in the designated
beneficiary's account. Such claim may not exceed the total
medical assistance paid for the designated beneficiary after
the establishment of the ABLE account under the State's
Medicaid plan established under title XIX of the Social
Security Act, net of any premiums paid from the ABLE account or
by or on behalf of the beneficiary to such State's Medicaid
Buy-In program.\120\
---------------------------------------------------------------------------
\120\Sec. 529A(f).
---------------------------------------------------------------------------
Treatment of ABLE accounts under Federal programs
Any amounts in an ABLE account, any contributions to such
account, and any distributions for qualified disability
expenses shall be disregarded for purposes of determining the
designated beneficiary's eligibility to receive, or the amount
of, any assistance or benefit authorized by any Federal means-
tested program.\121\ However, in the case of the SSI program, a
distribution from an ABLE account for housing expenses is not
disregarded, nor are amounts in an ABLE account in excess of
$100,000. If an individual's ABLE account balance exceeds
$100,000, such individual's SSI benefits shall not be
terminated but instead shall be suspended until such time as
the individual's resources fall below $100,000. However, such
suspension shall not be taken into account for purposes of
Medicaid eligibility.
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\121\Pub. L. No. 113-295, div. B, sec. 103, December 19, 2014.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes it is important to reward work and
encourage savings among individuals with disabilities, who will
then be better placed to live financially independent and self-
directed lives. Therefore, the Committee believes that the
contribution limits for ABLE accounts should continue to allow
individuals with disabilities who earn income to contribute a
portion of those funds to ABLE accounts, above and beyond the
contributions that are made on their behalf by family members
and others.

EXPLANATION OF PROVISION

The provision makes permanent the ability of a designated
beneficiary who is an employee (and for whom no contribution
during the taxable year is made to a tax-advantaged defined
contribution plan, a section 403(b) plan, or a governmental
section 457 plan) to contribute to his or her ABLE account the
lesser of his or her compensation included in gross income or
an amount equal to the poverty line for a one-person household
for the preceding calendar year. The beneficiary may make such
a contribution regardless of whether it increases the total
amount contributed (by the beneficiary or others) for the
taxable year above the amount determined under section 2503(b).
Under the provision, the maximum annual contribution limit
for an ABLE account (not including the employment-related
contributions made by the designated beneficiary) is equal to
the annual gift tax exclusion specified in section 2503(b) with
a modified inflation adjustment. Whereas section 2503(b)
adjusts the $10,000 base amount for inflation with a base year
of 1997,\122\ under the provision the $10,000 base amount is
adjusted for inflation with a base year of 1996. The extra year
of inflation increases the annual contribution limit above what
it would be under present law.
---------------------------------------------------------------------------
\122\Sec. 2503(b)(2)(B).
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision is generally effective for contributions made
after December 31, 2025. The modified inflation adjustment is
effective for taxable years beginning after December 31, 2025.

Extension of Savers Credit Allowed for ABLE Contributions (sec. 110016
of the bill and sec. 25B of the Code)

PRESENT LAW

Qualified ABLE programs
For present law regarding qualified ABLE programs, see the
present law description for the provision ``Extension of
Increased Limitation on Contributions to ABLE Accounts and
Permanent Enhancement'' (section 110015 of the bill), above.
Saver's Credit
Eligible individuals may claim a nonrefundable tax credit
(the ``saver's credit'') for qualified retirement savings
contributions to certain retirement accounts.\123\ The maximum
annual contribution eligible for the credit is $2,000 per
individual. The credit rate depends on the adjusted gross
income (``AGI'') of the taxpayer. For this purpose, AGI is
determined without regard to certain exclusions for foreign-
source earned income and certain U.S. possession-source income.
As the taxpayer's AGI increases, the saver's credit rate
available to the taxpayer is reduced, until, at certain AGI
levels, the credit is unavailable. For taxable years beginning
in 2025, the following taxpayers may be eligible for at least
some amount of credit: married taxpayers filing joint returns
with AGI of $79,000 or less, taxpayers filing head of household
returns with AGI of $59,250 or less, and all other taxpayers
filing returns with AGI of $39,500 or less. The credit rates
based on AGI for taxable years beginning in 2025 are provided
in the table below. The AGI levels used for the determination
of the available credit rate are indexed for inflation.
---------------------------------------------------------------------------
\123\Sec. 25B.

TABLE 4.--CREDIT RATES FOR SAVER'S CREDIT (2025)
----------------------------------------------------------------------------------------------------------------
7Joint Filers 8Heads of Households 9All Other Filers 10Credit Rate
----------------------------------------------------------------------------------------------------------------
$0-$47,500........................... $0-$35,625............. $0-$23,750............. 50 percent
$47,501-$51,000...................... $35,626-$38,250........ $23,751-$25,500........ 20 percent
$51,001-$79,000...................... $38,251-$59,250........ $25,501-$39,500........ 10 percent
Over $79,000......................... Over $59,250........... Over $39,500........... 0 percent
----------------------------------------------------------------------------------------------------------------

The saver's credit is in addition to any deduction or
exclusion that would otherwise apply with respect to the
qualified retirement savings contributions. The credit offsets
alternative minimum tax liability as well as regular tax
liability. The credit is available to individuals who are 18
years old or older, other than individuals who are full-time
students or claimed as a dependent on another taxpayer's
return.
Eligible contributions for purposes of the credit include:
(1) contributions to traditional and Roth individual retirement
accounts (``IRAs''), (2) elective deferrals to a section 401(k)
plan, a section 403(b) plan, a governmental section 457(b)
plan, a savings incentive match plan for employees (``SIMPLE
IRA''), or a simplified employee pension (``SEP'') plan, (3)
voluntary after-tax employee contributions to a qualified
retirement plan or annuity or a section 403(b) plan, and (4)
contributions to a section 501(c)(18) plan.\124\ Under changes
enacted by Public Law 115-97, eligible contributions for
purposes of the credit also include contributions made by the
individual to the ABLE account of which the individual is the
designated beneficiary.\125\ A credit for such ABLE
contributions is available for contributions made in calendar
years 2018 through 2025.
---------------------------------------------------------------------------
\124\Sec. 25B(d)(1).
\125\Sec. 25B(d)(1)(D).
---------------------------------------------------------------------------
Under changes enacted by Public Law 117-328, for taxable
years beginning after December 31, 2026, eligible contributions
for purposes of the credit for any individual are limited to
such individual's ABLE contributions, if any, made before
January 1, 2026.\126\ In effect, the credit is unavailable to
any taxpayer in a taxable year beginning after December 31,
2026. Instead, taxpayers may be eligible for the ``saver's
match'' credit enacted by Public Law 117-328, starting in
taxable years beginning after December 31, 2026.\127\
---------------------------------------------------------------------------
\126\Pub. L. No. 117-328, sec. 103(e) and (f), Dec. 29, 2022.
\127\Sec. 6433.
---------------------------------------------------------------------------
The amount of contributions eligible for the saver's credit
is reduced by distributions received by the taxpayer (or by the
taxpayer's spouse if the taxpayer files a joint return) from
any retirement plan or IRA to which eligible contributions may
be made during the taxable year for which the credit is
claimed, during the two taxable years prior to the year the
credit is claimed, and during the period after the end of the
taxable year for which the credit is claimed and prior to the
due date for filing the taxpayer's return for the year.\128\
Distributions that are rolled over to another retirement plan
or IRA do not affect the credit.
---------------------------------------------------------------------------
\128\Sec. 25B(d)(2).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes it is important to reward work and
encourage savings among individuals with disabilities, who will
then be better placed to live financially independent and self-
directed lives. Therefore, the Committee believes that
individuals with disabilities who earn income should continue
to receive a tax credit for a portion of the contributions they
make to their own ABLE accounts.

EXPLANATION OF PROVISION

The provision makes permanent the temporary provision
including ABLE account contributions made by the account's
designated beneficiary as eligible contributions for purposes
of the saver's credit. Therefore, for taxable years beginning
after December 31, 2026, eligible contributions for purposes of
the credit include (and are limited to) ABLE account
contributions made during the taxable year by the account's
beneficiary.

EFFECTIVE DATE

The provision is effective for taxable years ending after
December 31, 2025.

Extension of Rollovers From Qualified Tuition Programs to ABLE Accounts
Permitted (sec. 110017 of the bill and sec. 529 of the Code)

PRESENT LAW

Section 529 qualified tuition programs

In general
A qualified tuition program is a program established and
maintained by a State (or agency or instrumentality thereof) or
by one or more eligible educational institutions, which
satisfies certain requirements and under which a person may
purchase tuition credits or certificates on behalf of a
designated beneficiary that entitle the beneficiary to the
waiver or payment of qualified education expenses of the
beneficiary (a ``prepaid tuition program''). Section 529
provides favorable income tax and transfer tax rules for the
treatment of accounts and contracts established under qualified
tuition programs.\129\ In the case of a program established and
maintained by a State or agency or instrumentality thereof, a
qualified tuition program also includes a program under which a
person may make contributions to an account that is established
for the purpose of satisfying the qualified education expenses
of the designated beneficiary of the account, provided it
satisfies certain specified requirements (a ``savings account
program''). Under both types of qualified tuition programs, a
contributor establishes an account for the benefit of a
particular designated beneficiary to provide for that
beneficiary's qualified education expenses.
---------------------------------------------------------------------------
\129\For purposes of this description, the term ``account'' is used
interchangeably to refer to a prepaid tuition benefit contract or a
tuition savings account established pursuant to a qualified tuition
program.
---------------------------------------------------------------------------
In general, prepaid tuition contracts and tuition savings
accounts established under a qualified tuition program involve
prepayments or contributions made by one or more individuals
for the benefit of a designated beneficiary. Decisions with
respect to the contract or account are typically made by an
individual who is not the designated beneficiary. Qualified
tuition accounts or contracts generally require the designation
of a person (typically referred to as an ``account
owner'')\130\ whom the program administrator (oftentimes a
third-party administrator retained by the State or by the
educational institution that established the program) may look
to for decisions, recordkeeping, and reporting with respect to
the account established for a designated beneficiary. The
person or persons who make the contributions to the account
need not be the account owner. Under many qualified tuition
programs, the account owner generally has control over the
account or contract, including the ability to change designated
beneficiaries and to withdraw funds at any time and for any
purpose. Thus, in practice, qualified tuition accounts or
contracts generally involve a contributor, a designated
beneficiary, an account owner (who oftentimes is not the
contributor or the designated beneficiary), and an
administrator of the account or contract.
---------------------------------------------------------------------------
\130\Section 529 refers to contributors and designated
beneficiaries but does not define or otherwise refer to the term
``account owner,'' which is a commonly used term among qualified
tuition programs.
---------------------------------------------------------------------------
Qualified education expenses
For purposes of the Code's favorable tax treatment of
distributions from a qualified tuition program, qualified
education expenses include: (1) tuition, fees, books, supplies,
and equipment required for the enrollment or attendance of a
designated beneficiary at an eligible higher education
institution; (2) expenses for special needs services in the
case of a special needs beneficiary that are incurred in
connection with such enrollment or attendance; (3) expenses for
the purchase of computer or peripheral equipment, software, or
Internet access if these are to be used primarily by a
beneficiary while enrolled at an eligible higher education
institution; (4) certain room and board expenses incurred at an
eligible higher education institution by a beneficiary enrolled
at least half time; (5) up to $10,000 per year of tuition at an
elementary or secondary public, private, or religious school;
(6) expenses for fees, books, supplies and equipment required
for a beneficiary's participation in certain apprenticeship
programs; and (7) up to $10,000 of principal or interest
payments on certain education loans of the beneficiary.\131\
---------------------------------------------------------------------------
\131\The $10,000 amount is a lifetime limit per beneficiary.
---------------------------------------------------------------------------
Contributions to qualified tuition programs
Contributions to a qualified tuition program must be made
in cash. Section 529 does not impose a specific dollar limit on
the amount of contributions, account balances, or prepaid
tuition benefits relating to a qualified tuition account.
However, the program is required to have adequate safeguards to
prevent contributions in excess of amounts necessary to provide
for the beneficiary's qualified education expenses.
Contributions generally are treated as a completed gift
eligible for the gift tax annual exclusion. Contributions are
not tax deductible for Federal income tax purposes, though they
may be deductible for State income tax purposes. Amounts in the
account accumulate on a tax-free basis (i.e., income on
accounts in the plan is not subject to current Federal income
tax), although a qualified tuition program may be subject to
taxes imposed on the unrelated business income of tax-exempt
organizations.
A qualified tuition program may not permit any contributor
or designated beneficiary to direct (whether directly or
indirectly) the investment of any contributions or earnings
thereon more than twice in any calendar year, and the program
must provide separate accounting for each designated
beneficiary of the program. A qualified tuition program may not
allow any interest in an account or contract (or any portion
thereof) to be used as security for a loan.
Rollovers
Amounts rolled over within 60 days of distribution from a
qualified tuition program to certain other accounts generally
are not included in the gross income of the beneficiary. The
accounts eligible for such tax-free rollovers are: (1) another
qualified tuition program for the benefit of the same
beneficiary or a member of the beneficiary's family; (2) under
certain circumstances, a Roth IRA for the benefit of the same
beneficiary; and (3) for rollovers completed before January 1,
2026, an ABLE account for the same beneficiary or a member of
the beneficiary's family.\132\ In the case of ABLE rollovers,
the rolled-over amounts count toward the overall limitation on
amounts that may be contributed to an ABLE account within a
taxable year.\133\ To the extent that the rolled-over amount,
when added to all other amounts contributed to the ABLE account
in the taxable year, exceeds the inflation-indexed $10,000
amount under section 2503(b), the rolled-over amount is
includible in the gross income of the qualified tuition program
beneficiary in the manner provided by section 72.\134\
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\132\Sec. 529(c)(3)(C) and (E). For these purposes, a member of the
family means, with respect to any beneficiary, the beneficiary's: (1)
spouse, (2) child or descendant of a child, (3) brother, sister,
stepbrother, or stepsister, (4) father, mother, or ancestor of either,
(5) stepfather or stepmother, (6) niece or nephew, (7) aunt or uncle,
or (8) in-law. Also included are (9) the spouse of any individual
described in (2)-(8), and (10) any first cousin of the beneficiary.
Sec. 529(e)(2).
\133\Sec. 529A(b)(2)(B).
\134\Sec. 529(c)(3)(A).
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REASONS FOR CHANGE

Many families start saving in qualified tuition program
accounts before an individual's disability is diagnosed. If the
individual is later found to have a qualifying disability, the
qualified tuition program may no longer serve the needs of the
individual. The Committee believes that families should
permanently have the flexibility to transfer, without tax,
amounts save in a qualified tuition program account to an ABLE
account for the same or another member of the family.

EXPLANATION OF PROVISION

The provision makes permanent the temporary provision that
allows nontaxable rollovers from qualified tuition program to
ABLE accounts, provided that (i) the rollover is completed
within 60 days, (ii) the ABLE account beneficiary is either the
qualified tuition program beneficiary or a member of the
latter's family,\135\ and (iii) the rolled-over amount does
not, when added to all other contributions to the ABLE account
in the taxable year, exceed the inflation-indexed $10,000
amount under section 2503(b) (with an additional year of
inflation adjustment as provided by section 110015 of the
bill).
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\135\See sec. 529(e)(2).
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EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Treatment of Certain Individuals Performing Services in
the Sinai Peninsula and Enhancement to Include Additional Areas (sec.
110018 of the bill)

PRESENT LAW

Members of the Armed Forces serving in a combat zone are
afforded a number of tax benefits. These include:
1. An exclusion from gross income of certain military pay
received for any month during which the member served in a
combat zone or was hospitalized as a result of serving in a
combat zone;\136\
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\136\Sec. 112; see also sec. 3401(a)(1), exempting such income from
wage withholding.
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2. An exemption from taxes on death while serving in a
combat zone or dying as a result of wounds, disease, or injury
incurred while so serving;\137\
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\137\Sec. 692.
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3. Special estate tax rules where death occurs in a combat
zone;\138\
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\138\Sec. 2201.
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4. Special benefits to surviving spouses in the event of a
service member's death or missing status;\139\
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\139\Secs. 2(a)(3) and 6013(f)(1).
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5. An extension of time limits governing the filing of
returns and other rules regarding timely compliance with
Federal income tax rules;\140\ and
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\140\Sec. 7508.
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6. An exclusion from telephone excise taxes.\141\
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\141\Sec. 4253(d).
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Section 11026 of Public Law 115-97 provides that a
qualified hazardous duty area is temporarily treated in the
same manner as a combat zone for purposes of determining
eligibility for the tax benefits available to members of the
Armed Forces listed above.
The Sinai Peninsula of Egypt is identified as a ``qualified
hazardous duty area'' for this purpose. This qualified
hazardous duty area designation applies only during periods in
which a member of the Armed Forces is entitled to special pay
under 37 U.S.C. sec. 310 for duty subject to hostile fire or
imminent danger for services performed in the Sinai Peninsula
of Egypt. The identification of the Sinai Peninsula of Egypt as
a qualified hazardous duty area for this purpose begins June 9,
2015, and includes the portion of the first taxable year ending
after that date, as well as all subsequent taxable years
beginning before January 1, 2026.

REASONS FOR CHANGE

The Committee believes that members of the Armed Forces
should be provided tax relief for their service to the country.
The Committee believes that members of the Armed Forces serving
in the Sinai Peninsula of Egypt, Kenya, Mali, Burkina Faso, and
Chad deserve the same tax benefits provided to members of the
Armed Forces serving in designated combat zones.

EXPLANATION OF PROVISION

The provision amends Public Law 115-97 to permanently treat
a qualified hazardous duty area in the same manner as a combat
zone for purposes of determining eligibility for the certain
tax benefits available to members of the Armed Forces.
The provision also modifies the definition of qualified
hazardous duty area to include (1) the Sinai Peninsula of Egypt
if as of December 22, 2017, any member of the Armed Forces of
the United States is entitled do special pay under 37 U.S.C.
section 310 for duty subject to hostile fire or imminent danger
for services performed in such location and (2) Kenya, Mali,
Burkina Faso, and Chad if as of date of enactment, any member
of the Armed Forces of the United States is entitled to special
pay under 37 U.S.C. section 310 for duty subject to hostile
fire or imminent danger for services performed in such
location.

EFFECTIVE DATE

The provision is effective on January 1, 2026.

Extension of Exclusion From Gross Income of Student Loans Discharged on
Account of Death or Disability (sec. 110019 of the bill and sec. 108 of
the Code)

PRESENT LAW

Gross income generally includes the amount of a taxpayer's
indebtedness that is discharged.
An amount that otherwise would be includible in gross
income as a result of the discharge of a taxpayer's
indebtedness may be excluded from gross income under one of
several exceptions. Under one exception, an individual's gross
income does not include any amount from the forgiveness (in
whole or in part) of the individual's student loan (under the
definition described below) if the forgiveness is made under a
provision of the loan according to which all or a part of the
individual's indebtedness will be discharged if the individual
works for a certain period of time in certain professions for
any of a broad class of employers.\142\
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\142\Sec. 108(f)(1).
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A loan is a student loan in respect of which the exclusion
is allowed if it satisfies the following requirements.\143\ A
loan must be made to an individual to assist the individual in
attending an educational organization that normally maintains a
regular faculty and curriculum and normally has a regularly
enrolled body of students in attendance at the place where its
educational activities are regularly carried on. A loan may
qualify if the proceeds are used for tuition and required fees
or for room and board expenses. The loan must be made by (1)
the United States (or an instrumentality or agency thereof),
(2) a State, territory, or possession of the United States, or
the District of Columbia, or any political subdivision thereof,
(3) a tax-exempt public benefit corporation that controls a
State, county, or municipal hospital and whose employees have
been deemed to be public employees under State law, or (4) an
educational organization that originally received the funds
from which the loan was made from the United States, a State,
territory, or possession of the United States, or the District
of Columbia, or any political subdivision thereof, or a tax-
exempt public benefit corporation. The exclusion from gross
income for the discharge of a loan made by an educational
organization described in the last prong applies only if the
discharge is not on account of services performed for the
organization.\144\
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\143\Sec. 108(f)(2).
\144\Sec. 108(f)(3).
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An individual's gross income also does not include an
amount from the forgiveness of a loan made by an educational
organization (or, in the case of a refinancing loan, an
organization exempt from tax under section 501(a)) out of
private, nongovernmental funds if the proceeds of such loans
are used to pay costs of attendance at an educational
institution or to refinance any outstanding student loans (not
just loans made by educational organizations) and the student
is not employed by the lender organization. In the case of such
loans made or refinanced by educational organizations (or
refinancing loans made by certain tax-exempt organizations),
cancellation of the student loan must be contingent on the
student working in an occupation or area with unmet needs and
such work must be performed for, or under the direction of, a
tax- exempt charitable organization or a governmental entity.
An amount paid by a person other than the taxpayer in
repayment of the taxpayer's indebtedness generally is included
in the taxpayer's gross income. An individual's gross income
does not, however, include any loan repayment amount received
under the National Health Service Corps Loan Repayment Program
(the ``NHSC Loan Repayment Program''), a qualifying State loan
repayment program, or a qualifying State loan repayment or loan
forgiveness program that is intended to provide for the
increased availability of health care services in underserved
or health professional shortage areas (as determined by the
State).\145\
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\145\Sec. 108(f)(4). The NHSC Loan Repayment Program offers loan
repayment to certain health care professionals who provide medical
services for a certain number of years at an approved service site in
an area identified as having a shortage of health care professionals.
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A temporary provision enacted in Public Law 115-97 excluded
from an individual's gross income an otherwise includible
amount from the discharge of a qualifying loan on account of a
student's death or total and permanent disability.\146\ An
amount from the discharge of a loan qualified for this
exclusion if the loan was a (1) a student loan (under the
requirements for student loans described previously) or (2) a
private education loan.\147\ This temporary exclusion applied
to a discharge after December 31, 2017 and before January 1,
2026.
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\146\Pub. L. No. 115-97, sec. 11031(a), December 22, 2017; prior
law sec. 108(f)(5). The provision makes specific reference to those
provisions of the Higher Education Act of 1965 that discharge William
D. Ford Federal Direct Loan Program loans, Federal Family Education
Loan Program loans, and Federal Perkins Loan Program loans in the case
of death and total and permanent disability. See sec. 108(f)(5)(A)(i)
and (ii). The provision also includes a general exclusion for a
discharge on account of the death or total and permanent disability of
the student. See sec. 108(f)(5)(A)(iii).
\147\Sec. 108(f)(5)(B). For this purpose, a private education loan
is defined in section 140(a) of the Consumer Credit Protection Act (15
U.S.C. sec. 1650(a)).
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A more recently enacted temporary provision (included in
the American Rescue Plan Act) expands this earlier temporary
exclusion from gross income for amounts from the discharge of
student loan or private education loan indebtedness.\148\ This
more recent expansion applies to discharges of loans (in whole
or in part) after December 31, 2020 and before January 1, 2026.
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\148\Pub. L. No. 117-2, sec. 9675(a), March 11, 2021; present law
sec. 108(f)(5).
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Under the expanded exclusion, an amount from the discharge
of indebtedness is excluded from gross income irrespective of
whether the discharge is on account of a student's death or
total and permanent disability.
The temporary expanded exclusion not only is allowed
irrespective of whether a discharge is on account of a
student's death or disability; it also is available for
discharges of a broader category of loans than was the earlier
temporary rule for discharges on account of death or
disability. This broader category includes any loan provided
expressly for postsecondary educational expenses, regardless of
whether provided through the educational institution or
directly to the borrower, if the loan was made, insured, or
guaranteed by one of the categories of lenders in respect of
which the permanent exclusion is allowed (described previously
and including, for example, the United States or a State) or by
an eligible educational institution as defined in section 25A,
a category of educational institution that includes nearly all
public, nonprofit, and for-profit postsecondary institutions.

REASONS FOR CHANGE

The Committee believes that the discharge of a student loan
in the case of an individual whose loan was discharged on
account of death or disability of the student should not be a
taxable event.

EXPLANATION OF PROVISION

The provision restores the Public Law 115-97 exclusion from
an individual's gross income for an otherwise includible amount
from the discharge of a qualifying loan on account of a
student's death or total and permanent disability.
As under Public Law 115-97, an amount from the discharge of
a loan qualifies for the provision's exclusion if the loan was
a (1) a student loan (under the section 108(f)(2) requirements
for student loans described previously) or (2) a private
education loan.\149\
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\149\For this purpose, a private education loan is defined in
section 140(a) of the Consumer Credit Protection Act (15 U.S.C. sec.
1650(a)).
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The provision's exclusion from gross income is allowed in
respect of a discharge during a taxable year only if the
taxpayer includes on the tax return for the year the taxpayer's
Social Security number and, if the taxpayer is married, the
Social Security number of the taxpayer's spouse. For this
purpose, the term ``Social Security number'' has the same
meaning as under section 24(h)(7).\150\
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\150\Section 24(h)(7) defines ``Social Security number'' as a
Social Security number issued to an individual by the Social Security
Administration, but only if the number is issued before the due date
for the individual's tax return and is issued to a citizen of the
United States or pursuant to subclause (I) (or that portion of
subclause (III) that relates to subclause (I)) of section
205(c)(2)(B)(i) of the Social Security Act. For purposes of the Social
Security number requirement for an individual and an individual's
spouse, rules similar to the marital rules of section 32(d) apply.
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The provision treats the omission of a correct, required
Social Security number as a mathematical or clerical error for
purposes of section 6213.

EFFECTIVE DATE

The provision is effective for discharges after December
31, 2025.

PART II--ADDITIONAL TAX RELIEF FOR AMERICAN FAMILIES AND WORKERS

No Tax on Tips (sec. 110101 of the bill and secs. 45B, 199A, 3401,
6041, 6050W, 6051, 6213(g) and new sec. 224 of the Code)

PRESENT LAW

Under present law, tips are generally includible in an
individual's gross income\151\ and are subject to Federal
income and Federal employment taxes.
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\151\Treas. Reg. sec. 1.61-2(a).
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Federal income taxation
All tips received by an individual are subject to federal
income taxation including (1) cash tips received directly from
customers,\152\ (2) electronically paid tips from credit and
debit card charge customers, and (3) tips received under a tip-
splitting or tip-pooling arrangement. The value of noncash tips
received, such as tickets, passes or other goods or commodities
that a customer gives the individual are generally also subject
to income taxation. However, service charges that an employer
adds on to a customer's bill and pays to an employee are
treated as wages to the individual, not tips.
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\152\Certain individuals may receive ``indirect'' tips that are
treated as income to those individuals. An indirect tip occurs when an
employee, who normally does not receive tips directly from customers,
receives a tip. For example, bussers, service bartenders, cooks and
salon shampooers.
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The following factors generally determine whether a payment
qualifies as a tip; normally, each of the following must apply:
(1) the payment is made free from compulsion; (2) the customer
has the right to determine the amount of the payment; (3) the
payment isn't subject to negotiation or dictated by employer
policy; and (4) the customer generally has the right to
determine who receives the payment.\153\
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\153\Rev. Rul. 2012-18, 2012-26 I.R.B. 1032; IRS, Publication 531,
Reporting Tip Income, Rev. December 2024.
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Federal employment taxes
Federal employment taxes are imposed on covered wages paid
to employees with respect to employment and include taxes
imposed under the Federal Insurance Contributions Act
(``FICA''), the Federal Unemployment Tax Act (``FUTA''), and
the Federal income tax.\154\ In addition, Tier 1 of the
Railroad Retirement Tax Act (``RRTA'') imposes a tax on
compensation paid to railroad employees and
representatives.\155\
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\154\Secs. 3101, 3111, 3301, and 3401.
\155\Sec. 3221.
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FICA taxes are comprised of two components: the Old-Age,
Survivors, and Disability Insurance (``OASDI'') and Hospital
Insurance (``Medicare''). With respect to OASDI taxes, the
applicable rate is 12.4 percent with half of such rate (6.2
percent) imposed on the employee and the remainder (6.2
percent) imposed on the employer.\156\ The tax is assessed on
covered wages up to the OASDI wage base ($176,100 in 2025).
Generally, the OASDI wage base rises based on increases in the
national average wage index.\157\ With respect to Medicare
taxes, the applicable rate is 2.9 percent with half of such
rate (1.45 percent) imposed on the employee and the remainder
(1.45 percent) imposed on the employer.\158\ The employee
portion of the Medicare tax (not the employer portion) is
increased by an additional tax of 0.9 percent on wages received
in excess of a threshold amount. The threshold amount is
$250,000 in the case of a joint return, $125,000 in the case of
a married individual filing a separate return, and $200,000 in
any other case.
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\156\Secs. 3101(a) and 3111(a).
\157\Sec. 230 of the Social Security Act (42 U.S.C. sec. 430).
\158\Sec. 3101(b)(1) and 3111(b).
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The FICA tax is assessed on covered wages, which is defined
for such tax purposes as all remuneration for ``employment,''
including the cash value of all remuneration (including
benefits and tips) paid in any medium other than cash, with
certain exceptions. The name given to the remuneration for
employment is immaterial. Such wages include salaries, vacation
allowances, bonuses, deferred compensation, commissions, fringe
benefits, and tips. With respect to tips, wages for FICA
purposes includes cash and charge tips of $20 or more received
by an employee in a calendar month. Employees are generally
required to report to their employers the amount of tips
received as further described below.
The term ``employment'' is generally defined for FICA tax
purposes as any service, of whatever nature, performed by an
employee for the person employing him or her, with certain
specific exceptions.
The employee portion of OASDI and Medicare taxes must be
withheld and remitted to the Federal government by the employer
during the quarter, as required by the applicable deposit
rules. The employer is liable for the employee portion of the
OASDI and Medicare taxes, in addition to its own share, whether
or not the employer withholds that amount from the employee's
wages. OASDI and Medicare taxes are generally allocated by
statute among separate trust funds: the OASDI Trust Funds,
Medicare's Hospital Insurance Trust Fund, and the Medicare
Supplementary Trust Fund.
Employee reporting of tips to employers
Employees normally include tips in income when they are
received. However, employees who are required to report cash
tips to their employer in a written statement are treated as
receiving the tips when they provide this statement. For this
purpose, cash tips include tips paid by cash, check, debit card
and credit card.
If an employee receives cash tips of $20 or more in any
calendar month, the employee must report those tips to the
employer in one or more written statements by the tenth of the
month following the month the tips were received.\159\ The
employer reports that tip income to the employee on the
employee's W-2.\160\ Thus, the employee includes those cash
tips in income for the tax year in which he or she provides the
required written statement to the employer. The employer is
required to keep the employee tip reports and is required to
withhold taxes, including both income taxes and the employee's
and employer's share of FICA and Medicare tax on the total
wages paid to the tipped employees as well as the reported tip
income.\161\
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\159\Sec. 6053(a). The statement must include the employee's
signature; the employee's name and address; the month or period the
report covers; and the total of tips received during the month or
period.
\160\Sec. 6051(a); Treas. Reg. sec. 30.6051-1(vi). The employer
reports to the employee ``only such tips as are reported by the
employee to the employer in a written statement furnished to the
employer pursuant to section 6053(a).'' These tips are reported by the
employer in Box 7 of the Form W-2 (Social Security tips), and the Form
W-2 is reported to both the employee and the Internal Revenue Service.
\161\A special rule applies to large food or beverage
establishments (10 or more employees) that must also report ``allocated
tips'' to employees if the tips the employees reported to their
employer were less than 8% of the employer's food and drink sales.
Allocated tips are reported by the employer in box 8 of the Form W-2.
Those allocated tips must also be reported by the employee on his or
her tax return.
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Although noncash tips are not required to be reported to
the employer, the employee is required to report them on his or
her tax return. Any tips that the employee did not report to
the employer, the employee must report separately\162\ to
include as additional wages with his or her tax return. The
employee must also pay the employee share of Social Security
and Medicare tax on those tips.
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\162\On Form 4137, Social Security and Medicare Tax on Unreported
Tip Income.
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Independent contractor and sole proprietor reporting

Under present law, there is no required reporting of
``tips'' to independent contractors or sole proprietors.
However, under present law, there is tax reporting of
certain payments made to vendors and independent contractors
(both to those entities as well as to the IRS) on either a Form
1099-NEC or a Form 1099-K.\163\
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\163\Under secs. 6041(a) or 6050W(a).
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A business that pays at least $600 in a calendar year to an
individual who is not an employee (for example an independent
contractor or freelancer) for services performed by that
individual in the course of that business's trade or business
during that year is generally required to furnish to such
individual (and the IRS) a Form 1099-NEC on or before January
31 of the year following the calendar year for which the return
is required.\164\ The Form 1099-NEC provides the name, address
and phone number of the person required to make the return and
summarizes (provides the aggregate amount) of all nonemployee
compensation the business has paid to such an individual during
that calendar year.
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\164\Sec. 6041(a) and (d). Sec. 6041(e) provides that this section
does not apply to tips with respect to which section 6053(a) applies,
e.g., reporting of tips by employees to employers as described above.
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Payment settlement entities\165\ including third-party
settlement networks (such as VISA, Mastercard, PayPal or
Square) are required to report certain payments made in a
calendar year in settlement of payment card transactions\166\
and third-party network transactions\167\ on a Form 1099-K. The
report must set forth (1) the name, address and TIN of each
participating payee to whom one or more payments in settlement
of reportable payment transactions are made and (2) the gross
amount of the reportable payment transactions\168\ with respect
to each participating payee. Third party settlement
organizations which include payment apps and online
marketplaces are required to report payments on Form 1099-K
when the total amount of payments received for goods or
services through the platform exceeds: $5,000 in 2024, $2,500
in 2025, and $600 in 2026 and later.\169\
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\165\Defined as either a ``merchant acquiring entity'' in the case
of a payment card transaction or a ``third party settlement
organization'' in the case of a third-party network transaction.'' Sec.
6050W(b)(1). A ``merchant acquiring entity'' means the bank or other
organization which has the contractual obligation to make payment to
participating payees in settlement of payment card transactions. Sec.
6050W(b)(2). A ``third party settlement organization'' means the
central organization which has the contractual obligation to make
payment to participating payees of third party network transactions.
See sec. 6050W(b)(3).
\166\A payment card transaction means any transaction in which a
payment card is accepted as payment. Sec. 6050W(c)(2).
\167\A third party-network transaction means any transaction that
involves the establishment of accounts with a central organization by a
substantial number of persons who are unrelated to the organization,
provide goods or services and have agreed to settle transaction
pursuant to such agreement or arrangement. Sec. 6050W(d)(3)(A).
\168\Reportable payment transactions mean any payment card
transaction and any third party network transaction.
\169\However, money received from friends or family as a gift or
repayment for a personal expense are not reported on a Form 1099-K
because such payments are not taxable income.
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FICA Business Tip Credit

The Code\170\ allows certain food and beverage
establishments to elect to claim a business tax credit in an
amount equal to the employer share of FICA taxes paid on tips
in excess of those treated as wages for purposes of meeting the
minimum wage requirements of the Fair Labor Standards Act (the
``FLSA'') as in effect on January 1, 2007 (``FICA tip
credit'').\171\
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\170\Sec. 45B.
\171\As of January 1, 2007, the Federal minimum wage under the FLSA
was $5.15 per hour. In the case of tipped employees, the FLSA provides
that the minimum wage may be reduced to $2.13 per hour (that is, the
employer is only required to pay cash equal to $2.13 per hour) if the
combination of tips and cash income equals the Federal minimum wage.
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The credit applies only with respect to employer FICA tax
paid on tips received from customers in connection with the
providing, delivering, or serving of food or beverages for
consumption if the tipping of employees delivering or serving
food or beverages by customers is customary. No deduction is
allowed to the employer for any amount taken into account in
determining the tip credit. The credit is available whether or
not the employee reports the tips on which the employer FICA
tax is paid.

REASONS FOR CHANGE

The Committee believes that allowing hardworking Americans
to deduct their tips from income tax provides much-needed
financial relief to American workers in traditionally tipped
occupations. By alleviating the tax burden on tipped income,
tipped employees will benefit from enhanced economic security
and exceptional service will be rewarded.

EXPLANATION OF PROVISION

Federal tax deduction for qualified tips

The provision provides a federal income tax deduction (the
``tip deduction'') equal to the qualified tips that an
individual receives during any taxable year that are included
on Form W-2's, 1099-K's or 1099-NECs, or reported by the
taxpayer on Form 4317 (or successor).\172\
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\172\Pursuant to secs. 6041(d)(3), 6041A(e)(3), 6050W(f)(2), or
6051(a)(18).
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``Qualified tips'' are defined as any cash tip received by
an individual in an occupation which traditionally and
customarily received tips (including but not limited to
restaurant servers, bartenders, taxi drivers, rideshare
drivers, food delivery drivers, hairdressers, hairstylists,
hotel bellhops, hotel housekeepers, casino dealers, etc.) on or
before December 31, 2024, as provided by the Secretary. The
list of such occupations is to be published by the Secretary of
the Treasury (or the Secretary's delegate) within 90 days of
enactment. Qualified tips do not include any amount received by
an individual unless: (1) such amount is paid voluntarily
without any consequence in the event of nonpayment, is not the
subject of negotiation, and is determined by the payor; (2) the
trade or business in the course of which the individual
receives such amount is not a specified service trade or
business;\173\ (3) such individual does not receive earned
income\174\ in excess of the dollar amount in effect\175\ for
the calendar year in which the taxable year begins; and (4)
such other requirements as may be established by the Secretary
in regulations or other guidance are satisfied.
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\173\As defined in sec. 199A(d)(2).
\174\Within the meaning of section 32.
\175\As defined in sec. 414(q)(1)(B)(i). For 2025, that amount is
$160,000.
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In the case of qualified tips received by an individual
during any taxable year in the course of any trade or business
of such individual, such qualified tips are taken into account
only to the extent that the gross receipts of the taxpayer from
such trade or business for such taxable year (including such
qualified tips) exceeds the sum of: (1) the cost of goods sold
that are allocable to such receipts, plus (2) other expenses,
losses, or deductions (other than the deduction allowed under
this proposal), which are properly allocable to such receipts.

Non-itemizers may take the tip deduction in addition to the standard
deduction

For individuals who do not elect to itemize their
deductions, the tip deduction is allowed in addition to the
standard deduction.

Social Security number requirement

No tip deduction is allowed under this section with respect
to qualified tips unless the taxpayer includes the Social
Security number (SSN)\176\ of the individual who received such
tips on his or her tax return for the taxable year. If the
individual is married, such tax return must also include the
SSN of such spouse.\177\ An omission of a correct SSN is
treated as a mathematical or clerical error.\178\
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\176\As defined in sec. 24(h)(7).
\177\With respect to the treatment of married individuals for
purposes of this provision, rules similar to section 32(d) apply.
\178\For purposes of section 6213(g)(2) as amended by the preceding
provisions of this legislation . . .
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Exclusion from qualified business income

Any amount\179\ for which a tip deduction is allowable
under this provision is excluded from being considered
qualified business income.\180\
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\179\Under sec. 6050W(a).
\180\For purposes of the deduction under section 199A.
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Reporting requirements

Tip deductions to employees are only allowed for qualified
tips reported by the employer on Form W-2.\181\ With respect to
returns related to wages reported to the Secretary and the
employee,\182\ the total amount of tips reported by the
employee to the employer is provided.\183\
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\181\Under sec. 6051(a), as amended by the preceding provisions of
this Act and is further amended to provide this requirement.
\182\Under section 6051(a).
\183\Under section 6053(a).
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Independent contractors and sole proprietors are only
eligible for the tip deduction in the following situations: (1)
with respect to returns for payments made in the course of a
trade or business reported to the Secretary\184\ and the
payee,\185\ in the case of compensation to non-employees, there
is a separate accounting of the portion of payments that have
been properly designated as tips and whether such tips are
received in an occupation which traditionally and customarily
tips is noted;\186\ (2) with respect to returns for payments
made for services and direct sales reported to the
Secretary\187\ and the payee,\188\ there is a separate
accounting of the portion of payments that have been properly
designated as tips and whether such tips are received in an
occupation which traditionally and customarily tips is
noted;\189\ and (3) with respect to returns and payments
relating to third party settlement organizations reported to
the Secretary\190\ and the payee,\191\ there is a separate
accounting of the portion of the reportable payment
transactions that have been properly designated by payors as
tips and whether such tips are received in an occupation which
traditionally and customarily tips is noted.\192\
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\184\Under section 6041(a).
\185\Under section 6041(d).
\186\As described in section 224(c)(1).
\187\Under sec. 6041A(a).
\188\Under sec. 6041A(e).
\189\As described in sec. 224(c)(1).
\190\Under sec. 6050W(a).
\191\Under sec. 6050W(f)(2).
\192\As described in sec. 224(c)(1).
---------------------------------------------------------------------------

Withholding tables and procedures to be updated

Withholding tables and procedures, with respect to Federal
individual income taxes, is to be updated to account for the
tip deduction.

Regulations

The Secretary has the authority to prescribe such
regulations or other guidance as may be necessary to prevent
reclassification of income as qualified tips, including
regulations or other guidance to prevent abuse of the tip
deduction.

Sunset of tip deduction

No tip deduction is allowed under this section for any
taxable year beginning after December 31, 2028.

Extension of tip credit to beauty service business

The provision extends the FICA tip credit to certain beauty
services.
The provision extends the FICA tip credit to tips received
from customers or clients by an employee in connection with
providing beauty services for which tipping is customary.
``Beauty services'' are defined to include barbering, hair
care, nail care, esthetics, and body and spa treatments. The
minimum wage limitation is revised with respect to beauty
services to reference the minimum wage rate applicable under
the FLSA for that month (rather than the rate applicable as of
January 1, 2007).

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2024.

No Tax on Overtime (sec. 110102 of the bill and secs. 3402, 6051,
6213(g) and new sec. 225 of the Code)

PRESENT LAW

Under present law, overtime is generally includible in an
individual's gross income\193\ and is subject to Federal income
and Federal employment taxes.
---------------------------------------------------------------------------
\193\Treas. Reg. sec. 1.61-2(a). Overtime is reported in Box 1 of
the Form W-2.
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Federal Labor Standards Act of 1938

The Federal Labor Standards Act of 1938 (``FLSA'' or the
``Act'')\194\ provides for the payment of overtime pay.\195\
---------------------------------------------------------------------------
\194\Pub. L. No. 75-718, June 25, 1938.
\195\29 U.S.C. sec. 207(a).
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Overtime under FLSA

Under present law, employers generally must pay covered,
non-exempt employees at least one-and-a half times their
``regular rate'' of pay for hours worked over 40 hours a week
at a given job (``overtime compensation'').\196\
---------------------------------------------------------------------------
\196\Congressional Research Service, The Fair Labor Standards Act
(FLSA): An Overview, updated March 8, 2023, available at https://
crsreports.congress.gov. 29 U.S.C. sec. 207(o) provides that an
employee of a public agency which is a State, a political subdivision
of a state or an interstate governmental agency may receive, in lieu of
overtime compensation, compensatory time off.
---------------------------------------------------------------------------

Regular rate of pay

The amount of overtime pay is based on the employee's
regular rate of pay and the number of hours worked in a
workweek. Because earnings may be determined on a piece-rate,
salary, commission, or some other basis and the FLSA does not
provide for how work hours are scheduled,\197\ the
determination of the regular rate of pay is based upon the
actual facts of the individual's job and work schedule (as well
as certain other rules) and is calculated by dividing the total
pay for employment (except for certain statutory exclusions
such as the premium portion of overtime compensation) in any
workweek by the total number of hours actually worked.
---------------------------------------------------------------------------
\197\Wage and Hour Division, Department of Labor, ``Fact Sheet #23:
Overtime Pay Requirements of the FLSA,'' revised October 2019. An
employee's workweek is a fixed and regularly recurring period of 168
hours, seven consecutive 24-hour periods. Different workweeks may be
established for different employees or groups of employees.
---------------------------------------------------------------------------
The regular rate of pay includes all remuneration for
employment, except certain payments excluded by the Act.\198\
---------------------------------------------------------------------------
\198\29 U.S.C. sec. 207(e). For example, expenses incurred on the
employer's behalf such as traveling expenses, discretionary bonuses,
gifts and payments in the nature of gifts on special occasions, premium
payments for overtime work, extra compensation provided by a premium
rate for work by the employee on Saturdays, Sundays, and holidays,
contributions irrevocably made by an employer for providing old-age,
retirement, life, accident or health insurance or similar benefits to
employees, payments made to a bona fide profit sharing or thrift or
savings plan, and payments for occasional periods when no work is
performed due to vacation, holidays or illness.
---------------------------------------------------------------------------

Covered employees

The FLSA covers employees and enterprises engaged in
interstate commerce. The FLSA covers most, but not all, private
and public sector employees.\199\
---------------------------------------------------------------------------
\199\29 U.S.C. sec. 203(e).
---------------------------------------------------------------------------

Exemptions

There are a number of exemptions from the overtime
requirements, including a broad exemption for executive,
administrative, professional, computer and outside sales
employees that narrows the individuals who are eligible to
receive overtime compensation.\200\
---------------------------------------------------------------------------
\200\29 U.S.C. sec. 213(a)(1).
---------------------------------------------------------------------------

Tip credit under FLSA and impact on overtime

Under the FLSA, an employer must pay a tipped worker a
minimum cash wage of $2.13 if the employee receives at least
$5.12 an hour in tips (for a total wage of $7.25).\201\
Employers may claim up to $5.12 in tips as a tip credit. The
additional amount may not exceed the value of the tips actually
received by an employee and the employer must provide notice to
the employee of the tip credit provision before applying the
tip credit.\202\ All tips received by such employee must be
retained by the employee except the provision does not prohibit
the pooling of tips among employees who customarily and
regularly receive tips. However, if a tipped employee receives
less than $5.12 an hour in tips, the employer must make up the
difference with a higher cash wage.
---------------------------------------------------------------------------
\201\29 U.S.C. sec. 203(m)(2).
\202\The notice must include the amount of the cash wage the
employer is paying the tipped employee, the additional amount claimed
by the employer as a tip credit, provide that the tip credit claimed by
the employer cannot exceed the amount of tips actually received by the
tipped employee, that all tips received by the tipped employee are to
be retained by the employee except for a valid tip pooling arrangement
limited to employees who customarily and regularly receive tips, and
that the tipped employee must have been provided this notice.
---------------------------------------------------------------------------
An employer can use the tip credit towards meeting the
overtime requirements as well.

Recordkeeping

Every covered employer must keep certain records for each
non-exempt employee. FLSA does not require a particular form
for such records but does require that the records include
certain identifying information about the employee and data
about the hours worked and the wages earned.\203\ Among other
information included in such records is the employee's full
name and Social Security number, the time and day of week when
the employee's workweek begins, hours worked each day, total
hours worked each workweek, the basis on which the employee's
wages are paid, the regular hourly pay rate, and total premium
pay for overtime hours for the workweek.\204\
---------------------------------------------------------------------------
\203\29 C.F.R. Part 516.
\204\29 C.F.R. Part 516.2.
---------------------------------------------------------------------------
Each employer is required to retain payroll records,
collective bargaining agreements, and sales and purchase
records for at least three years.\205\ Records on which wage
computations are based are retained for two years, including
time cards and piece work tickets, wage rate tables, work and
time schedules and records of additions to or deductions from
wages.\206\
---------------------------------------------------------------------------
\205\29 C.F.R. Part 516.5.
\206\29 C.F.R. Part 516.6.
---------------------------------------------------------------------------
Employers are also required to keep detailed records of
tips.\207\
---------------------------------------------------------------------------
\207\29 C.F.R. Part 515.28.
---------------------------------------------------------------------------
These records must be open for inspection by the Wage and
Hour Division of the Department of Labor, who may ask the
employer to make extensions, computations or
transcriptions.\208\
---------------------------------------------------------------------------
\208\Wage and Hour Division, Department of Labor, ``Fact Sheet #21:
Recordkeeping Requirements under the Fair Labor Standards Act,''
revised July 2008.
---------------------------------------------------------------------------

Income taxation

All overtime received by an individual is subject to
federal income taxation and is currently reported in Box 1 of
the W-2. An employer reports overtime compensation as part of
all other taxable wages, tips, and other compensation paid to
the employee during the year. Currently, there is no separate
reporting of overtime compensation for tax reporting purposes
on either the Form W-2 or on the Form 1040.

Employment taxes

For a general description of employment taxes, see Subtitle
A, Part 2, section 110101 of this document, ``No tax on tips.''

Tax reporting

Under present law, there are no special rules for reporting
overtime compensation for purposes of income taxation or
employment tax reporting.

REASONS FOR CHANGE

The Committee believes that allowing hardworking Americans
to deduct overtime compensation from income taxation encourages
people to work more hours, boosting the economy and increasing
individual earnings, rewarding those who work extra hours, and
providing much-needed tax relief to those who contribute more
to the economy.

EXPLANATION OF PROVISION

Federal tax deduction for qualified overtime compensation

The provision provides a federal income tax deduction (the
``overtime deduction'') equal to the qualified overtime
compensation that an individual receives during the taxable
year. Amounts excluded from the overtime deduction include (1)
any qualified tips\209\ and (2) any amount received by an
individual during a taxable year if such individual is a highly
compensated employee\210\ of any employer for the calendar year
in which the taxable year begins, or receives earned income in
excess of the dollar amount in effect\211\ for such calendar
year.
---------------------------------------------------------------------------
\209\As defined in sec. 224(c).
\210\As defined in sec. 414(q)(1).
\211\As defined in sec. 414(q)(1)(B)(i). For 2025, that amount is
$160,000.
---------------------------------------------------------------------------
``Qualified overtime compensation'' means overtime
compensation paid to an individual required under section seven
of the FLSA that is in excess of the regular rate (as used in
that section) at which such individual is employed. Such term
does not include any qualified tips as defined in section
110101 of this bill, ``No tax on tips.''\212\ As a result,
there is no double tax benefit provided to qualified tips for
which a deduction is permitted under that section and then used
to determine qualified overtime compensation for purposes of
calculating the overtime deduction under this section of the
bill.
---------------------------------------------------------------------------
\212\Subtitle A, Part 2, section 110101.
---------------------------------------------------------------------------

Non-itemizers may take the overtime deduction in addition to the
standard deduction

For individuals who do not elect to itemize their
deductions, the overtime deduction is allowed in addition to
the standard deduction.

Social Security number requirement

No overtime deduction is allowed under this section with
respect to qualified overtime compensation unless the taxpayer
includes the Social Security number\213\ of the individual who
received such qualified overtime compensation on his or her tax
return for the taxable year. If the individual is married, such
tax return must also include the Social Security number of such
spouse.\214\ An omission of a correct Social Security number
(relating to the qualified overtime deduction) to be included
on a return is treated as a mathematical or clerical
error.\215\
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\213\As defined in sec. 24(h)(7).
\214\With respect to the treatment of married individuals for
purposes of this provision, rules similar to section 32(d) apply.
\215\For purposes of sec. 6213(g)(2).
---------------------------------------------------------------------------

Reporting requirements

Overtime deductions to employees are only allowed for
qualified overtime compensation if the total amount of
qualified overtime compensation is reported separately on the
Form W-2.\216\
---------------------------------------------------------------------------
\216\Under sec. 6051(a) as amended by the preceding provisions of
this Act and further amended to provide this requirement.
---------------------------------------------------------------------------

Withholding tables and procedures to be updated

Withholding tables and procedures, with respect to Federal
individual income taxes, must be updated to account for the
overtime deduction.

Regulations

The Secretary has the authority to prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this provision.

Sunset of overtime deduction

No overtime deduction is allowed under this section for any
taxable year beginning after December 31, 2028.

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2024.

Enhanced Deduction for Seniors (sec. 110103 of the bill and sec. 63 of
the Code)

PRESENT LAW

An individual who does not elect to itemize deductions
reduces adjusted gross income (``AGI'') by the amount of the
applicable standard deduction in arriving at taxable income.
The standard deduction is the sum of the basic standard
deduction and, if applicable, the additional standard
deduction.\217\ The basic standard deduction varies depending
upon a taxpayer's filing status. For taxable years beginning in
2025, the amount of the basic standard deduction is $15,000 for
an unmarried individual (other than a head of household or a
surviving spouse) and a married individual filing a separate
return,\218\ $22,500 for a head of household, and $30,000 for
married individuals filing a joint return and a surviving
spouse.\219\
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\217\Sec. 63(c)(1).
\218\In the case of a married individual filing a separate return
where either spouse itemizes deductions, the standard deduction is
zero. Sec. 63(c)(6).
\219\Rev. Proc. 2024-40, 2024-45 I.R.B. 1100, November 4, 2024.
---------------------------------------------------------------------------
An additional standard deduction is allowed to an
individual who has attained age 65 before the close of the
taxable year or is blind at the close of the taxable year.\220\
For 2025, the additional amount is $1,600 for a married
taxpayer (for each spouse meeting the applicable criteria in
the case of a joint return) and a surviving spouse. The
additional amount for a single individual and head of household
is $2,000. An individual who is both blind and has attained age
65 is entitled to two additional standard deductions, for a
total additional amount (for 2025) of $3,200 or $4,000, as
applicable.
---------------------------------------------------------------------------
\220\Sec. 63(f).
---------------------------------------------------------------------------
In the case of a dependent for whom a deduction for a
personal exemption\221\ is allowable to another taxpayer, the
standard deduction may not exceed the greater of (i) $1,350 (in
2025) or (ii) the sum of $450 (in 2025) plus the dependent's
earned income.\222\ The standard deduction for an estate or
trust is zero.\223\ The amounts of the basic and additional
standard deduction are indexed annually for inflation.\224\
---------------------------------------------------------------------------
\221\For taxable years beginning in 2018 through 2025, the personal
exemption amount is reduced to zero. Sec. 151(d)(5). This reduction is
not taken into account in determining the limitation on the standard
deduction for dependents. See sec. 151(d)(5).
\222\Sec. 63(c)(5).
\223\Sec. 63(f).
\224\Sec. 63(c)(4) and (c)(7)(B).
---------------------------------------------------------------------------
Public law 115-97 temporarily increases the basic standard
deduction for tax years beginning after December 31, 2017, and
before January 1, 2026. Under present law, relative to taxable
years beginning in 2025, the standard deduction will decrease
for taxable years beginning in 2026, with the amount of the
basic standard deduction being $8,300 for an unmarried
individual (other than a head of household or a surviving
spouse) and a married individual filing a separate return,\225\
$12,150 for a head of household, and $16,600 for married
individuals filing a joint return and a surviving spouse.\226\
The additional standard deduction was not modified by Public
Law 115-97.
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\225\In the case of a married individual filing a separate return
where either spouse itemizes deductions, the standard deduction is
zero. Sec. 63(c)(6).
\226\Joint Committee on Taxation staff projections.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the tax burden on low- and
middle-income seniors is too high. Providing an income-targeted
additional deduction for seniors, regardless of whether they
take the standard deduction or itemize deductions, will help to
ease the tax burden on seniors. The Committee believes this
benefit should also be targeted to taxpayers with work-
authorized Social Security numbers.

EXPLANATION OF PROVISION

The provision creates a deduction for a bonus additional
amount for all individuals who have attained age 65 (for each
spouse meeting the applicable criteria in the case of a joint
return) for taxable years beginning after December 31, 2024,
and before January 1, 2029. This additional amount is $4,000
per individual, the ``senior bonus amount.'' The senior bonus
amount phases out for taxpayers with income over a threshold
amount of $150,000 for taxpayers filing jointly and $75,000 for
all other taxpayers. The senior bonus amount is reduced by four
percent of modified AGI in excess of the applicable threshold
amount. For purposes of this limitation, modified AGI means AGI
increased by any amount excluded from gross income under
section 911 (foreign earned income exclusion), 931 (exclusion
of income for a bona fide resident of American Samoa), or 933
(exclusion of income for a bona fide resident of Puerto Rico).
The deduction for the senior bonus amount is allowed to
taxpayers who claim the standard deduction and to taxpayers who
elect to itemize deductions. The senior bonus amount is not
indexed for inflation.
Under the provision, the Social Security number (``SSN'')
of the taxpayer and the taxpayer's spouse (if married filing
jointly) must appear on the return.\227\ The SSN for each
individual must be issued before the due date of the return.
Each SSN also must be issued to a citizen or national of the
United States or pursuant to a provision of the Social Security
Act relating to the lawful admission for employment in the
United States.\228\
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\227\With respect to the treatment of married individuals for
purposes of this provision, rules similar to section 32(d) apply.
\228\See sec. 205(c)(2)(B)(i)(I) (or that portion of subclause
(III) that relates to subclause (I)) of the Social Security Act.
---------------------------------------------------------------------------
The provision treats the omission of a correct, required
SSN as a mathematical or clerical error for purposes of section
6213.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2024.

No Tax on Car Loan Interest (sec. 110104 of the bill and secs. 62 and
163 and new sec. 6050AA of the Code)

PRESENT LAW

A deduction is allowed for interest paid or accrued on
indebtedness.\229\ For a taxpayer other than a corporation,
however, no deduction is allowed for personal interest.\230\
For this purpose, personal interest means any interest for
which a deduction is allowable under chapter 1 of subtitle A of
the Code other than several kinds of specified interest
including, for example, qualified residence interest (interest
paid or accrued on indebtedness incurred in purchasing or
improving the taxpayer's principal residence).\231\
---------------------------------------------------------------------------
\229\Sec. 163(a).
\230\Sec. 163(h)(1).
\231\Sec. 163(h)(2).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that a deduction for interest
payments on indebtedness incurred to buy personal-use passenger
vehicles that are assembled in the United States will ease the
financial burden of car ownership for working and growing
families and will improve the economy for American workers by
promoting domestic manufacturing.

EXPLANATION OF PROVISION

For taxable years beginning in 2025, 2026, 2027, and 2028,
the provision excludes from the definition of personal interest
qualified passenger vehicle loan interest. As a consequence,
unless another rule disallows a deduction, for taxable years
2025 through 2028 a deduction is allowed for qualified
passenger vehicle loan interest.

Qualified passenger vehicle loan interest

For purposes of this rule, qualified passenger vehicle loan
interest means any interest that is paid or accrued during the
taxable year on indebtedness incurred by the taxpayer after
December 31, 2024 for the purchase of, and that is secured by a
first lien on, an applicable passenger vehicle for personal use
(referred to below as ``auto acquisition indebtedness'').
Qualified passenger vehicle loan interest does not
include--
1. A loan to finance fleet sales,
2. A personal cash loan secured by a vehicle previously
purchased by the taxpayer,
3. A loan incurred for the purchase of a commercial vehicle
that is not used for personal purposes,
4. Any lease financing,
5. A loan to finance the purchase of vehicle with a salvage
title, or
6. A loan to finance the purchase of a vehicle intended to
be used for scrap or parts.
The provision limits the amount of interest that a taxpayer
may take into account in a taxable year as qualified passenger
vehicle loan interest to $10,000.
The provision reduces the amount that is otherwise
allowable as a deduction for qualified passenger vehicle loan
interest (after taking into account the $10,000 limitation) by
20 percent of the amount by which a taxpayer's modified
adjusted gross income (``modified AGI'') exceeds $100,000 (or,
in the case of married individuals filing a joint return,
$200,000). Accordingly, for a taxpayer with an otherwise
allowable deduction of $10,000, the deduction is fully
eliminated when modified AGI is at least $150,000 ($250,000 in
the case of a joint return). For purposes of this income-based
phaseout, modified AGI is adjusted gross income determined
after application of sections 86, 135, 137, 219, 221, and 469
(other Code provisions that require determination of modified
AGI) and without regard to the provision and the exclusions
under sections 911, 931, and 933.\232\
---------------------------------------------------------------------------
\232\The provision makes conforming changes to the definitions of
modified AGI in these other sections.
---------------------------------------------------------------------------
For purposes of the exclusion from personal interest for
qualified passenger vehicle loan interest, an applicable
passenger vehicle is any vehicle that is manufactured primarily
for use on public streets, roads, and highways; that has at
least two wheels; and that is a car, minivan, van, sport
utility vehicle, pickup truck, or motorcycle. An all-terrain
vehicle designed for use on land is also an applicable
passenger vehicle. For this purpose an all-terrain vehicle is
defined as any motorized vehicle that has three or four wheels,
a seat designed to be straddled by the operator, and handlebars
for steering control, An applicable passenger vehicle also
includes any trailer, camper, or vehicle (designed for use on
land) that is designed to provide temporary living quarters for
recreational, camping, or seasonal use and that is a motor
vehicle or is designed to be towed by, or affixed to, a motor
vehicle.
A vehicle is an applicable passenger vehicle only if the
vehicle's final assembly occurs in the United States.
For purposes of the U.S. final assembly requirement, final
assembly is the process by which a manufacturer produces a
vehicle at, or through the use of, a plant, factory, or other
place from which the vehicle is delivered to a dealer or
importer with all component parts necessary for the mechanical
operation of the vehicle included with the vehicle, whether or
not the component parts are permanently installed in or on the
vehicle.
Interest on indebtedness may be considered qualified
passenger vehicle loan interest if the indebtedness is incurred
to refinance acquisition indebtedness, but only to the extent
that the amount of this refinancing indebtedness does not
exceed the amount of the acquisition indebtedness and only if
the refinancing indebtedness is secured by a first lien on the
applicable passenger vehicle with respect to which the
acquisition indebtedness was incurred.
Indebtedness that is owed to a person related to the
taxpayer within the meaning of section 267(b) or 707(b)(1) is
not qualified passenger vehicle loan interest.
The deduction for qualified passenger vehicle loan interest
is allowed in determining a taxpayer's adjusted gross income,
with the consequence that the deduction is allowable to a
taxpayer who does not elect to itemize deductions.
The deduction for qualified passenger vehicle loan interest
is allowed for purposes of the alternative minimum tax.

REPORTING

The provision provides a new reporting requirement (in new
section 6050AA) for interest received on a specified passenger
vehicle loan. Any person who is engaged in a trade or business
and who receives in the course of that trade or business from
any individual at least $600 in a calendar year on a specified
passenger vehicle loan must, by a deadline to be prescribed by
the Secretary, make a return for each individual from whom the
interest was received.
The prescribed return must contain the following
information:
1. the name and address of the individual from whom the
interest was received,
2. the amount of the interest received for the calendar
year,
3. the amount of outstanding principal on the specified
passenger vehicle loan at the beginning of the calendar year.
4. the date of the origination of the loan,
5. the year, make, and model of the applicable passenger
vehicle that secures the loan (or another description of the
vehicle as the Secretary may prescribe), and
6. any other information that the Secretary may prescribe.
A person that is required to make a return under this rule
must furnish to each individual whose name is required to be
set forth on that return a written statement that includes (1)
the name, address, and phone number of the information contact
of the person required to make the return, and (2) the
information described in items 2 through 6 above. This written
statement must be furnished by January 31 of the year following
the calendar year for which the corresponding return was
required to be made.
A specified passenger vehicle loan is the indebtedness with
respect to which qualified passenger vehicle loan interest
(described previously) is paid or accrued.

EFFECTIVE DATE

The provision is effective for indebtedness incurred after
December 31, 2024.

Enhancement of Employer-Provided Child Care Credit (sec. 110105 of the
bill and sec. 45F of the Code)

PRESENT LAW

In general

Taxpayers may claim a general business credit for certain
expenses associated with providing child care for their
employees. The amount of the credit is equal to 25 percent of
qualified child care expenditures and 10 percent of qualified
child care resource and referral expenditures for the taxable
year.\233\ The maximum total credit that may be claimed by a
taxpayer cannot exceed $150,000 per taxable year.\234\
---------------------------------------------------------------------------
\233\Sec. 45F(a).
\234\Sec. 45F(b).
---------------------------------------------------------------------------
Qualified child care expenditures include costs paid or
incurred: (1) to acquire, construct, rehabilitate, or expand
property that is to be used as part of the taxpayer's qualified
child care facility (``qualified construction
expenditures'');\235\ (2) for the operation of the taxpayer's
qualified child care facility, including the costs of training
and certain compensation for employees of the child care
facility, and scholarship programs; or (3) under a contract
with a qualified child care facility to provide child care
services to employees of the taxpayer.\236\ Qualified child
care expenditures do not include expenses in excess of the fair
market value of providing child care.\237\
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\235\The property must be subject to depreciation or amortization
and must not be part of the principal residence (within the meaning of
section 121) of the taxpayer or any employee of the taxpayer.
\236\Sec. 45F(c)(1)(A).
\237\Sec. 45F(c)(1)(B).
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A qualified child care facility is a facility with the
principal use of providing child care assistance that meets all
applicable State and local laws and regulations, including any
licensing laws.\238\ A facility is not treated as a qualified
child care facility with respect to a taxpayer unless: (1) its
enrollment is open to the employees of the taxpayer; (2) at
least 30 percent of the children enrolled in the center are
dependents of the taxpayer's employees, if the facility is the
principal trade or business of the taxpayer; and (3) use of the
facility (or eligibility to use such facility) does not
discriminate in favor of highly compensated employees of the
taxpayer (within the meaning of section 414(q)).\239\
---------------------------------------------------------------------------
\238\Sec. 45F(c)(2)(A). If the facility is the principal residence
(within the meaning of section 121) of the operator of the facility, it
does not satisfy the ``principal use of providing child care
assistance'' requirement.
\239\Sec. 45F(c)(2)(B).
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Qualified child care resource and referral expenditures are
amounts paid or incurred under a contract to provide child care
resource and referral services to an employee of the
taxpayer.\240\ These services must be provided (or be eligible
for use) in a way that does not discriminate in favor of highly
compensated employees of the taxpayer (within the meaning of
section 414(q)).\241\
---------------------------------------------------------------------------
\240\Sec. 45F(c)(3)(A).
\241\Sec. 45F(c)(3)(B).
---------------------------------------------------------------------------

Denial of double benefit and recapture

No deduction or credit is allowed with respect to the
amount of credit claimed for qualified child care expenditures
and qualified child care resource and referral
expenditures.\242\ Additionally, if the credit is taken with
respect to qualified construction expenditures, the taxpayer's
basis in the property acquired, constructed, rehabilitated, or
expanded is reduced by the amount of the credit attributable to
such expenditures.\243\
---------------------------------------------------------------------------
\242\Sec. 45F(f)(2).
\243\Sec. 45F(f)(1)(A).
---------------------------------------------------------------------------
A credit claimed with respect to qualified construction
expenditures is subject to recapture for the first ten years
after the qualified child care facility is placed in service.
Under the recapture provision, a percentage of the credit
claimed with respect to qualified construction expenditures is
treated as an increase in tax liability in the year of
recapture.\244\ The recapture percentage is reduced over the
10-year recapture period:\245\
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\244\Sec. 45F(d)(1).
\245\Sec. 45F(d)(2).

------------------------------------------------------------------------
The applicable recapture
If the recapture event occurs in: percentage is:
------------------------------------------------------------------------
Years 1-3..................................... 100
Year 4........................................ 85
Year 5........................................ 70
Year 6........................................ 55
Year 7........................................ 40
Year 8........................................ 25
Years 9 and 10................................ 10
Years 11 and thereafter....................... 0
------------------------------------------------------------------------

A recapture event occurs if the taxpayer either (1) ceases
operation of the qualified child care facility or (2) transfers
its interest in the qualified child care facility without
securing an agreement to assume recapture liability for the
transferee.\246\ The recapture tax is not treated as a tax for
purposes of determining the amount of other income tax credits
or for determining the amount of the alternative minimum
tax.\247\ Only a credit that previously reduced tax liability
may result in an increase in tax liability under the recapture
rule; if the credit resulted in a carryforward or carryback,
the recapture instead causes an adjustment of the carryforward
or carryback.\248\
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\246\Sec. 45F(d)(3). Cessation of operations due to a casualty loss
is not a recapture event to the extent that the loss is restored by
reconstruction or replacement of the facility within a reasonable
period established by the Secretary. Sec. 45F(d)(4)(C).
\247\Sec. 45F(d)(4)(B).
\248\Sec. 45F(d)(4)(A). The carryforward and carryback rules for
the general business credit are provided in section 39.
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Any increase in tax liability or adjustment of carryforward
or carrybacks is treated as an increase in basis immediately
before the event giving rise to the recapture.\249\ Thus, the
taxpayer is not subject to both a reduction of basis and
recapture, and may use the increase in basis to offset any gain
on disposition of the facility (if applicable).
---------------------------------------------------------------------------
\249\Sec. 45F(f)(1)(B).
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Special rules

All persons treated as a single employer under sections
52(a) and (b) are treated as single taxpayer for purposes of
the credit.\250\ There are guidelines that govern the
allocation of the credit between a trust or estate and the
beneficiaries of such trust or estate, and for the allocation
of the credit among partners in a partnership.\251\
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\250\Sec. 45F(e)(1).
\251\Sec. 45F(e)(2), (3).
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REASONS FOR CHANGE

The Committee believes the employer-provided child care
credit can be a useful tool to improve access to and the
affordability of child care inworking families. Currently, the
relatively low amount of the credit as well as the restrictions
on the use of the credit result in very few taxpayers claiming
the credit each year. The Committee believes expanding the
types of child care options eligible for the credit and
increasing the credit from 40 percent (or 50 percent in the
case of small businesses) as well as raising the overall
limitation on the credit (to $500,000, or $600,000 for small
businesses) will significantly improve the take-up rate of the
credit, and thereby improve the supply of child care options
for individual households.

EXPLANATION OF PROVISION

The provision increases the employer-provided child care
credit to 40 percent of qualified child care expenditures (50
percent for eligible small businesses) in addition to 10
percent of qualified referral expenses allowed under present
law. The total credit limit is increased to $500,000 ($600,000
for small businesses), adjusted for inflation.
The provision provides for a small business gross receipts
test of less than or equal to $25 million (inflation
adjusted)\252\ based on the 5-year period (rather than 3-year
period) preceding the taxable year. In 2025, the small business
gross receipts threshold is $31 million.
---------------------------------------------------------------------------
\252\Sec. 448(c).
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The definition of qualified child care expenditures is
expanded to include amounts paid or incurred under a contract
with a third-party that contracts with one or more qualified
child care facilities to provide child care services. In
addition, the definition of qualified child care facilities is
expanded to allow for qualified child care facilities that are
jointly owned or operated by the taxpayer and other entities or
persons.
The Secretary is directed to issue regulations as
necessary.

EFFECTIVE DATE

The provision is effective for amounts paid or incurred
after December 31, 2025.

Extension and Enhancement of Paid Family and Medical Leave Credit (sec.
110106 of the bill and sec. 45S of the Code)

PRESENT LAW

In general

The Family and Medical Leave Act of 1993, as amended (the
``FMLA''), generally requires employers to provide employees
with up to 26 weeks of leave under certain circumstances.\253\
In general, FMLA does not require that the employer continue to
pay employees during such leave, although employers may choose
to pay for all or a portion of such leave. State and local
governments may provide, or State and local laws may require
employers to provide, employees with up to a certain amount of
paid leave for types of leave that may or may not fall under
the FMLA.
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\253\Pub. L. No. 103-3, February 5, 1993.
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Employer credit for paid family and medical leave

For wages paid in taxable years beginning after December
31, 2017, and before January 1, 2026, ``eligible employers''
may claim a general business credit, under section 45S, equal
to 12.5 percent of the amount of eligible wages (based on the
normal hourly wage rate) paid to ``qualifying employees''
during any period in which such employees are on ``family and
medical leave'' if the rate of payment under the program is 50
percent of the wages normally paid to an employee for actual
services performed for the employer.\254\ The credit is
increased by 0.25 percentage points (but not above 25 percent)
for each percentage point by which the rate of payment exceeds
50 percent. The maximum amount of family and medical leave that
may be taken into account with respect to any qualifying
employee for any taxable year is 12 weeks.
---------------------------------------------------------------------------
\254\Sec. 45S. Wages for this purpose are Federal Unemployment Tax
Act wages defined in section 3306(b), without regard to the dollar
limitation, but do not include amounts taken into account for purposes
of determining any other credit under subpart D of the Code. Sec.
45S(g).
---------------------------------------------------------------------------
An ``eligible employer'' is one which has in place a
written policy that allows all qualifying full-time employees
not less than two weeks of annual paid family and medical
leave, and which allows all less-than-full-time qualifying
employees a commensurate amount of leave (on a pro rata basis)
compared to the leave provided to full-time employees. The
policy must also provide that the rate of payment under the
program is not less than 50 percent of the wages normally paid
to any such employee for services performed for the
employer.\255\
---------------------------------------------------------------------------
\255\Sec. 45S(c).
---------------------------------------------------------------------------
In addition, in order to be an eligible employer, the
employer is prohibited from certain practices or acts which are
also prohibited under the FMLA, regardless of whether the
employer is subject to the FMLA. Specifically, the employer
must provide paid family and medical leave in compliance with a
written policy that ensures that the employer will not
interfere with, restrain, or deny the exercise of or the
attempt to exercise, any right provided under the policy and
will not discharge or in any other manner discriminate against
any individual for opposing any practice prohibited by the
policy.
A ``qualifying employee'' means any individual who is an
employee under tax rules and principles and is defined in
section 3(e) of the Fair Labor Standards Act of 1938,\256\ as
amended, who has been employed by the employer for one year or
more, and who for the preceding year, had compensation not in
excess of 60 percent of the compensation threshold in such year
for highly compensated employees.\257\ For 2025, this 60
percent amount is $96,000.
---------------------------------------------------------------------------
\256\Pub. L. No. 75-718, June 25, 1938.
\257\Sec. 414(q)(1)(B) ($160,000 for 2025).
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``Family and medical leave'' for purposes of new section
45S is generally defined as leave described under sections
102(a)(1)(A)-(E) or 102(a)(3) of the FMLA.\258\ If an employer
provides paid leave as vacation leave, personal leave, or other
medical or sick leave\259\ (unless the medical or sick leave is
specifically for one or more of the ``family and medical
leave'' purposes defined above), such paid leave would not be
considered to be family and medical leave. In addition, leave
paid for by a State or local government or required by State or
local law (including such leave required to be paid by the
employer) is not taken into account in determining the amount
of paid family and medical leave provided by the employer that
is eligible for the credit.
---------------------------------------------------------------------------
\258\FMLA section 102(a)(1) provides leave for FMLA purposes due to
(A) the birth of a son or daughter of the employee and in order to care
for such son or daughter; (B) the placement of a son or daughter with
the employee for adoption or foster care; (C) caring for the spouse, or
a son, daughter, or parent, of the employee, if such spouse, son,
daughter, or parent has a serious health condition; (D) a serious
health condition that makes the employee unable to perform the
functions of the employee's position; (E) any qualifying exigency (as
the Secretary of Labor shall, by regulation, determine) arising out of
the fact that the spouse, or a son, daughter, or parent of the employee
is on covered active duty (or has been notified of an impending call or
order to covered active duty) in the Armed Forces. In addition, FMLA
section 102(a)(3) provides leave for FMLA purposes due to the need of
an employee who is a spouse, son, daughter, parent, or next-of-kin of
an eligible service member to care for such service member.
\259\These terms mean these types of leave within the meaning of
FMLA section 102(d)(2).
---------------------------------------------------------------------------
A taxpayer may elect not to have the rules under section
45S apply for a taxable year. All persons treated as a single
employer under sections 52(a) and (b) are treated as a single
taxpayer.\260\ Under IRS guidance, this aggregation rule
applies only for purposes of the taxpayer's election not to
have section 45S apply.\261\
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\260\Sec. 45S(c)(3). Secs. 52(a) and (b) describe controlled groups
of corporations and organizations such as partnerships and
proprietorships under common control.
\261\Notice 2018-71, 2018-41 I.R.B. 548, October 9, 2018, Q&A 33.
---------------------------------------------------------------------------
The Secretary will make determinations as to whether an
employer or an employee satisfies the applicable requirements
for an eligible employer or qualifying employee, based on
information provided by the employer that the Secretary
determines to be necessary or appropriate.

REASONS FOR CHANGE

The Committee believes that paid family and medical leave
is an important benefit for workers and wishes to further
encourage employers to offer this benefit by expanding and
making the credit permanent. The Committee believes that
employers should receive the credit not only for paying wages
to employee who are on leave, but also for purchasing insurance
policies that offer paid family and medical leave. In addition,
The Committee believes that an employer should generally only
receive the paid family and medical leave credit if all
qualifying employees in the employer's controlled group are
eligible for paid family and medical leave.

EXPLANATION OF PROVISION

The provision extends the paid family and medical leave
credit permanently. It also modifies the credit to allow it to
be claimed for an applicable percentage of premiums paid or
incurred by an eligible employer during a taxable year for
insurance policies that provide paid family and medical leave
for qualifying employees. Similar to the applicable percentage
that applies in the case of wages paid to employees who are on
leave, the applicable percentage in the case of an insurance
policy is equal to 12.5 percent if the rate of payment under
the policy is 50 percent of wages normally paid to an employee,
and is increased by 0.25 percentage points (but not above 25
percent) for each percentage point by which the rate of payment
exceeds 50 percent of wages normally paid. The rate of payment
is determined without regard to whether any qualifying
employees were actually on family and medical leave during the
taxable year. Under the provision, the employer elects whether
to claim the credit based on wages paid or on premiums paid.
(Thus, the credit cannot be claimed for both premiums paid on
an insurance policy and wages paid under such insurance
policy).
The provision also includes an aggregation rule that
provides that employers within the same controlled group are
treated as a single employer under section 45S.\262\ Thus, in
order for an employer to qualify for the credit, each member of
the controlled group must have a written policy providing paid
family and medical leave that meets the requirements of section
45S. An exception exists for a person who establishes to the
satisfaction of the Secretary that such person has a
substantial and legitimate business reason for failing to
provide such a written policy. For this purpose, ``substantial
and legitimate business reason'' does not include the operation
of a separate line of business, the rate of wages or category
of jobs for employees (or any similar basis), or the
application of State of local laws relating to family and
medical leave, but it may include the grouping of employees of
a common law employer. However, the provision also modifies the
rule relating to paid leave mandated by a State or local
government to provide that such leave is taken into account in
determining the amount of paid family and medical leave
provided by the employer, except for purposes of determining
the amount of the credit. Thus, an employer that is otherwise
eligible to receive the section 45S credit would not fail to be
eligible merely because another member of the employer's
controlled group provides paid leave under a State or locally
mandated policy.
---------------------------------------------------------------------------
\262\The provision provides that all persons treated a single
employer under section 414(b) and (c) of the Code are treated as a
single employer. This rule modifies the present law aggregation rule in
section 45S(c)(4), which treats members within the same controlled
group as a single taxpayer.
---------------------------------------------------------------------------
Employers are permitted under the provision to treat
employees who have been employed for at least six months as
qualifying employees (assuming the employee otherwise meets the
definition of a qualifying employee). For purposes of the
compensation limit that applies to qualifying employees, the
provision provides that compensation is determined on an
annualized basis, except that it is determined pro rata for
part-time employees. An employee must be customarily employed
for at least 20 hours per week in order to be considered
qualifying.
Under the provision, certain offices of the Small Business
Administration must conduct outreach regarding the paid family
and medical leave credit to relevant parties, including through
targeted communications, education, training, technical
assistance, and the development of a written paid family leave
policy. The provision also directs the Secretary to perform
targeted outreach to employers and other relevant entities
regarding the availability and requirements of the credit,
including providing relevant information as part of IRS
communications that are regularly issued to payroll service
entities, tax professionals, and small businesses.

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2025.

Enhancement of Adoption Credit (sec. 110107 of the bill and sec. 23 of
the Code)

PRESENT LAW

In general

A taxpayer is allowed a nonrefundable income tax credit for
the amount of qualified adoption expenses that the taxpayer
pays or incurs (the ``adoption tax credit'').\263\ The adoption
credit is allowed only to individual taxpayers, not to
partnerships, corporations, or other entities.
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\263\Sec. 23.
---------------------------------------------------------------------------
For an expense paid or incurred before the taxable year in
which an adoption becomes final, the credit is allowed for the
taxable year after the year in which the expense is paid or
incurred.\264\ For an expense paid or incurred in the year in
which an adoption becomes final or in a later year, the credit
is allowed for the year in which the expense is paid or
incurred.\265\
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\264\Sec. 23(a)(2)(A).
\265\Sec. 23(a)(2)(B).
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In 2025 the total amount of qualified adoption expenses
that a taxpayer is permitted to take into account for all
taxable years with respect to the taxpayer's adoption of a
child is $17,280.\266\ A taxpayer's 2025 maximum total $17,280
of qualified adoption expenses is reduced ratably over a
$40,000 income range as the taxpayer's adjusted gross income
increases above $259,190; the adoption tax credit is, as a
consequence, eliminated for a taxpayer with adjusted gross
income of $299,190 or more.\267\
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\266\Sec. 23(b)(1), (h).
\267\Sec. 23(b)(2)(A). For purposes of the income-based reduction
of the adoption tax credit, adjusted gross income is determined without
regard to the foreign earned income exclusion (section 911), the
exclusion for certain income from American Samoa, Guam, or the Northern
Mariana Islands (section 931), and the exclusion for certain income
from Puerto Rico sources (section 933). Sec. 23(b)(2)(B).
---------------------------------------------------------------------------
The maximum amount of qualified adoption expenses that may
be taken into account in determining a taxpayer's credit and
the amount of adjusted gross income at which this maximum
expense amount begins to be reduced are adjusted annually for
inflation.\268\
---------------------------------------------------------------------------
\268\Sec. 23(h).
---------------------------------------------------------------------------

Qualified adoption expenses

Qualified adoption expenses are reasonable and necessary
adoption fees, court costs, attorney fees, and other expenses
that--
are directly related to and have as their
principal purpose a taxpayer's legal adoption of an
eligible child;
are not incurred in violation of State or
Federal law or in carrying out any surrogate parenting
arrangement;
are not expenses in connection with an
individual's adoption of a child who is the child of
the individual's spouse, and
are not reimbursed under an employer program
or otherwise.\269\
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\269\Sec. 23(d)(1). An employee is allowed to exclude from gross
income amounts that the employee's employer pays or incurs for
qualified adoption expenses in connection with the employee's adoption
of a child if the amounts are furnished under an adoption assistance
program. Sec. 137. The maximum amount of qualified adoption expenses
taken into account for purposes of this exclusion, the income-based
reduction in the amount of expenses taken into account, the definition
of qualified adoption expenses, and the rules for special needs
adoptions (described next), are the same as the corresponding rules for
the adoption tax credit. Sec. 137(a)(2), (b), (d), (e), (f).
---------------------------------------------------------------------------
An eligible child is any individual who is younger than age
18 or who is physically or mentally incapable of caring for
himself or herself.\270\
---------------------------------------------------------------------------
\270\Sec. 23(d)(2).
---------------------------------------------------------------------------

Special needs adoption

If a taxpayer adopts a child with special needs, the
taxpayer is treated as having paid during the year in which the
adoption becomes final an amount of qualified adoption expenses
equal to the excess of (1) $17,280 (in 2025) over (2) the
amount of total qualified adoption expenses the taxpayer
actually paid or incurred in respect of the adoption in that
year and all prior years.\271\
---------------------------------------------------------------------------
\271\Sec. 23(a)(3).
---------------------------------------------------------------------------
For example, if a taxpayer's adoption of a child with
special needs becomes final in 2025 and the taxpayer actually
spent a total of $9,000 in qualified adoption expenses related
to the adoption in 2024 (and no other amounts in any other
year), the taxpayer is treated as having paid $8,280 in
qualified adoption expenses in 2025 in addition to the $9,000
of actual expenses taken into account for 2024. Assuming the
taxpayer's adjusted gross income in 2025 does not exceed
$259,190, and assuming the other adoption tax credit
requirements are satisfied, the taxpayer is allowed a
nonrefundable credit of $17,280 in 2025 ($9,000 of actual
expenses plus $8,280 of deemed expenses).
A child with special needs is any child if (1) a State has
determined that the child cannot or should not be returned to
the home of the child's parents, (2) the State has determined
that, because of a specific factor or condition related to the
child (for example, the child's age, ethnic background,
membership in a minority or sibling group, or a medical
condition or physical, mental, or emotional handicap), it is
reasonable to conclude that the child cannot be placed with
adoptive parents without providing adoption assistance, and (3)
the child is a citizen or resident of the United States.\272\
---------------------------------------------------------------------------
\272\Sec. 23(d)(3).
---------------------------------------------------------------------------

Carryforward of unused credit

If the amount of adoption tax credit that is allowable to a
taxpayer for any year exceeds the excess of (1) the taxpayer's
income tax liability (less the amount of the taxpayer's
allowable foreign tax credit, and including any amount of
alternative minimum tax) for that year over (2) the sum of
other nonrefundable income tax credits (other than the section
25D residential clean energy credit) (items (1) and (2)
referred to below as the ``tax liability limitation''), the
excess allowable adoption tax credit is carried to the
succeeding taxable year and is added to the adoption tax credit
otherwise allowable in that year.\273\ No credit may be carried
forward under this rule for more than five years after the year
in which the credit arose.\274\
---------------------------------------------------------------------------
\273\Sec. 23(c)(1).
\274\Sec. 23(c)(2). For purposes of this five-year carryforward
limitation, credits are treated as used on a first-in, first-out basis.
Ibid.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the adoption tax credit serves
an important role in helping adoptive parents afford the high
costs of adoption. Making the credit partly refundable will
give more assistance to individuals and families of modest
means who hope to adopt children.

EXPLANATION OF PROVISION

The provision treats up to $5,000 of the adoption tax
credit as refundable. This $5,000 maximum refundable amount is
indexed for inflation starting in 2026.
The provision limits the maximum amount of the present law
five-year carryforward of the portion of an adoption tax credit
that a taxpayer is not permitted to use because it is exceeds
the taxpayer's tax liability limitation. Under the provision
the maximum amount of an unused adoption tax credit that may be
carried forward is limited to the maximum amount of the
adoption tax credit that is nonrefundable ($12,280 in 2025
(which equals the $17,280 maximum credit minus the $5,000
refundable portion)).

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2024.

Recognizing Indian Tribal Governments for Purposes of Determining
Whether a Child Has Special Needs for Purposes of the Adoption Credit
(sec. 110108 of the bill and sec. 23(d)(3) of the Code)

PRESENT LAW

In general

For a description of the adoption credit, see supra the
description of present law for section 110106, Adoption
expenses credit made partially refundable.

Special needs adoption

Indian tribal government

An Indian tribal government is treated as a State only if
(a) a particular Code section specifically so provides, or (b)
the Code section is listed in section 7871, which treats Indian
tribal governments as States for certain purposes. Neither
section 23 nor section 7871 provides that an Indian tribal
government is to be treated as a State for purposes of the
adoption credit. Thus, a determination by an Indian tribal
government that a child is a child with special needs would not
be sufficient to entitle the adoptive parents to a credit for
an adoption of a child with special needs.

REASONS FOR CHANGE

Present law prevents an Indian tribal government from
determining whether a child has special needs for purposes of
the adoption tax credit. This limitation creates a disparity
between States and Indian tribal governments to the detriment
of special needs children. The Committee believes the law
should be changed to correct this disparity and mitigate the
financial burden of those taxpayers who adopt a child with
special needs, irrespective of which government entity has made
the special need determination.

EXPLANATION OF PROVISION

The provision provides an Indian tribal government the same
authority as a State for purposes of determining a child is a
child with special needs for the adoption credit.

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2024.

Tax Credit for Contributions of Individuals to Scholarship Granting
Organizations (sec. 110109 of the bill and new secs. 25F and 4969 of
the Code)

PRESENT LAW

Charitable contribution deduction

In computing taxable income, an individual taxpayer who
itemizes deductions or a corporate taxpayer generally is
allowed to deduct the amount of cash and the fair market value
of property contributed to an organization described in section
501(c)(3) or to a Federal, State, or local governmental entity,
including to most educational organizations.\277\
---------------------------------------------------------------------------
\277\Within certain limitations, donors also are entitled to deduct
such contributions for estate and gift tax purposes. See secs. 2055 and
2522.
---------------------------------------------------------------------------
The amount of the deduction allowable for a taxable year
with respect to a charitable contribution of property may be
reduced depending on the type of property contributed, the type
of charitable organization to which the property is
contributed, and the income of the taxpayer.\278\ For
individual taxpayers, the income-based limitation on the
charitable contribution deduction is higher for gifts made to
public charities than for gifts made to private foundations.
Contributions of cash to a public charity generally are
deductible up to 60 percent\279\ of the donor's adjusted gross
income (``AGI'')\280\ (30 percent for capital gain property,
and 50 percent for non-capital gain property other than cash),
whereas contributions to most private foundations generally are
deductible up to 30 percent of the donor's AGI (20 percent for
capital gain property).\281\ For corporate taxpayers, the
deductible amount of charitable contributions generally is
limited to 10 percent of taxable income.\282\ For all
taxpayers, gifts of capital gain property to a public charity
generally are deductible at the property's fair market
value,\283\ whereas gifts of capital gain property (other than
publicly traded stock) to most private foundations are
deductible at the taxpayer's basis (cost) in the property.\284\
---------------------------------------------------------------------------
\278\Sec. 170(b) and (e).
\279\For contributions made in taxable years beginning after
December 31, 2025, the 60-percent limit is reduced to 50 percent. Sec.
170(b)(1)(G)(i).
\280\The charitable percentage limits are applied to the donor's
``contribution base,'' which is the donor's AGI computed without regard
to any net operating loss carryback to the taxable year under section
172. Sec. 170(b)(1)(H).
\281\Sec. 170(b)(1).
\282\Sec. 170(b)(2).
\283\Sec. 170(e)(1). However, contributions of tangible personal
property not for an exempt purpose of the donee organization are
deductible at the taxpayer's basis in the property. Sec.
170(e)(1)(B)(i). A special rule determines the aggregate deduction for
contributions of certain intellectual property. Sec. 170(e)(1)(B)(iii)
and 170(m).
\284\Sec. 170(e)(1)(B)(ii) and 170(e)(5).
---------------------------------------------------------------------------

Qualified scholarships and qualified tuition reduction

Present law provides an exclusion from gross income for
income tax purposes and from wages for employment tax purposes
for amounts received as a qualified scholarship by an
individual who is a candidate for a degree at an educational
organization described in section 170(b)(1)(A)(ii) (a
``qualifying educational organization'').\285\ In general, a
qualified scholarship is any amount received by such an
individual as a scholarship or fellowship grant if the amount
is used for qualified tuition and related expenses. Qualified
tuition and related expenses include tuition and fees required
for enrollment or attendance, or for fees, books, supplies, and
equipment required for courses of instruction, at the
qualifying educational organization. This definition does not
include regular living expenses, such as room and board. A
qualifying educational organization is an educational
organization that normally maintains a regular faculty and
curriculum and normally has a regularly enrolled body of pupils
or students in attendance at the place where its educational
activities are regularly carried on. These institutions include
K-12 schools.
---------------------------------------------------------------------------
\285\Secs. 117(a) and 3121(a)(20).
---------------------------------------------------------------------------
Present law also provides an exclusion from gross income
for income tax purposes and from wages for employment tax
purposes for qualified tuition reductions for certain education
(below the graduate level) that is provided to employees (and
their spouses and dependents) of qualifying educational
organizations.\286\ The education must be provided at the
employing organization or another qualifying educational
organization. This exclusion does not apply to any amount
received by a student that represents payment for teaching,
research, or other services by the student required as a
condition for receiving the tuition reduction.
---------------------------------------------------------------------------
\286\Secs. 117(d) and 3121(a)(20).
---------------------------------------------------------------------------

Gift tax exclusion for educational expenses

Under present law, gift tax is imposed on transfers of
property by gift, subject to several exceptions. One exception
is the gift tax annual exclusion of section 2503(b). Under this
exclusion, a donor can transfer up to $18,000 of property to
each of an unlimited number of donees without incurring gift
tax on such transfers.\287\
---------------------------------------------------------------------------
\287\The Code provides an amount of $10,000 for the maximum gift
tax annual exclusion, adjusted in $1,000 increments for inflation
occurring after 1997. The inflation-adjusted amount for 2024 is
$18,000.
---------------------------------------------------------------------------
In addition to the gift tax annual exclusion, the Code
provides that certain tuition payments are not considered
transfers of property by gift for gift tax purposes.\288\ This
exclusion covers amounts paid on behalf of an individual as
tuition to a qualifying educational organization. An unlimited
exclusion applies only to direct transfers to the educational
institution, not to reimbursements to donees for amounts paid
by them for otherwise qualifying services, or to trusts to
provide for the education of designated beneficiaries.\289\
Further, an unlimited exclusion is not permitted for books,
supplies, dormitory fees, board, or other similar expenses that
do not constitute direct tuition costs.\290\ This exclusion
applies without regard to the relationship of the donor and
donee.
---------------------------------------------------------------------------
\288\Sec. 2503(e).
\289\Treas. Reg. sec. 25.2503-6(c), ex. 2.
\290\Treas. Reg. sec. 25.2503-6(b)(2).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that contributions to charitable
organizations that provide scholarships for elementary and
secondary school expenses and expand educational freedom for
parents and students should be encouraged. Qualified Elementary
and Secondary Education Scholarships are valuable tools for
millions of American families and students to help parents and
students have access to the right school that best meets a
student's needs. The Committee believes the use of elementary
and secondary education scholarships should be expanded to help
ease the educational cost burden for parents and expand
educational opportunities for students. Because of the
education divide at the state level, many states have not
adopted school choice programs that promote parental choice and
educational freedom for students. By offering this incentive at
the federal level, the Committee believes that this will expand
affordable education options across America so that students
receive the education most tailored to their individual needs.
Ultimately, the Committee believes that a new income tax credit
to encourage giving to these organizations will help to promote
school choice, parental choice, and educational freedom.

EXPLANATION OF PROVISION

Tax credit for contributions of individuals to scholarship granting
organizations

Individual income tax credit
The provision creates a nonrefundable income tax credit
that is equal to the aggregate amount of qualified
contributions made by the taxpayer during the taxable year. The
credit allowed to a taxpayer for a taxable year may not exceed
the greater of 10 percent of the taxpayer's aggregate gross
income or $5,000. An individual is allowed the credit only to
the extent that the Secretary of the Treasury (the
``Secretary''), subject to an aggregate volume cap that is
described below, allocates the credit to the individual.
For purposes of the credit, a ``qualified contribution'' is
a charitable contribution (within the meaning of section
170(c)) to a scholarship granting organization in the form of
cash or marketable securities. The amount allowed as a credit
to a taxpayer for a taxable year is reduced by the amount
allowed as a credit on any State tax return of the taxpayer for
qualified contributions made by the taxpayer during the taxable
year. The provision provides that any qualified contribution
for which a credit is allowed is not taken into account as a
charitable contribution for purposes of section 170.
A ``scholarship granting organization'' is any organization
(a) that is described in section 501(c)(3), is exempt from tax
under section 501(a), and is not a private foundation; (b)
substantially all of the activities of which are providing
scholarships for qualified elementary or secondary education
expenses of eligible students; (c) that prevents the co-
mingling of qualified contributions with other amounts by
maintaining one or more separate accounts exclusively for
qualified contributions; and (d) that either meets the
requirements to be a scholarship granting organization
(discussed below) or was eligible on the date of enactment to
receive contributions for which the donor is entitled to a
State tax credit if the contributions are used by the
organization to provide scholarships. An ``eligible student''
is an individual who is a member of a household with annual
income of no greater than 300 percent of the area median gross
income (within the meaning of that term in section 42) and is
eligible to enroll in a public elementary or secondary school.
An organization meets the requirements of a scholarship
granting organization (referred to above) only if (a) the
organization provides scholarships to two or more students at
two or more schools, (b) the organization does not provide
scholarships for expenses other than qualified elementary or
secondary education expenses, (c) the organization provides
scholarships to eligible students with a priority for students
awarded a scholarship the previous year and their siblings, (d)
the organization does not earmark or set aside contributions
for scholarships for any particular student, (e) the
organization takes appropriate steps to verify the income and
family size of eligible students to whom it awards
scholarships, and limits scholarships to individuals in
households with annual household income that meets the limits
set forth in the definition of an eligible student (the
``income verification requirement''), (f) the organization
obtains from an independent certified public accountant\291\
annual financial and compliance audits and certifies to the
Secretary that the audit has been completed, and (g) no officer
or board member of the organization has been convicted of a
felony.
---------------------------------------------------------------------------
\291\For purposes of this requirement, the term ``independent
certified public accountant'' means a certified public accountant who
is not a person described in section 465(b)(3)(A) (i.e., having an
interest, or being a related person to a person having an interest)
with respect to such organization or any employee of such organization.
---------------------------------------------------------------------------
The term ``qualified elementary or secondary education
expense'' means the following expenses in connection with
enrollment or attendance at, or for students enrolled at or
attending, an elementary or secondary public, private, or
religious school: tuition; curriculum and curricular materials;
books or other instructional materials; online educational
materials; tuition for certain tutoring or educational classes
outside of the home;\292\ fees for a nationally standardized
norm-referenced achievement test, an Advanced Placement
examination, or any examinations related to college or
university admission; fees for dual enrollment in an
institution of higher education; and educational therapies for
students with disabilities provided by a licensed or accredited
practitioner or provider. Such expenses include expenses in
connection with a homeschool (whether treated as a homeschool
or a private school for purposes of applicable State law).
However, such expenses do not include amounts paid to an
elementary or secondary school unless the school demonstrates
that it maintains an admissions policy which provides that the
school does not take into account whether the student seeking
enrollment has a current individualized education plan or
whether the student requires equitable services for a learning
disability, and if a student does have such an individualized
education plan, the school abides by the plan's terms and
provides services outlined in the plan.
---------------------------------------------------------------------------
\292\Such tuition is a qualified expense only if the tutor or
instructor is not related to the student and is licensed as a teacher
in any State, has taught at an eligible educational institution, or is
a subject matter expert in the relevant subject.
---------------------------------------------------------------------------
A scholarship granting organization can satisfy the income
verification requirement, discussed above, by reviewing all of
the following documents (as applicable): (1) Federal and State
income tax returns or tax return transcripts with applicable
schedules for the taxable year prior to application, (2) income
reporting statements for tax purposes or wage and income
transcripts from the Internal Revenue Service, (3) notarized
income verification letter from employers, (4) unemployment or
workers compensation statements, and (5) budget letters
regarding public assistance payments and Supplemental Nutrition
Assistance Program (``SNAP'') payments including a list of
household members.
The credit is a nonrefundable personal tax credit taken
against income tax liability. The credit is allowable against
both the regular tax and the alternative minimum tax under
section 26(a). If the credit allowable for any taxable year
exceeds the limitation imposed by section 26(a) for such
taxable year reduced by the sum of nonrefundable personal tax
credits (other than the individual credit under the provision
and the credits allowable under section 23 and section 25D),
the excess is carried to the succeeding taxable year and added
to the credit allowable for such taxable year. However, no
credit may be carried forward to any taxable year following the
fifth taxable year after the taxable year in which the credit
arose. For this purpose, credits are treated as used on a
first-in, first-out basis.
The provision provides rules against self-dealing, such
that a scholarship granting organization may not award a
scholarship to a disqualified person. For this purpose, a
disqualified person is determined pursuant to rules similar to
rules in section 4946, and includes, for example, substantial
contributors, founders, and family members of substantial
contributors and founders.
Failure of scholarship granting organizations to make
distributions
If the Secretary determines that a scholarship granting
organization has not satisfied one or more of the
distributional requirements, described below, any contribution
made to the organization during the first taxable year
beginning after the date of the determination is not treated as
a qualified contribution for purposes of the tax credit for
individuals created under the provision.
Under the provision, the amount of receipts of the
scholarship granting organization for the taxable year which
are distributed before the distribution deadline with respect
to such receipts must be at least equal to the required
distribution amount for the taxable year. The ``required
distribution amount'' with respect to a taxable year is equal
to 100 percent of the total receipts of the scholarship
granting organization for the taxable year, (a) reduced by the
sum of the receipts that are retained for reasonable
administrative expenses for the taxable year or are carried to
the succeeding taxable year, and (b) increased by the amount of
carryover from the preceding taxable year. Administrative
expenses of a scholarship granting organization are deemed to
be reasonable if the expenses do not exceed 10 percent of the
organization's total receipts for the taxable year. At the
election of the scholarship granting organization, an amount of
up to 15 percent of the total receipts of the organization may
be carried to the succeeding taxable year.
Under the provision, a ``distribution'' includes amounts
which are formally committed but not distributed. A formal
commitment may include contributions set aside for eligible
students for more than one year. The distribution deadline with
respect to receipts for a taxable year is the first day of the
third taxable year following the taxable year in which the
scholarship granting organization receives the receipts.

Volume cap

The provision sets an aggregate volume cap on the total
amount of credits at $5 billion for each of calendar years 2026
through 2029, and zero for any calendar years after 2029. In
the case of a calendar year for which the volume cap is in
effect and which follows a high use calendar year, the volume
cap is increased to 105 percent of the dollar amount in effect
for the high use calendar year. The term ``high use calendar
year'' means any calendar year for which 90 percent or more of
the volume cap in effect for such calendar year is allocated to
taxpayers. The provision provides that the volume cap in effect
for a calendar year must at least equal the volume cap in
effect for the preceding calendar year. Thus, if the volume cap
is increased in a year following a high-use calendar year, it
is not subsequently reduced.
Generally, for purposes of allocating volume cap for a
calendar year, the Secretary is directed to allocate the credit
on a first-come, first-served basis, based on the time (during
that calendar year) at which the taxpayer made the qualified
contribution with respect to which the allocation is made. The
Secretary may not allocate volume cap for a calendar year after
December 31 of that calendar year. However, 10 percent of the
annual volume cap is evenly divided among the States,\293\ with
such amounts being available to individuals residing in such
States. The Secretary is directed to develop a system to track
the amount of qualified distributions made during the calendar
year for which a credit may be claimed, with such information
updated in real time.
---------------------------------------------------------------------------
\293\For purposes of the volume cap, the term ``State'' includes
the District of Columbia. Therefore, for calendar year 2026, a total of
$500 million (10 percent of $5 billion) is divided equally among the 50
States and the District of Columbia, with each State receiving
approximately $9.8 million in allocations.
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision is effective for taxable years ending after
December 31, 2025.

Additional Elementary, Secondary, and Home School Expenses Treated as
Qualified Higher Education Expenses for Purposes of 529 Accounts (sec.
110110 of the bill and sec. 529 of the Code)

PRESENT LAW

Section 529 qualified tuition programs

To describe programs that are known colloquially as 529
plans, the Code uses the term ``qualified tuition programs''
and distinguishes between two types of programs.\294\ One type
of program, sometimes referred to as a prepaid tuition program,
allows a person to purchase on behalf of a designated
beneficiary tuition credits or certificates that entitle the
beneficiary to the waiver or payment of the beneficiary's
qualified higher education expenses.\295\ Prepaid tuition
programs are established and maintained by State governments
(or their agencies or instrumentalities) and eligible
educational institutions.\296\ The other type of program,
sometimes referred to as a college savings plan, allows a
person to make contributions to an account that is established
for the purpose of satisfying the qualified higher education
expenses of the designated beneficiary of the account.\297\ A
college savings plan may be established and maintained by State
governments (or their agencies or instrumentalities), not by
educational institutions.\298\
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\294\Sec. 529(a), (b).
\295\Sec. 529(b)(1)(A)(i).
\296\Ibid.
\297\Sec. 529(b)(1)(A)(ii).
\298\Ibid.
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A qualified tuition program generally is exempt from
Federal income taxation (but is subject to unrelated business
income tax).\299\ As a consequence, contributors to, and
beneficiaries of, these programs (whether prepaid tuition
programs or college savings plans) generally have no taxable
income inclusions from earnings on assets held in the programs.
---------------------------------------------------------------------------
\299\Sec. 529(a).
---------------------------------------------------------------------------
To be treated as a qualified tuition program that is
generally exempt from Federal income taxation, a program must
satisfy several requirements. The program must provide that
purchases of tuition credits or certificates or contributions
to a program must be made only in cash.\300\ The program must
provide separate accounting for each designated
beneficiary.\301\ The program must provide that a contributor
to, or a designated beneficiary under, the program may direct
the investment of any contributions to the program (or earnings
on those investment) no more than twice a year.\302\ The
program must not allow any interest in the program to be used
as a security for a loan.\303\ The program must provide
adequate safeguards to prevent contributions on behalf of a
designated beneficiary that exceed the amount necessary to pay
the beneficiary's qualified higher education expenses (referred
to below as the ``prohibition on excess contributions'').\304\
---------------------------------------------------------------------------
\300\Sec. 529(b)(2).
\301\Sec. 529(b)(3).
\302\Sec. 529(b)(4).
\303\Sec. 529(b)(5).
\304\Sec. 529(b)(6).
---------------------------------------------------------------------------
When there is a cash distribution under a qualified tuition
program, the portion of the distribution that is considered to
be earnings on contributions to the account is includible in
the gross income of the recipient of the distributions only to
the extent that the total amount of cash distributions during
the taxable year exceeds the amount of qualified higher
education expenses of the account beneficiary during that
year.\305\ The income tax that is imposed on a recipient of a
distribution that is included in the recipient's gross income
is, with certain exceptions, increased by 10 percent of the
amount of the inclusion.\306\
---------------------------------------------------------------------------
\305\Sec. 529(c)(3)(A), (B)(ii). A payor of a distribution
generally is required to report to the IRS and the recipient of the
distribution on Form 1099-Q the amount of the distribution and the
portions of the distributions representing contributions and earnings.
\306\Sec. 529(c)(6).
---------------------------------------------------------------------------
Qualified higher education expenses include, among other
expenses, tuition, fees, books, supplies, and equipment
required for the enrollment or attendance of the account
beneficiary at an eligible post-secondary educational
institution; in the case of a beneficiary who is at least a
half-time student, reasonable costs for room and board;
expenses for the purchase of computer equipment and software to
be used primarily by the beneficiary when enrolled at an
eligible educational institution; fees, books, supplies, and
equipment required for a beneficiary's participation in an
eligible apprenticeship program; up to a $10,000 lifetime
maximum in payments of principal and interest on a
beneficiary's student loan; and, for certain purposes of
section 529--not including for purposes of the prohibition on
excess contributions, expenses for tuition in connection with
enrollment or attendance at an elementary or secondary public,
private, or religious school.\307\ There is a $10,000
limitation on the total amount of nontaxable cash distributions
that may be made in a taxable year from all qualified tuition
programs with respect to a beneficiary to pay for that
beneficiary's elementary or secondary school tuition.\308\
---------------------------------------------------------------------------
\307\Sec. 529(c)(7), (c)(8), (c)(9), (e)(3).
\308\Sec. 529(e)(3)(A).
---------------------------------------------------------------------------
For certain purposes, including the rules allowing tax-free
distributions from a qualified tuition program to pay qualified
higher education expenses, qualified higher education expenses
also include amounts for books, supplies, and equipment
required for the participation of a beneficiary in an
apprenticeship program registered and certified with the
Secretary of Labor under section 1 of the National
Apprenticeship Act. (29 U.S. Code 50).\309\
---------------------------------------------------------------------------
\309\Sec. 529(c)(8).
---------------------------------------------------------------------------
A contribution to a qualified tuition program is treated as
a completed gift for gift tax purposes (and, as a consequence,
may benefit from the gift tax annual exclusion).\310\ If an
individual's total contributions to a qualified tuition program
during a year exceed the gift tax annual exclusion amount in
that year, the individual may elect to take the total amount of
the contributions into account for purposes of the annual
exclusion ratably over the five-year period beginning with the
year of the excess contributions.\311\ An individual's interest
in a qualified tuition program generally is excluded from the
individual's gross estate for estate tax purposes.\312\
---------------------------------------------------------------------------
\310\Sec. 529(c)(2)(A).
\311\Sec. 529(c)(2)(B).
\312\Sec. 529(c)(4)(A).
---------------------------------------------------------------------------
A distribution from a qualified tuition program that
otherwise would be included in the income of the recipient of
the distribution (for example, the beneficiary of the account)
may be excluded under rules allowing, subject to limitations,
tax-free rollovers to, among other alternatives, an ABLE
account of the beneficiary or of a member of the family of the
beneficiary, a Roth IRA of the beneficiary, or the credit of
another beneficiary of a qualified tuition program who is a
member of the family of the beneficiary with respect to whom
the distribution was made.\313\
---------------------------------------------------------------------------
\313\Sec. 529(c)(3)(C), (E).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes taxpayers should be provided with
broader choices in elementary and secondary education
including, for example, public, private or religious schools,
and homeschools. Expansion of qualified expenses for 529 plans
to include these types of educational expenses would allow
families the freedom and flexibility to pursue the education
most tailored to their needs and to save accordingly.

EXPLANATION OF PROVISION

The provision provides that the following expenses in
connection with the enrollment or attendance of a designated
beneficiary at an elementary or secondary public, private, or
religious school, or in connection with a homeschool, are
qualified higher education expenses: tuition (as under present
law), curriculum and curricular materials, books or other
instructional materials, online educational materials, tuition
for certain tutoring or educational classes outside of the
home, fees for certain tests, fees for dual enrollment in an
institution of higher education, and certain educational
therapies for students with disabilities.
Under the provision, these elementary and secondary school
expenses are considered qualified higher education expenses for
all purposes of section 529, including the prohibition on
excess contributions. As a consequence, a beneficiary's
elementary and secondary school expenses may be taken into
account in determining whether a contribution to a qualified
tuition program is prohibited because the contribution would be
in excess of the amount necessary to provide for the
beneficiary's qualified higher education expenses.

EFFECTIVE DATE

The provision is effective for distributions made after the
date of enactment.

Certain Postsecondary Credentialing Expenses Treated as Qualified
Higher Education Expenses for Purposes of 529 Accounts (sec. 110111 of
the bill and sec. 529 of the Code)

PRESENT LAW

For a general description of 529 Accounts, see section J of
this document.

REASONS FOR CHANGE

The Committee believes taxpayers should be provided with
broader choices in education including, for example, obtaining
and maintaining post-secondary credentials like licenses and
certifications. Expansion of qualified expenses for 529 plans
to include postsecondary credentialing expenses would allow
American students and workers to make pursue education and
training as they see fit and save accordingly.

EXPLANATION OF PROVISION

The provision treats a broad category of postsecondary
credentialing expenses as qualified higher education expenses
for all purposes of section 529. These ``qualified
postsecondary credentialing expenses'' are tuition, fees,
books, supplies, and equipment required for the enrollment or
attendance of a designated beneficiary in a recognized
``postsecondary credential program,'' or any other expense in
connection with enrollment in or attendance at such a program
if such expenses would, if incurred in connection with
enrollment in or attendance at an eligible educational
institution, be considered qualified higher education expenses
before application of the provision; fees for testing required
to obtain or maintain a recognized credential; and, fees for
continuing education if such education is required to maintain
a recognized postsecondary credential.
For this purpose, a ``recognized postsecondary credential
program'' means a program to obtain a recognized postsecondary
credential if (a) such program is included on a list prepared
under section 122(d) of the Workforce Innovation and
Opportunity Act; (b) such program is listed in the WEAMS Public
directory (or successor) maintained by the Department of
Veterans Affairs; (c) an examination (developed or administered
by an organization widely recognized as providing reputable
credentials in the occupation) is required to obtain or
maintain a postsecondary credential and the organization
recognizes the program as providing training or education that
prepares individuals to take the examination; or, (d) such
program is identified by the Treasury Secretary, after
consultation with the Labor Secretary, as being a reputable
program for obtaining a recognized postsecondary credential.
A ``recognized postsecondary credential'' means any
postsecondary employment credential that is industry
recognized, any certificate of completion of an apprenticeship
that is registered and certified with the Secretary of Labor
under the National Apprenticeship Act, any occupational or
professional license issued or recognized by a State or the
Federal government, and any recognized postsecondary credential
as defined under section 3 of the Workforce Innovation and
Opportunity Act.

EFFECTIVE DATE

The provision is effective for distributions made after the
date of enactment.

Reinstatement of Partial Deduction for Charitable Contributions of
Individuals Who Do Not Elect to Itemize (sec. 110112 of the bill and
sec. 170(p) of the Code)

PRESENT LAW

Itemized deduction for charitable contributions

An income tax deduction is permitted for charitable
contributions, subject to certain limitations that depend on
the type of taxpayer, the property contributed, and the
recipient organization.\314\ For individuals, the deduction for
charitable contributions is available only to a taxpayer who
elects to itemize deductions.
---------------------------------------------------------------------------
\314\Sec. 170.
---------------------------------------------------------------------------
Charitable contributions of cash are deductible in the
amount contributed. In general, contributions of capital gain
property to a qualified charity are deductible at fair market
value with certain exceptions. Capital gain property means any
capital asset or property used in the taxpayer's trade or
business the sale of which at its fair market value, at the
time of contribution, would have resulted in gain that would
have been long-term capital gain. Contributions of other
appreciated property generally are deductible at the donor's
basis in the property. Contributions of depreciated property
generally are deductible at the fair market value of the
property.
For individuals, in any taxable year, the amount deductible
as a charitable contribution is limited to a percentage of the
taxpayer's contribution base. The applicable percentage of the
contribution base varies depending on the type of recipient
organization and property contributed. The contribution base is
defined as the taxpayer's adjusted gross income computed
without regard to any net operating loss carryback.\315\
---------------------------------------------------------------------------
\315\Sec. 170(b)(1)(H).
---------------------------------------------------------------------------
Charitable contributions that exceed the applicable
percentage limit generally may be carried forward for up to
five years.\316\ In general, contributions carried over from a
prior year are taken into account after contributions for the
current year that are subject to the same percentage limit.
---------------------------------------------------------------------------
\316\Sec. 170(b)(1)(G)(ii) and (d).
---------------------------------------------------------------------------

Temporary Charitable Deduction for Nonitemizers

Under section 170(p), an individual who does not itemize
deductions may claim a deduction in an amount not to exceed
$300 ($600 in the case of a joint return) for certain
charitable contributions made during a taxable year that begins
in 2021. The deduction is not available for contributions made
during a taxable year that begins after 2021.
Contributions taken into account for this purpose include
only contributions made in cash during the taxable year to a
charitable organization described in section 170(b)(1)(A),
other than contributions to (i) a supporting organization
described in section 509(a)(3) or (ii) for the establishment of
a new, or maintenance of an existing, donor advised fund (as
defined in section 4966(d)(2)). Contributions of noncash
property, such as securities, are not qualified contributions.
Qualified contributions must be to an organization described in
section 170(b)(1)(A); thus, contributions to, for example, a
charitable remainder trust generally are not qualified
contributions, unless the charitable remainder interest is paid
in cash to an eligible charity during the applicable time
period. A qualifying charitable contribution does not include
an amount that is treated as a contribution in the taxable year
by reason of being carried forward from a prior contribution
year under section 170(b)(1)(G) or (d)(1).
There is an increased penalty under section 6662 for an
underpayment of tax resulting from an overstatement of the
section 170(p) deduction.\317\ The penalty is increased from 20
percent of the underpayment to 50 percent of the underpayment.
The section 6662 penalty relating to an overstatement of the
temporary nonitemizer charitable deduction is exempt from the
requirement for supervisory approval under section 6751(b).
---------------------------------------------------------------------------
\317\Sec. 6662(l).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that it is important to provide a
tax benefit for charitable giving. The Committee believes that
allowing non-itemizers a partial deduction for charitable
contributions will improve horizontal equity between itemizers
and non-itemizers with respect to charitable giving.

EXPLANATION OF PROVISION

The provision reinstates the section 170(p) deduction for
taxable years beginning after December 31, 2024, and before
January 1, 2029. The provision sets the maximum deduction
amount to $300 for taxpayers who are married filing jointly and
to $150 for all other taxpayers.

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2024.

Exclusion for Certain Employer Payments of Student Loans Under
Educational Assistance Programs Made Permanent and Adjusted for
Inflation (sec. 110113 of the bill and sec. 127 of the Code)

PRESENT LAW

Under section 127, an employee may exclude from gross
income for income tax purposes\318\ and the employer may
exclude from wages for employment tax purposes\319\ up to
$5,250 annually of educational assistance provided by the
employer to the employee.\320\ For the exclusion to apply,
certain requirements must be satisfied: (1) the educational
assistance must be provided pursuant to a separate written plan
of the employer; (2) employers must provide reasonable
notification of the terms and availability of the program to
eligible employees; (3) the employer's educational assistance
program must not discriminate in favor of highly compensated
employees; and (4) no more than five percent of the amounts
paid or incurred by the employer during the year for
educational assistance under a qualified educational assistance
program may be provided for the class of individuals consisting
of (i) more than five-percent owners of the employer and (ii)
the spouses or dependents of such owners.\321\
---------------------------------------------------------------------------
\318\See also sec. 3401(a)(18).
\319\Secs. 3121(a)(18) and 3306(b)(13).
\320\Sec. 127(a).
\321\Sec. 127(b).
---------------------------------------------------------------------------
For purposes of the exclusion, ``educational assistance''
means the payment by an employer of expenses incurred by or on
behalf of the employee for education of the employee including,
but not limited to, tuition, fees and similar payments, books,
supplies, and equipment, and the provision by the employer of
courses of instruction for the employee, including books,
supplies, and equipment.\322\ Educational assistance also
includes the payment by an employer to the employee or to a
lender of principal or interest on any qualified education loan
(as defined in section 221(d)(1)) incurred by the employee for
education of the employee. Only student loan payments made
before January 1, 2026, qualify as educational assistance.
---------------------------------------------------------------------------
\322\Sec. 127(c)(1).
---------------------------------------------------------------------------
Educational assistance does not include payment for or the
provision of tools or supplies that may be retained by the
employee after completion of a course, meals, lodging, or
transportation, or any education involving sports, games, or
hobbies. The education need not be job-related or part of a
degree program.\323\ Educational assistance qualifies for the
exclusion only if the employer does not give the employee a
choice between educational assistance and other remuneration
includible in the employee's income.
---------------------------------------------------------------------------
\323\Treas. Reg. sec. 1.127-2(c)(4).
---------------------------------------------------------------------------
The exclusion for employer-provided educational assistance
applies only with respect to education provided to the
employee. The exclusion does not apply, for example, to
assistance provided directly or indirectly for the education of
the spouse or a child of the employee.
The employer's costs for providing such educational
assistance are generally deductible as a trade or business
expense.\324\
---------------------------------------------------------------------------
\324\See sec. 162.
---------------------------------------------------------------------------
In the absence of the specific exclusion for employer-
provided educational assistance under section 127, employer-
provided educational assistance is excludable from gross income
for income tax purposes\325\ and wages for employment tax
purposes\326\ only if the education expenses qualify as a
working condition fringe benefit under section 132(d) or as a
qualified tuition reduction under section 117(d). In general,
education qualifies as a working condition fringe benefit if
the employee could have deducted the education expenses under
section 162 if the employee paid for the education.\327\ In
general, education expenses are deductible by an individual
under section 162 if the education (1) maintains or improves a
skill required in a trade or business currently engaged in by
the taxpayer, or (2) meets the express requirements of the
taxpayer's employer, applicable law, or regulations imposed as
a condition of continued employment.\328\ However, education
expenses are generally not deductible if they relate to certain
minimum educational requirements or to education or training
that enables a taxpayer to begin working in a new trade or
business.\329\
---------------------------------------------------------------------------
\325\See also sec. 3401(a)(19).
\326\Secs. 3121(a)(20) and 3306(b)(16).
\327\Sec. 132(d).
\328\Treas. Reg. sec. 1.162-5.
\329\For taxable years beginning before January 1, 2026, trade or
business expenses relating to the trade or business of the performance
of services by the taxpayer as an employee are disallowed miscellaneous
itemized deductions. Secs. 62(a)(1), 67(g), and 162(a).
---------------------------------------------------------------------------

REASONS FOR CHANGE

Because the Committee wants to encourage individuals to
pursue job-relevant learning and education, the Committee
believes that a certain amount of employer payments of
principal or interest on an employee's qualified education loan
should not be taxable. Additionally, the Committee recognizes
that inflation has eroded the value of the overall exclusion,
having not been increased in over four decades. As such, the
Committee believes that increasing the overall exclusion amount
will further encourage individuals to pursue further job-
relevant learning and education.

EXPLANATION OF PROVISION

The provision removes the requirement that a student loan
payment must be made before January 1, 2026, to qualify as
``educational assistance.'' As a result, the provision makes
the exclusion for employer payments of qualified education
loans permanent.
The provision would inflation adjust the maximum exclusion
under section 127 for taxable years beginning after 2026.

EFFECTIVE DATE

The provision applies to payments made after December 31,
2025.

Extension of Rules for Treatment of Certain Disaster-Related Personal
Casualty Losses (sec. 110114 of the bill)

PRESENT LAW

Personal casualty losses

In general
An individual taxpayer may claim an itemized deduction for
a personal casualty loss.\330\ If the loss is attributable to a
disaster declared by the President under section 401 of the
Robert T. Stafford Disaster Relief and Emergency Assistance Act
(the ``Stafford Act''),\331\ then the loss is deductible only
to the extent of the sum of the individual's personal casualty
gains plus the amount by which aggregate net disaster-related
losses exceed 10 percent of the individual taxpayer's adjusted
gross income.\332\ In any taxable year beginning after December
31, 2017, and before January 1, 2026, all other personal
casualty losses are deductible only to the extent that the
losses do not exceed the individual's personal casualty gains.
---------------------------------------------------------------------------
\330\Sec. 165(h).
\331\Sec. 165(h)(5).
\332\Sec. 165(h)(2). Personal casualty gains are reduced for this
purpose by any gain used to offset any personal casualty loss which is
not attributable to a disaster.
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For individual taxpayers, personal casualty losses are
losses of property not connected with a trade or business or a
transaction entered into for profit, if such losses arise from
fire, storm, shipwreck, or other casualty, or from theft.\333\
Personal casualty gains are recognized gains from any
involuntary conversion of property not connected with a trade
or business or a transaction entered into for profit, if such
gains arise from fire, storm, shipwreck, or other casualty, or
from theft.\334\ Personal casualty losses are deductible to the
extent they exceed $100 per casualty.\335\
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\333\Sec. 165(c)(3)(B).
\334\Sec. 165(c)(3)(A).
\335\Sec. 165(h)(1).
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Additional relief for certain disasters
Congress has at times enacted more generous casualty loss
provisions in response to specific natural disasters.\336\
---------------------------------------------------------------------------
\336\See, e.g., sec. 204(b) of Pub. L. No. 116-94 (Hurricanes
Florence and Michael); sec. 20104(b) of Pub. L. No.115-123 (certain
California wildfires); sec. 504(b) of Pub. L. No. 115-63 (Hurricanes
Harvey, Irma, and Maria); and former sec. 1400S(b) (Hurricanes Katrina,
Rita, and Wilma).
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Division EE of Public Law 116-260, the Taxpayer Certainty
and Disaster Tax Relief Act of 2020 (``TCDTRA''),\337\ as
modified by the Federal Disaster Tax Relief Act of 2023
(``FDTRA''),\338\ provides special rules for ``qualified
disaster-related personal casualty losses.'' These losses
include personal casualty losses arising in a qualified
disaster area on or after the first day of the incident period
of the applicable qualified disaster which are attributable to
that qualified disaster.\339\ These losses are deductible
without regard to whether aggregate net losses exceed 10
percent of a taxpayer's adjusted gross income and to the extent
they exceed $500 per casualty.\340\ These losses are allowed as
a deduction in addition to the standard deduction and are
allowed against alternative minimum taxable income.
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\337\Sec. 304(b) of Div. EE. of Pub. L. No. 116-260, December 27,
2020.
\338\Sec. 2 of Pub. L. No. 118-148, December 12, 2024.
\339\Sec. 304(b)(3) of Div. EE. of Pub. L. No. 116-260, December
27, 2020.
\340\Sec. 304(b)(1) of Div. EE. of Pub. L. No. 116-260, December
27, 2020.
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As modified by FDTRA, a ``qualified disaster area'' refers
to an area with respect to which a major disaster has been
declared by the President during the period beginning on
January 1, 2020, and ending on the date which is 60 days after
the date of enactment of FDTRA,\341\ under section 401 of the
Stafford Act, if the incident period of the disaster with
respect to which the declaration is made begins on or after
December 28, 2019, and on or before the date of enactment of
FDTRA.\342\ A qualified disaster area does not include any area
with respect to which a major disaster had been declared only
by reason of COVID-19.
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\341\FDTRA became law on December 12, 2024.
\342\Sec. 301(1) of Div. EE. of Pub. L. No. 116-260; sec. 2 of Pub.
L. No. 118-148.
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A ``qualified disaster'' is, with respect to the applicable
qualified disaster area, the disaster by reason of which a
major disaster was declared with respect to that area.\343\
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\343\Sec. 301(3) of Div. EE. of Pub. L. No. 116-260, December 27,
2020, December 12, 2024.
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The ``incident period'' is, with respect to the applicable
qualified disaster, the period specified by the Federal
Emergency Management Agency as the period during which the
disaster occurred, except that the period is not treated as
ending after the date which is 30 days after the date of
enactment of FDTRA.\344\
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\344\Sec. 301(4) of Div. EE. of Pub. L. No. 116-260, December 27,
2020; sec. 2 of Pub. L. No. 118-148, December 12, 2024.
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REASONS FOR CHANGE

The Committee wishes to provide tax relief for taxpayers
affected by certain disasters and events. The Committee
believes that the expansion of the personal casualty loss
deduction under section 165 under TCDTRA and FDTRA provided
necessary tax relief to taxpayers who suffered losses in major
disasters, and that such relief should be extended to provide
similar relief for major disasters through 2024 and part of
2025.

EXPLANATION OF PROVISION

For purposes of personal casualty losses arising in a
qualified disaster area, the provision broadens TCDTRA's
definition of qualified disaster area (as modified by FDTRA) to
include any area with respect to which a major disaster was
declared by the President during the period beginning on
January 1, 2020, and ending on the date which is 60 days after
the date of enactment of the provision, under section 401 of
Stafford Act if the incident period of the disaster begins on
or after December 28, 2019, and on or before the date of
enactment of the provision. The incident period will be treated
as ending no later than the date which is 30 days after the
date of enactment of the provision.
Thus, under the provision, certain disaster-related
personal casualty losses attributable to major disasters
beginning any time after the date of enactment of TCDTRA and
through the date of enactment of the provision are provided the
same treatment as qualified disaster-related personal casualty
losses under TCDTRA.

EFFECTIVE DATE

The provision is effective on the date of enactment.

MAGA Accounts (secs. 110115 and 110116 of the bill and new sec. 530A of
the Code)

PRESENT LAW

The Code permits various types of tax-advantaged accounts
for individuals. For example, qualified tuition programs under
section 529 and Coverdell education savings accounts\345\ allow
individuals to save for the education expenses of a beneficiary
on a tax-preferred basis. Similarly, qualified ABLE accounts
allow individuals to pay the disability expenses of a
beneficiary with similar tax benefits.\346\ Retirement accounts
such as those in qualified retirement plans (such as 401(k)
plans)\347\ and individual retirement plans\348\ allow
individuals to save for retirement in tax-advantaged accounts.
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\345\Sec. 530.
\346\Sec. 529A.
\347\Sec. 401(a).
\348\Sec. 408.
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As a general rule, section 6103 provides that returns and
return information are confidential. The definition of return
information is very broad and includes any information received
or collected by the Internal Revenue Service (``IRS'') with
respect to the liability under the Code of any person for any
tax, penalty, interest, or offense. Returns and return
information cannot be disclosed unless there is an applicable
exception in the Code. Section 6103 contains numerous narrowly
tailored exceptions to the general rule of confidentiality,
grouped into 13 general categories.\349\ Criminal penalties
apply to the willful unauthorized disclosure or inspection of a
return or return information.\350\ The Code also provides a
civil damage remedy for a taxpayer whose return or return
information was disclosed or inspected in a manner not
authorized by section 6103.\351\
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\349\Sec. 6103(c)-(o).
\350\Secs. 7213 (relating to felony unauthorized disclosure) and
7213A (relating to misdemeanor unauthorized inspection).
\351\Sec. 7431.
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REASONS FOR CHANGE

The Committee recognizes that for many Americans it is
difficult to accumulate meaningful savings, particularly when
facing high costs events early in life such as paying for
higher education, postsecondary credentials, or purchasing a
first home. Raising capital can also be a hurdle to starting a
small business. Congress wishes to help alleviate these
challenges by helping Americans begin saving at birth, and by
providing tax-preferred treatment when savings are used for the
costs described above. The Committee also believes that helping
children to begin saving and investing earlier in life will
help promote financial literacy.

EXPLANATION OF PROVISION

In general

The provision establishes a new type of tax-preferred
account, a money account for growth and advancement (``MAGA
account''). A MAGA account is a trust created or organized in
the United States for the exclusive benefit of an individual
and designated at the time of establishment as such (in such
manner as the Secretary shall prescribe), provided that the
written governing instrument creating the trust meets certain
requirements, as described below. A MAGA account is subject to
the unrelated business income tax but is otherwise exempt from
tax.
In order to be eligible for an account, the account
beneficiary must not have attained age eight on the date the
account is established. The individual establishing the account
must provide the trustee his or her Social Security number
(SSN) as well as the account beneficiary's SSN. In addition,
except in the case of a qualified rollover contribution, the
MAGA account may not accept a contribution unless (1) it is in
cash, (2) the account beneficiary is under age 18, (3) the
contribution does not cause the aggregate contributions for the
taxable year to exceed the applicable contribution limit, and
(4) the contribution is made on or after January 1, 2026. For
this purpose, a qualified rollover contribution is an amount
paid in a direct trustee-to-trustee transfer to a MAGA account
from another MAGA account created for the benefit of the same
account beneficiary.
The trustee of the MAGA account must be a bank\352\ or
another person who demonstrates to the satisfaction of the
Secretary that the manner in which the person will administer
the trust will be consistent with the provision's requirements
or who has so demonstrated with respect to an individual
retirement plan. The account beneficiary's interest in the
account must be nonforfeitable. The assets of the trust must
not be commingled with other property except in a common trust
fund or common investment fund, and no trust funds may be
invested in any asset other than eligible investments. For this
purpose, eligible investment means an investment managed by a
regulated investment company\353\ that (1) tracks a well-
established index of United States equities (or that invests in
an equivalent diversified portfolio of United States
equities),\354\ (2) does not use leverage, (3) minimizes costs,
and (4) meets such other criteria as the Secretary determines
appropriate.
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\352\As defined in sec. 408(n).
\353\Within the meaning of sec. 851.
\354\A fund is generally eligible if it tracks an established index
of U.S. equities or otherwise invests in a diversified portfolio of
U.S. equities. This is meant to include traditional indices like the
S&P 500, the Dow Jones Industrial Index, or the Nasdaq 100, as well as
funds that invest in a more generic portfolio of U.S. equities such as
a large-cap or total market fund.
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Under the provision, the contribution limit for a MAGA
account for a taxable year is $5,000 (adjusted for inflation),
except that qualified rollover contributions and contributions
from the Federal Government or any State, local, or tribal
government are not subject to this limit. The exception from
the $5,000 limit also applies to contributions made by certain
tax-exempt organizations through a special program that the
provision directs the Secretary to establish. The Secretary is
directed to establish a program through which contributions may
be made by an exempt organization described under section
501(c) to a large group of account beneficiaries provided that
the MAGA accounts that will receive the contributions are
selected on the basis of the location of the residence of the
account beneficiaries, the school district in which such
beneficiaries attend school, or another basis the Secretary
deems appropriate. In addition, all account beneficiaries must
receive an equal portion of the contribution. The contributions
described in this paragraph that are exempt from the $5,000
limit are not included in the account beneficiary's investment
in the contract.
Distributions are not permitted from the MAGA account until
the account beneficiary attains age 18. At age 18, and before
the account beneficiary attains age 25, the aggregate
distributions must not exceed half of the cash equivalent value
of the account as of the date the beneficiary turned 18.
Distributions from the account that are used for qualified
expenses are taxable as capital gains.\355\ Other distributions
are includible in income and subject to an additional tax of 10
percent if the beneficiary is under age 30. (The portion of any
distribution that is allocable to the investment in the
contract is not includible in income). These distribution rules
do not apply to the distribution of a qualified rollover
contribution. Qualified expenses are (1) qualified higher
education expenses,\356\ (2) qualified post-secondary
credentialing expenses,\357\ (3) under regulations provided by
the Secretary, amounts paid or incurred with respect to any
small business which the beneficiary has obtained through a
small business loan, small farm loan, or similar loan, and (4)
an amount used for the purchase of a principal residence of an
account beneficiary who is a first-time homebuyer.\358\ Upon
attaining age 31, the account ceases to be a MAGA account and
is treated as distributed to the account beneficiary.
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\355\Under sec. 1(h)(12).
\356\As defined in section 529(e)(3), determined without regard to
section 529(c)(7).
\357\Sec. 529(f).
\358\``Purchase'' is defined in section 36(c)(3), ``principal
residence'' in section 121, and ``first-time homebuyer'' in section
36(c)(1).
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An individual is only permitted to be an account
beneficiary of one MAGA account. However, an exception applies
if the entire amount of a MAGA account is rolled over as a
qualified rollover contribution to another MAGA account. In the
case of a duplicate MAGA account that does not meet the above
exception, such account ceases to be treated as a MAGA account
and the entire balance is treated as distributed. In addition,
an excise tax is imposed equal to the amount in the account
that is allocable to income. If notified by the Secretary that
an account is a duplicate account, the trustee must deduct and
withhold the excise tax from the distribution of the account.
For this purpose, a duplicate MAGA account means (1) in the
case of an account beneficiary for whom an account was
established by the Secretary, any other MAGA account of such
beneficiary, and (2) in the case of any other account
beneficiary, any MAGA account established after the first MAGA
account was established for the benefit of such account
beneficiary.
If excess contributions are made to a MAGA account, an
excise tax is imposed on the account beneficiary equal to six
percent of such excess for each taxable year during which
excess contributions are in the account.\359\ Rules after the
death of an account beneficiary are similar to the rules that
apply with respect to health savings accounts.\360\
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\359\Sec. 4973, as amended by this provision to include MAGA
accounts.
\360\Sec. 223(f)(8).
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The trustee of a MAGA account must make reports regarding
the account to the Secretary and to the account beneficiary
with respect to contributions, distributions, the amount of the
investment of the contract, and such other matters as the
Secretary may require. The reports must be filed and furnished
at such time and in such manner as required by the Secretary.
The provision imposes a penalty of $50 for each failure to file
the report unless such failure is due to reasonable cause.\361\
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\361\Sec. 6693, as modified by this provision to include MAGA
accounts.
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The provision includes a new exception to the general rule
of confidentiality in section 6103, authorizing the release of
limited taxpayer information for the sole purpose of enabling
the Secretary to effect deposits from various governmental or
private exempt organizations to the individual accounts of
unrelated account beneficiaries. Upon written request signed by
the head of the bureau or office of Treasury requesting the
inspection or disclosure, and only to the extent necessary to
carry out the purpose described in the preceding sentence, the
following information for each intended beneficiary may be
provided to officers and employees of such bureau or office:
information necessary to identify the account holders in a
particular class of beneficiaries identified by a donor as the
intended recipients; the name, address, and SSN of a
beneficiary; the account custodian and address; the account
number; and the routing number. To the extent determined by the
Secretary in regulations, other information necessary to ensure
proper routing of funds may also be provided. The information
may only be used for the proper routing of funds and may not be
redisclosed by the Secretary.

Program for Federal Government contributions

The provision provides that the Secretary will make a one-
time payment of $1,000 to the MAGA account of each qualifying
child\362\ of a taxpayer, if such qualifying child is an
eligible individual. An eligible individual is a child born
after December 31, 2024 and before January 1, 2029 who is a
United States citizen at birth. If the Secretary determines
that a MAGA account has not been established for an eligible
individual by the qualifying date, the Secretary must establish
the MAGA account for such eligible individual and must notify
the individual with respect to whom the eligible individual is
a qualifying child. The Secretary must provide such individual
with the opportunity to elect to decline the Secretary's
establishment of the account. The qualifying date is the first
date on which a return is filed by an individual with respect
to whom such eligible individual is a qualifying child with
respect to the taxable year to which the return relates.
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\362\As defined in sec. 152(c).
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For purposes of selecting a trustee for a MAGA account
established by the Secretary, the Secretary must take into
account (1) the history of reliability and regulatory
compliance of such trustee, (2) the customer service experience
of such trustee, (3) the costs imposed by such trustee on the
account or account beneficiary, and (4) to the extent
practicable, the preferences of the individual with respect to
whom the eligible individual is a qualifying child.
In order to receive the $1,000 credit, the taxpayer whose
qualifying child is an eligible individual must include on the
return the SSN of such individual, such individual's spouse,
and the eligible individual.\363\
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\363\Omission of a correct Social Security number is treated as a
math error. Sec. 6213(g)(2) (as amended by Part 3.E of Subtitle C,
``Earned Income Tax Credit Reforms'').
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If any taxpayer makes an excessive claim for the $1,000
credit, a penalty of $500 is imposed in the case of negligence
or disregard of rules or regulations,\364\ and a penalty of
$1,000 is imposed in the case of fraud.
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\364\Negligence and disregard are defined under section 6662.
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EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2024.

PART III--INVESTING IN HEALTH OF AMERICAN FAMILIES AND WORKERS

A. Treatment of Health Reimbursement Arrangements Integrated With
Individual Market Coverage (sec. 110201 of the bill and sec. 9815 of
the Code)

PRESENT LAW

Group health plan requirements

The Internal Revenue Code (the ``Code'') imposes various
requirements with respect to employment-related health plans,
referred to for this purpose as group health plans.\365\ The
Patient Protection and Affordable Care Act (``PPACA'')\366\
expanded the market reform requirements applicable to group
health plans.\367\ These requirements include a prohibition on
lifetime or annual limits,\368\ a coverage mandate regarding
preventive services,\369\ and a requirement to provide
summaries of benefits and coverage.\370\ In addition, insurance
issued to a fully-insured group health plan in the small group
market is subject to additional requirements, including a
prohibition on group-by-group rating.\371\
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\365\See, e.g., sec. 4980B (relating to continuation coverage or
``COBRA'' requirements) and Chapter 100 (secs. 9801-9834, relating to
various additional requirements, such as prohibitions on preexisting
condition exclusions and discrimination based on health status). Code
section 5000 also imposes Medicare secondary payor requirements on
group health plans.
\366\Pub. L. No. 111-148, March 23, 2010, as amended by the Health
Care and Education Reconciliation Act of 2010 (``HCERA''), Pub. L. No.
111-152, March 30, 2010. PPACA and HCERA are referred to collectively
as the PPACA.
\367\See, e.g., secs. 2711 and 2713 of the Public Health Service
(``PHS'') Act, 42 U.S.C. secs. 300gg-11 and 300gg-13. These provisions
of the PPACA are incorporated into the Code through section 9815.
\368\Sec. 2711 of the PHS Act, 42 U.S.C. sec. 300gg-11.
\369\Sec. 2713 of the PHS Act, 42 U.S.C. sec. 300gg-13.
\370\Sec. 2715 of the PHS Act, 42 U.S.C. sec. 300gg-15.
\371\Sec. 2701 of the PHS Act, 42 U.S.C. sec. 300gg.
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Under the Code, an employer is generally subject to an
excise tax of $100 a day per employee if it sponsors a group
health plan that fails to meet any of these requirements.\372\
Generally, if the failure is due to reasonable cause and not to
willful neglect, the maximum tax that can be imposed for
failures during a taxable year is the lesser of 10 percent of
the employer's group health plan expenses for the prior year or
$500,000. In some cases, the excise tax does not apply if the
failure is due to reasonable cause and not to willful neglect
and the failure is corrected within a certain period. In
addition, in some cases in which failure is due to reasonable
cause and not to willful neglect, some or all of the excise tax
may be waived to the extent payment of the tax would be
excessive relative to the failure involved.
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\372\Section 4980B(a) and (b) apply to a violation of the COBRA
requirements, subject to an exception for plans of employers with fewer
than 20 employees. Section 4980D(a) and (b) apply to a violation of the
requirements under Chapter 100, subject to an exception for a plan of
an employer with no more than 50 employees if coverage is provided
solely through insurance. In some cases, a party other than the
employer, such as a multiemployer plan, may be liable for the tax. For
simplicity, this document refers to ``employers'' to indicate all such
entities that may sponsor group health plans.
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Other health rules under the Code

Under the PPACA, ``minimum essential coverage'' includes
employer-sponsored coverage under a group health plan, other
than certain types of limited coverage, such as coverage only
for vision or dental medical services.\373\ Minimum essential
coverage also includes coverage purchased in the individual
insurance market, other than certain types of limited coverage,
such as coverage only for vision or dental medical services.
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\373\Sec. 5000A.
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An advanceable, refundable income tax credit, the premium
tax credit (``premium assistance credit'' or ``premium tax
credit''), is available to certain individuals who purchase
health insurance coverage in the individual market through an
American Health Benefit Exchange (an ``Exchange'').\374\
However, an employee is generally not eligible for the premium
tax credit if his or her employer offers affordable minimum
essential coverage under a group health plan and the coverage
provides minimum value. For this purpose, coverage is
affordable if the employee's share of the premium for self-only
coverage under the group health plan is not more than 9.02
percent (for 2025)\375\ of the employee's household income. To
provide minimum value, the coverage offered under the group
health plan must cover at least 60 percent of the total costs
of benefits covered under the plan. An individual who applies
for advance payment of the premium tax credit with respect to
Exchange coverage for a year must provide the Exchange with
certain information, including information relating to
employer-provided minimum essential coverage.\376\
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\374\Sec. 36B. An Exchange is established under section 1311 of the
PPACA, 42 U.S.C. sec. 13031. Lower-income individuals who are eligible
for the premium tax credit and enrolled in health insurance coverage
purchased on an Exchange may also be eligible for cost-sharing
reductions under section 1402 of the PPACA, 42 U.S.C. sec. 18071.
\375\Rev. Proc. 2024-35, 2024-39 I.R.B. 638. This percentage is
updated as needed to reflect cost-of-living changes.
\376\Sec. 1411(b) of the PPACA, 42 U.S.C. sec. 18081(b). This
information is subject to verification during the Exchange process
under section 1411(c) and (d).
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If an applicable large employer fails to offer employees
minimum essential coverage, or offers minimum essential
coverage that either is not affordable (under the standard
described above) or fails to provide minimum value, and any
employee is allowed the premium tax credit, the employer may be
subject to a tax penalty.\377\ For this purpose, applicable
large employer generally means, with respect to a calendar
year, an employer that employed an average of at least 50 full-
time employees (including full-time equivalents) on business
days during the preceding calendar year.\378\
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\377\Sec. 4980H.
\378\In determining whether an employer is an applicable large
employer (that is, whether the employer has at least 50 full-time
employees), besides the number of full-time employees, the employer
must include the number of its full time equivalent employees for a
month, determined by dividing the aggregate number of hours of service
of employees who are not full-time employees for the month by 120. In
addition, in determining applicable large employer status, members of
the same controlled group, group under common control, and affiliated
service group under section 414(b), (c), (m) and (o) are treated as a
single employer.
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Health reimbursement arrangements

In addition to offering health coverage, employers
sometimes reimburse medical expenses of their employees (and
their spouses and dependents). These arrangements are sometimes
used by employers to pay or reimburse employees for medical
expenses that are not covered by health insurance and are
commonly referred to as health reimbursement arrangements
(``HRAs'').\379\
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\379\See secs. 105(b) and 106; Rev. Rul. 61-146, 1961-2 C.B. 25;
Notice 2002-45, 2002-2 C.B. 93, July 15, 2002, and Rev. Rul. 2002-41,
2002-2 C.B. 75. Under section 105(h), a self-insured HRA must meet
certain nondiscrimination requirements in order for the benefits
provided to a highly compensated individual to be excluded from income.
For this purpose, the following groups of employees may be excluded:
employees who have not completed three years of service with the
employer, employees under age 25, part-time or seasonal employees,
employees covered by a collective bargaining agreement if health
benefits were the subject of good faith bargaining, and nonresident
aliens with no earned income from sources within the United States.
Employer payments and reimbursements for health insurance and medical
expenses are also excluded from wages for employment tax purposes.
Secs. 3121(a)(2), 3231(e)(1), 3306(b)(2), 3401(a)(20); Rev. Rul. 56-
632, 1956-2 C.B. 101. For simplicity, this document refers to ``HRAs''
to indicate all arrangements to which the individual coverage HRA final
rules (described later in this document) apply.
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The amounts in an HRA can be used only to reimburse medical
expenses (which may include health insurance premiums), and
HRAs cannot be funded on a salary reduction basis. HRAs have a
maximum dollar amount for each coverage period, and amounts
remaining in an HRA at the end of the year may be carried
forward to be used to reimburse medical expenses in following
years.\380\
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\380\General guidance with respect to HRAs is provided in Notice
2002-45.
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An employee may exclude amounts provided through an HRA
from gross income. For employer payments or reimbursements
under an HRA to be excluded from gross income, expenses must be
substantiated and an employee must be entitled to receive
payments from the employer only if he or she incurs qualifying
expenses.\381\
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\381\Treas. Reg. sec. 1.105-2.
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After the enactment of the PPACA and before the
establishment of individual coverage HRAs (as described below),
an HRA generally failed to meet the group health plan
requirements imposed by the PPACA unless the HRA complied with
IRS rules relating to HRAs provided in conjunction with (or
``integrated'' with) certain other employer-sponsored coverage
that met the group health plan requirements.\382\ An HRA that
is integrated with such employer-sponsored coverage is often
referred to as an ``integrated'' HRA, and an HRA that is not
integrated with such employer-sponsored coverage is often
referred to as a ``stand-alone'' HRA. Thus, an employer could
be subject to an excise tax if it provided employees a stand-
alone HRA covering medical expenses, with the exception of
certain limited benefits, for example, coverage only for vision
or dental medical services.\383\
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\382\See, e.g., Notice 2013-54, 2013-40 I.R.B. 287, September 30,
2013. The 21st Century Cures Act created a limited exception to this
rule in the form qualified small employer health reimbursement
arrangements (``QSEHRAs''). Unlike traditional HRAs, QSEHRAs are
designed so that small employers may subsidize employees' purchase of
individual coverage on an Exchange. Pub. L. No. 114-255, sec. 18001,
December 13, 2016.
\383\See Notice 2015-87, 2015-52 I.R.B. 889, December 28, 2015.
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Individual coverage HRAs
In 2019, final rules were issued permitting employers to
contribute to HRAs used in conjunction with the purchase of
individual health insurance coverage, without violating the
group health plan requirements (the ``final rules'').\384\ The
final rules provide that employers may offer employees an
``individual coverage HRA,'' and that, if those individuals use
the amounts contributed to that HRA in conjunction with the
purchase of health insurance coverage on the individual market,
the group health plan meets the relevant group health plan
requirements. An individual coverage HRA may also be used in
conjunction with coverage under Medicare Part A and B or
C.\385\
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\384\T.D. 9867, 84 Fed. Reg. 28888, June 20, 2019. The final rules
were issued in conjunction with the Departments of Labor and Health and
Human Services.
\385\Treas. Reg. sec. 54.9802-4(e).
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Individual coverage HRAs are subject to detailed
regulations, including the following requirements: the terms of
the individual coverage HRA must require that employees,
spouses, and dependents enrolled in the HRA also be enrolled in
individual health insurance coverage;\386\ employers are not
permitted to allow employees to choose between an individual
coverage HRA and traditional employment-related health
coverage;\387\ employers are required to offer individual
coverage HRAs on the same terms to all employees within
enumerated classes of employees;\388\ generally, employers are
required to provide employees notice regarding the individual
coverage HRA at least 90 calendar days before the beginning of
the plan year;\389\ and employers are required to adopt
reasonable procedures for substantiation regarding individuals'
enrollment in qualifying individual coverage.\390\
---------------------------------------------------------------------------
\386\Treas. Reg. sec. 54.9802-4(c)(1).
\387\Treas. Reg. sec. 54.9802-4(c)(2).
\388\Treas. Reg. sec. 54.9802-4(c)(3).
\389\Treas. Reg. sec. 54.9802-4(c)(6).
\390\Treas. Reg. sec. 54.9802-4(c)(5).
---------------------------------------------------------------------------
Because individual coverage HRAs are employer-sponsored
group plans, individuals enrolled in individual coverage HRAs
are not eligible for the premium tax credit. Furthermore, the
final rules include an affordability test, under which the
value of the employer contribution to the individual coverage
HRA is compared to the price of the lowest cost silver plan
available to the employee. Similar to the rule for traditional
group health plans, if the employee's share of the premium for
self-only coverage under that plan is more than 9.02 percent
(for 2025) of the employee's household income, the individual
coverage HRA is not considered affordable and the employee may
be entitled to the premium tax credit for individual health
coverage purchased on an Exchange.\391\
---------------------------------------------------------------------------
\391\Treas. Reg. sec. 1.36B-2(c)(3). An individual coverage HRA
that is affordable is also treated as providing minimum value.
---------------------------------------------------------------------------
In addition to amounts contributed to an individual
coverage HRA by the employer, employees may make contributions
through a cafeteria plan to purchase individual coverage if,
for example, the employer's contribution to the individual
coverage HRA is less than the premium for the individual
coverage selected by the employee. However, amounts available
through a cafeteria plan may not be used to purchase individual
health coverage on an Exchange, so, in these circumstances,
employees must purchase off-Exchange coverage.\392\
---------------------------------------------------------------------------
\392\Sec. 125(f)(3), providing that an employer generally may not
provide for a qualified health plan offered through an Exchange as a
cafeteria plan benefit.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that individual coverage HRAs have
greatly enhanced the health coverage options available to
individuals, families, and employers. Individual coverage HRAs
have provided more choice and flexibility for working people,
and have saved employers, particularly small businesses, on the
administrative expenses and burdens associated with traditional
employer-sponsored health insurance. The Committee therefore
believes it is appropriate to codify the regulations permitting
the adoption of these arrangements, to ensure that families and
businesses may continue to benefit from them, and to make
certain changes to make these arrangements more administrable
and attractive.

EXPLANATION OF PROVISION

The provision generally codifies the final rules permitting
employers to offer individual coverage HRAs--renamed as Custom
Health Option and Individual Care Expense, or ``CHOICE,''
arrangements--without violating the group health plan
requirements. Thus, the provision specifies that a CHOICE
arrangement that otherwise satisfies the requirements
prescribed in the provision complies with sections 2711 and
2713 of the PHS Act. In addition, the provision specifies that
a CHOICE arrangement complies with section 9802 of the Code and
section 2705 of the PHS Act relating to non-discrimination.
The provision makes three changes from the final rules.
First, it specifies that CHOICE arrangements that otherwise
satisfy the requirements prescribed in the provision also
satisfy the requirement of section 2715 of the PHS Act to
provide a summary of benefits and coverage. Second, the
provision allows an employer that offers its employees a fully-
insured group health plan subject to the requirements of the
small group market to offer the employees offered that plan a
choice between that plan and a CHOICE arrangement. Third, the
provision amends the notice requirement to provide that
employers generally must provide the required notice no later
than 60 days before the beginning of the plan year.
In detail, the provision defines a CHOICE arrangement as an
HRA under which payments or reimbursements may be made only for
medical care during periods during which a covered individual
is also covered under individual health insurance coverage
offered in the individual market (other than coverage that
consists solely of excepted benefits) or under Medicare parts A
and B or C. In addition, a CHOICE arrangement must meet the
following requirements:
The CHOICE arrangement must be offered to
all employees in the same class of employees on the
same terms.
The employer may not offer any other group
health plan (other than an account-based plan or a plan
consisting solely of excepted benefits) to any
employees in such a class, with an exception for the
offer of a fully-insured plan subject to the small
group market requirements.
The CHOICE arrangement must have reasonable
procedures to substantiate that the covered individuals
are, or will be, enrolled in qualifying individual
market coverage as of the beginning date of coverage
under the arrangement; and that the covered individuals
remain so enrolled when requests are made for payment
or reimbursement of medical care.
A CHOICE arrangement generally must provide
each employee eligible to participate in the in the
CHOICE arrangement with written notice of the
employee's rights and obligations under the arrangement
not later than 60 days before the beginning of the plan
year. The notice must be sufficiently accurate and
comprehensive to apprise the employee of such rights
and obligations and be written in a manner calculated
to be understood by the average employee eligible to
participate.
The provision includes the following classes of employees:
Full-time employees;
Part-time employees;
Salaried employees;
Non-salaried employees;
Employees whose primary site of employment
is in the same rating area;
Employees who are included in a collective
bargaining unit;
Employees who have not met a waiting period
requirement;
Seasonal employees;
Employees who are non-resident aliens and
who receive no earned income (within the meaning of
section 911(d)(2)) from the employer which constitutes
income from sources within the United States;\393\ and
---------------------------------------------------------------------------
\393\Under the section 861(a)(3) rules for the source of income
from personal services.
---------------------------------------------------------------------------
Such other classes as designated by the
Treasury.
Under the provision, an employer may designate two or more
of the classes as specified classes to which the arrangement is
offered, and distinctions regarding full-time, part-time, and
seasonal employees must be made under rules similar to those
that apply under sections 105(h) or 4980H, at the election of
the employer for the upcoming plan year. An arrangement does
not fail to qualify as a CHOICE arrangement merely because the
maximum dollar amount varies within a class provided that the
variation is due to an increase in the number of additional
individuals covered under an employee's arrangement, or
increases as the age of the employee increases (as long as the
increase is not in excess of 300 percent of the lowest maximum
dollar amount available). Finally, an employer that currently
offers a traditional group health plan to a class of employees
is permitted to prospectively offer newly-hired employees in
that class a CHOICE arrangement while continuing to offer
previously-hired employees a traditional health plan without
violating the rule prohibiting differing offers within a class
of employees.
The provision provides that, to the extent not inconsistent
with the provision, no inference is intended with respect to
the individual coverage HRA final rules. The provision also
specifies that all references in the provision to CHOICE
arrangements must be treated as including references to
individual coverage HRAs, so that references in statute and
regulations referring to CHOICE arrangements refer equally to
CHOICE arrangements and individual coverage HRAs offered under
the final rules.
The provision directs the Secretaries of the Treasury,
Labor, and Health and Human Services (``HHS'') to modify the
final rules as may be necessary to conform them with the three
amendments made by this provision.
Finally, the provision provides that employers are required
to report the total permitted benefits for enrolled individuals
in the CHOICE arrangement on Form W-2.\394\
---------------------------------------------------------------------------
\394\Sec. 6051(a).
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision is effective for plans years beginning after
December 31, 2025.

Participants in CHOICE Arrangement Eligible for Purchase of Exchange
Insurance Under Cafeteria Plan (sec. 110202 of the bill and sec. 125 of
the Code)

PRESENT LAW

For a general description of individual coverage HRAs and
CHOICE arrangements, see Section A of this Part.
There is no Federal requirement that employers offer health
insurance coverage to employees or their families. However, as
with other compensation, the cost of employer-provided health
coverage is a deductible business expense under section
162.\395\ In addition, employer-provided health insurance
coverage is generally not included in an employee's gross
income.\396\
---------------------------------------------------------------------------
\395\Sec. 162. However, see special rules in sections 419 and 419A
for the deductibility of contributions to welfare benefit plans with
respect to medical benefits for employees and their dependents.
\396\Sec. 106.
---------------------------------------------------------------------------

Definition of a cafeteria plan

If an employee receives a qualified benefit (as defined
below) based on the employee's election between the qualified
benefit and a taxable benefit under a cafeteria plan, the
qualified benefit generally is not includable in gross
income.\397\ However, if a plan offering an employee an
election between taxable benefits (including cash) and
nontaxable qualified benefits does not meet the requirements
for being a cafeteria plan, the election between taxable and
nontaxable benefits results in gross income to the employee,
regardless of what benefit is elected and when the election is
made.\398\ A cafeteria plan is a separate written plan under
which all participants are employees, and participants are
permitted to choose among at least one permitted taxable
benefit (for example, current cash compensation) and at least
one qualified benefit. Finally, a cafeteria plan generally must
not provide for deferral of compensation.\399\
---------------------------------------------------------------------------
\397\Sec. 125(a).
\398\Prop. Treas. Reg. sec. 1.125-1(b).
\399\There are exceptions enumerated in section 125(d)(2)(B), (C),
and (D).
---------------------------------------------------------------------------

Qualified benefits

Qualified benefits under a cafeteria plan are generally
employer-provided benefits that are not includable in gross
income under an express provision of the Code. Examples of
qualified benefits include employer-provided health insurance
coverage, group term life insurance coverage not in excess of
$50,000, and benefits under a dependent care assistance
program. In order to be excludable, any qualified benefit
elected under a cafeteria plan must independently satisfy any
requirements under the Code section that provides the
exclusion. However, some employer-provided benefits that are
not includable in gross income under an express provision of
the Code are explicitly not allowed in a cafeteria plan. These
benefits are generally referred to as nonqualified benefits.
Examples of nonqualified benefits include scholarships;\400\
educational assistance;\401\ and fringe benefits.\402\ A plan
offering any nonqualified benefit is not a cafeteria plan.\403\
---------------------------------------------------------------------------
\400\Sec. 117.
\401\Sec. 127.
\402\Sec. 132.
\403\Prop. Treas. Reg. sec. 1.125-1(q).
---------------------------------------------------------------------------

Payment of health insurance premiums through a cafeteria plan

Employees participating in a cafeteria plan may be able to
pay the portion of premiums for health insurance coverage not
otherwise paid for by their employers on a pre-tax basis
through salary reduction.\404\ Such salary reduction
contributions are treated as employer contributions for
purposes of the Code, and are thus excluded from gross income.
---------------------------------------------------------------------------
\404\Sec. 125.
---------------------------------------------------------------------------
Prior to the enactment of the PPACA, one way that employers
could offer employer-provided health insurance coverage for
purposes of the tax exclusion was to offer to reimburse
employees for the premiums for health insurance purchased by
employees in the individual health insurance market. The
payment or reimbursement of employees' substantiated individual
health insurance premiums was excludible from employees' gross
income.\405\ This reimbursement for individual health insurance
premiums could also be paid for through salary reduction under
a cafeteria plan.\406\
---------------------------------------------------------------------------
\405\Rev. Rul. 61-146, 1961-2 C.B. 25.
\406\Prop. Treas. Reg. sec. 1.125-1(m).
---------------------------------------------------------------------------
Such an offer to reimburse individual health insurance
premiums constituted a group health plan. Before the
publication of the individual coverage HRA final rules,
however, the PPACA market reforms generally made it impossible
for a group health plan offered in this manner to satisfy the
group health plan requirements.\407\
---------------------------------------------------------------------------
\407\See Notice 2013-54, 2013-40 I.R.B. 287, September 30, 2013;
FAQs about Affordable Care Act Implementation (PART XXII), November 6,
2014.
---------------------------------------------------------------------------
In addition, the PPACA generally forbids employees from
purchasing Exchange coverage using funds provided by an
employer under a cafeteria plan. Specifically, the PPACA
provides that reimbursement (or direct payment) for the
premiums for coverage under any qualified health plan offered
through an Exchange is a qualified benefit under a cafeteria
plan only if the employer is a qualified employer.\408\ Under
section 1312(f)(2) of the PPACA, a qualified employer is
generally a small employer that elects to make all its full-
time employees eligible for one or more qualified plans offered
in the small group market through an Exchange.\409\ Otherwise,
reimbursement (or direct payment) for the premiums for coverage
under any qualified health plan offered through an Exchange is
not a qualified benefit under a cafeteria plan. Thus, an
employer cannot offer to reimburse an employee for the premium
for a qualified plan that the employee purchases through the
individual market in an Exchange as a health insurance coverage
option under its cafeteria plan, including in conjunction with
an individual coverage HRA.
---------------------------------------------------------------------------
\408\Sec. 125(f)(3).
\409\State may allow issuers of health insurance coverage in the
large group market to offer qualified plans on an Exchange. In that
event, a qualified employer includes a large employer that elects to
make all its full-time employees eligible for one or more qualified
plans offered in the large group market through an Exchange. See sec.
1312(f)(2) of the PPACA.
---------------------------------------------------------------------------

REASONS FOR CHANGE

Currently, an employee enrolled in an individual coverage
HRA is not allowed to reduce his or her salary to pay for
health insurance purchased on an Exchange. This rule makes it
more difficult for employers and employees to use individual
coverage HRAs, and disadvantages participants in individual
coverage HRAs that are offered in conjunction with salary
reduction. The Committee believe that all employees should have
the right to purchase individual health insurance on the same
terms when covered by a CHOICE arrangement.

EXPLANATION OF PROVISION

The provision permits employees enrolled in a CHOICE
arrangement in conjunction with a cafeteria plan to use salary
reduction to purchase health insurance coverage on an Exchange.
Therefore, employees participating in a CHOICE arrangement that
is available in conjunction with a cafeteria plan may now
purchase individual Exchange coverage using a cafeteria plan
election, similar to CHOICE arrangement participants not using
salary reduction.\410\
---------------------------------------------------------------------------
\410\As described in the description of the provision in Section A
of this Part, all references to CHOICE arrangements incorporate
reference to individual coverage HRAs offered under the individual
coverage HRA final rules.
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Employer Credit for CHOICE Arrangement (sec. 110203 of the bill and new
sec. 45BB of the Code)

PRESENT LAW

For a general description of individual coverage HRAs and
CHOICE arrangements, see Section A of this Part.

REASONS FOR CHANGE

The Committee believes that individual coverage HRAs have
greatly enhanced the health coverage options available to
individuals, families, and employers. Take-up of this health
coverage model may be muted, however, by employer unfamiliarity
and hesitancy. The Committee therefore believes it is
appropriate to encourage small businesses to change to the
CHOICE arrangement model through a tax credit.

EXPLANATION OF PROVISION

The provision establishes a new credit for employers whose
employees are enrolled in CHOICE arrangements maintained by the
employer. The credit is determined with respect to each
employee enrolled in such a CHOICE arrangement during the
credit period, which is the first two one-year periods
beginning with the month during which the employer first
establishes a CHOICE arrangement of behalf of its employees.
The credit equals (1) $100 multiplied by the number of
months for which the employee is enrolled in the CHOICE
arrangement during the first year of the credit period, and (2)
one-half of the dollar amount in (1), multiplied by the number
of months the employee is enrolled in the CHOICE arrangement
during the second year of the credit period. The $100 amount is
adjusted for inflation beginning in 2027.
In order to be eligible for the credit, the employer must
not (with respect to any taxable year beginning in a calendar
year) be an applicable large employer for the calendar year
under section 4980H. In addition, an employee is not taken into
account for the credit unless the employee would be treated as
eligible for minimum essential coverage for purposes of the
premium tax credit, without regard to whether the employee has
enrolled in the Choice arrangement offered by the employer.
Therefore, the credit is available only when the employer's
offer of a CHOICE arrangement constitutes affordable minimum
essential coverage that provides minimum value.\411\
---------------------------------------------------------------------------
\411\The IRS has published regulations for determining when an
individual coverage HRA (and thus a CHOICE arrangement) constitutes
such coverage at Treas. Reg. sec. 1.36B-2(c)(5).
---------------------------------------------------------------------------
The credit is part of the general business credit and is
allowed against the alternative minimum tax.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Individuals Entitled to Part A of Medicare by Reason of Age Allowed to
Contribute to Health Savings Accounts (sec. 110204 of the bill and sec.
223 of the Code)

PRESENT LAW

Health savings accounts

An individual may contribute to a health savings account
(an ``HSA'') only if the individual is covered under a plan
that meets the requirements for a high deductible health plan,
as described below. In general, HSAs provide tax-favored
treatment for current medical expenses, as well as the ability
to save on a tax-favored basis for future medical expenses. In
general, an HSA is a tax-exempt trust or custodial account
created exclusively to pay for the qualified medical expenses
of the account holder and his or her spouse and dependents.
Within limits,\412\ contributions to an HSA made by or on
behalf of an eligible individual (with the exception of
contributions by the individual's employer) are deductible by
the individual. HSA contributions made on behalf of an eligible
individual by their employer are excludible from income and
from wages for employment tax purposes. Earnings on amounts in
HSAs are not taxable. Distributions from an HSA used for
qualified medical expenses are not includible in gross income.
Distributions from an HSA that are not used for qualified
medical expenses are includible in gross income and are subject
to an additional tax of 20 percent. The 20-percent additional
tax does not apply if the distribution is made after death,
disability, or the individual attains the age of Medicare
eligibility (age 65).
---------------------------------------------------------------------------
\412\For 2025, the basic limit on annual contributions that can be
made to an HSA is $4,300 in the case of self-only coverage and $8,550
in the case of family coverage. Rev. Proc. 2024-25, 2024-22 I.R.B.
1333. The basic annual contribution limits are increased by $1,000 for
individuals who have attained age 55 by the end of the taxable year
(referred to as ``catch-up'' contributions). Sec. 223(b)(3).
---------------------------------------------------------------------------

High deductible health plans

A high deductible health plan (an ``HDHP'') is a health
plan that has an annual deductible which is not less than
$1,650 (for 2025) for self-only coverage (twice this amount for
family coverage), and for which the sum of the annual
deductible and other annual out-of-pocket expenses (other than
premiums) for covered benefits does not exceed $8,300 (for
2025) for self-only coverage (twice this amount for family
coverage).\413\ These dollar thresholds are adjusted for
inflation.\414\
---------------------------------------------------------------------------
\413\Ibid. Sec. 223(c)(2).
\414\Sec. 223(g).
---------------------------------------------------------------------------
An individual who is covered under an HDHP is eligible to
contribute to an HSA, provided that while such individual is
covered under the HDHP, the individual is not covered under any
health plan that (1) is not an HDHP and (2) provides coverage
for any benefit (subject to certain exceptions) covered under
the HDHP.\415\
---------------------------------------------------------------------------
\415\Sec. 223(c)(1).
---------------------------------------------------------------------------
Various types of coverage are disregarded for this purpose,
including coverage of any benefit provided by permitted
insurance, coverage (whether through insurance or otherwise)
for accidents, disability, dental care, vision care, or long-
term care, as well as certain limited coverage through health
flexible spending arrangements.\416\ Permitted insurance means
insurance under which substantially all of the coverage
provided relates to liabilities incurred under workers'
compensation laws, tort liabilities, liabilities relating to
ownership or use of property, or such other similar liabilities
as specified by the Secretary of the Treasury (the
``Secretary'') under regulations. Permitted insurance also
means insurance for a specified disease or illness and
insurance paying a fixed amount per day (or other period) of
hospitalization.\417\
---------------------------------------------------------------------------
\416\Sec. 223(c)(1)(B).
\417\Sec. 223(c)(3).
---------------------------------------------------------------------------
Under a safe harbor, an HDHP is permitted to provide
coverage for preventive care before satisfaction of the minimum
deductible.\418\ IRS guidance provides for the types of
coverage that constitute preventive care for this purpose.\419\
---------------------------------------------------------------------------
\418\Sec. 223(c)(2)(C).
\419\Notice 2004-23, 2004-1 C.B. 725. See also Notice 2004-50,
2004-33 I.R.B. 196, August 16, 2004, Q&A's-26 and 27; Notice 2008-59,
2008-29 I.R.B. 123, July 21, 2008; Notice 2013-57, 2013-40 I.R.B. 293,
September 30, 2013; Notice 2019-45, 2019-32 I.R.B. 593, August 5, 2019;
and Notice 2024-75, 2024-44 I.R.B. 1026, October 28, 2024.
---------------------------------------------------------------------------

Health savings accounts and entitlement to Medicare

After an individual has attained age 65 and becomes
enrolled in Medicare benefits, contributions can no longer be
made to the individual's HSA.\420\ An individual who is
receiving retirement benefits from Social Security or the
Railroad Retirement Board is automatically enrolled in both
Medicare Part A (hospital insurance benefits) and Part B
(supplementary medical insurance benefits) starting the first
day of the month in which he or she attains age 65.\421\ When
an individual is automatically enrolled in Medicare at age 65,
the amount that can be deducted by that individual for
contributions to the HSA drops to zero for the first month (and
each subsequent month) that the individual is entitled to
Medicare benefits.\422\ In addition, the 20-percent additional
tax that otherwise applies to distributions not used for
qualified medical expenses does not apply if the distribution
is made after the individual attains age 65.
---------------------------------------------------------------------------
\420\See sec. 223(b)(7), as interpreted by Notice 2004-2, 2004-2
I.R.B. 269, January 12, 2004, corrected by Announcement 2004-67, 2004-
36 I.R.B. 459, September 7, 2004 (``After an individual has attained
age 65 and becomes enrolled in Medicare benefits, contributions,
including catch-up contributions, cannot be made to an individual's
HSA.''). See also Notice 2004-50, 2004-33 I.R.B. 196, August 16, 2004,
Q&A-2 (``Thus, an otherwise eligible individual under section 223(c)(1)
who is not actually enrolled in Medicare Part A or Part B may
contribute to an HSA until the month that individual is enrolled in
Medicare.''); Notice 2008-59, 2008-29 I.R.B. 123, July 21, 2008, Q&A-5
and Q&A-6 (``[A]n individual is not an eligible individual under
section 223(c)(1) in any month during which such individual is both
eligible for benefits under Medicare and enrolled to receive benefits
under Medicare[, including Part D (or any other Medicare benefit)]'').
See also Treas. Reg. sec. 54.4980B-7 Q&A(3)(b) (regarding
``entitlement'' to Medicare benefits: ``A qualified beneficiary becomes
entitled to Medicare benefits upon the effective date of enrollment in
either part A or B, whichever occurs earlier. Thus, merely being
eligible to enroll in Medicare does not constitute being entitled to
Medicare benefits.'').
\421\Sec. 226(a) of the Social Security Act, 42 U.S.C. sec. 426(a).
Medicare Part B, however, is a voluntary program, and enrollees must
pay premiums. See sec. 1839 of the Social Security Act, 42 U.S.C. sec.
1395r.
\422\Sec. 223(b)(7).
---------------------------------------------------------------------------

Qualified medical expenses

Generally, for purposes of distributions from HSAs,
qualified medical expenses\423\ mean amounts paid for medical
care\424\ or menstrual care products. Medical care generally
means amounts paid for the diagnosis, cure, mitigation,
treatment and prevention of disease, or for the purpose of
affecting any structure or function of the body, as well as
transportation primarily for and essential to medical care.
Health insurance premiums are generally not qualified medical
expenses,\425\ but an individual who attains the age of
Medicare eligibility (age 65) may use an HSA to pay for health
insurance other than a Medicare supplemental policy.\426\
---------------------------------------------------------------------------
\423\Sec. 223(d)(2).
\424\Based on the definition under sec. 213(d).
\425\Sec. 223(d)(2)(B).
\426\As defined in section 1882 of the Social Security Act, 42
U.S.C. sec. 1395ss. Sec. 223(d)(2)(C)(iv).
---------------------------------------------------------------------------

REASONS FOR CHANGE

As Americans increasingly work later into their lives, the
Committee believes that an individual should not be precluded
from contributing to an HSA because the individual is entitled
to Medicare Part A merely because the individual has elected to
receive Social Security retirement benefits.

EXPLANATION OF PROVISION

Under the provision, with respect to an individual who is
Medicare eligible but enrolled only in Medicare Part A, such
coverage does not cause the allowable deduction for
contributions to an HSA to become zero during any month for
such individual. Such coverage also does not cause an
individual to be considered as having a health plan or other
coverage that would cause that individual to fail to be an
eligible individual for purposes of making contributions to an
HSA. Thus, an individual eligible for Medicare but enrolled
only in Medicare Part A would not fail to be treated as
eligible to make HSA contributions merely by reason of
enrollment in Medicare Part A.
In addition, the provision provides that individuals who
have attained age 65 and who are eligible to contribute to an
HSA generally may not use HSA funds to pay for health
insurance, unlike other individuals who have attained age 65,
and that the 20-percent additional tax on HSA distributions
that otherwise does not apply to individuals who have attained
age 65 continues to apply if the individual is an eligible
individual.

EFFECTIVE DATE

The provision applies to months beginning after December
31, 2025.

Treatment of Direct Primary Care Service Arrangements (sec. 110205 of
the bill and sec. 223 of the Code)

PRESENT LAW

Direct primary care service arrangements

For a general description of HSA eligibility, see Section D
of this Part.
Under present law, a direct primary care service
arrangement may constitute other health coverage, depending on
the specific attributes of the arrangement, and therefore an
individual covered by a direct primary care service arrangement
may not be eligible to contribute to an HSA.\427\
---------------------------------------------------------------------------
\427\See IRS, Certain Medical Care Arrangements, proposed rule, 85
Fed. Reg. 35398, June 10, 2020. In the proposed rule, the IRS proposed
defining a direct primary care arrangement as a contract between an
individual and one or more primary care physicians under which the
physician or physicians agree to provide medical care for a fixed
annual or periodic fee without billing a third party.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that direct primary care service
arrangements are an important tool for families looking for
low-cost, high-quality primary care, and that current law may
impede the use of direct primary care service arrangements
because taxpayers may not be able to contribute to an HSA at
the same time they are enrolled in a direct primary care
service arrangement. The Committee therefore believes it is
vital to make clear that individuals enrolled in direct primary
care service arrangements may continue to contribute to HSAs
and may use HSA funds to pay for these types of arrangements.

EXPLANATION OF PROVISION

Under the provision, a direct primary care service
arrangement is not treated as a health plan that makes an
individual ineligible to contribute to an HSA. For this
purpose, a direct primary care service arrangement means, with
respect to any individual, an arrangement under which such
individual is provided medical care consisting solely of
primary care services provided by primary care
practitioners\428\ if the sole compensation for such care is a
fixed periodic fee. With respect to any individual for any
month, the aggregate fees for all direct primary care service
arrangements for such individual for such month cannot exceed
$150 per month (in the case of an individual with any such
arrangement that covers more than one individual, twice such
dollar amount). The aggregate limit is adjusted annually for
inflation.
---------------------------------------------------------------------------
\428\As defined in section 1833(x)(2)(A) of the Social Security
Act, 42 U.S.C. sec. 13951, without regard to clause (ii) thereof.
---------------------------------------------------------------------------
For this purpose, the term ``primary care services'' does
not include (1) procedures that require the use of general
anesthesia, (2) prescription drugs other than vaccines
(therefore, vaccines are permitted primary care services), and
(3) laboratory services not typically administered in an
ambulatory primary care setting. The Secretary, after
consultation with the Secretary of HHS, is required to issue
regulations or other guidance related to application of this
rule. Finally, fees paid for any direct primary care service
arrangement are treated as medical expenses (and not the
payment of insurance).

EFFECTIVE DATE

The provision applies to months beginning after December
31, 2025.

Allowance of Bronze and Catastrophic Plans in Connection With Health
Savings Accounts (sec. 110206 of the bill and sec. 223 of the Code)

PRESENT LAW

For a general description of HDHPs, see Section D of this
Part.
Plans available on the Exchanges\429\ are defined by
reference to various metal categories which correspond to the
percentage of costs an enrollee is expected to incur, including
bronze, silver, gold, and platinum plans.\430\ A bronze plan
provides coverage that is designed to provide benefits that are
actuarially equivalent to 60 percent of the full actuarial
value of the benefits provided under the plan.\431\ This
percentage increases to 70 percent in a silver plan, 80 percent
in a gold plan, and 90 percent in a platinum plan.
---------------------------------------------------------------------------
\429\See secs. 1311 and 1321 of the PPACA.
\430\See sec. 1302 of the PPACA.
\431\Sec. 1302(d)(1)(A) of the PPACA.
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Catastrophic plans\432\ do not fall into any of these
categories and have low monthly premiums and very high
deductibles. Catastrophic plans are available only to
individuals under age 30 or individuals of any age with a
hardship exemption. Under present law, catastrophic plans
cannot be HDHPs.
---------------------------------------------------------------------------
\432\See sec. 1302(e) of the PPACA.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that individuals enrolled in
Exchange health coverage with particularly high deductibles
should generally be eligible to contribute to HSAs, even if the
particular coverage in which the individual is enrolled does
not meet all of the requirements to be an HDHP. Currently,
individuals enrolled in bronze plans sometimes may not--and
individuals enrolled in catastrophic plans cannot--contribute
to HSAs because of mismatches between the requirements
applicable to HDHPs and these plan types. The Committee
therefore believes it is necessary to address this inequity.

EXPLANATION OF PROVISION

Under the provision, any bronze or catastrophic plan
offered in the individual market on an Exchange is treated as
an HDHP.

EFFECTIVE DATE

The provision is applicable to months beginning after
December 31, 2025.

On-Site Employee Clinics (sec. 110207 of the bill and sec. 223 of the
Code)

PRESENT LAW

For a general description of HSAs and HDHPs, see Section D
of this Part.

On-site employee clinics

On-site employer-sponsored health clinics may provide a
range of health services to employees for free or at a reduced
cost. Under IRS guidance, an otherwise eligible individual who
has access to free health care or health care at charges below
fair market value from a clinic on an employer's premises does
not fail to be eligible to contribute to an HSA merely because
of this free or reduced cost care as long as the clinic does
not provide significant benefits in the nature of medical care
in addition to disregarded coverage or preventive care.
For example, an employer that provides the following free
health care (in addition to disregarded coverage or preventive
care) for employees does not provide significant benefits in
the nature of medical care: (1) physicals and immunizations,
(2) injecting antigens provided by employees, such as
performing allergy injections, (3) a variety of aspirin and
other nonprescription pain relievers, and (4) treatment for
injuries caused by accidents at a plant. However, a hospital
that permits its employees to receive care at its facilities
for all their medical needs for free (when the employee does
not have insurance) or that waives copays and deductibles (when
the employee has health insurance) provides significant
benefits in the nature of medical care, and the hospital's
employees fail to be eligible individuals for purposes of HSA
contributions.\433\
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\433\Notice 2008-59, 2008-29 I.R.B. 123, July 21, 2008, Q&A-10.
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Preventive care

The IRS has issued guidance providing a safe harbor for
preventive care benefits allowed under an HDHP.\434\ In that
guidance, the IRS defines preventive care as including, but not
limited to (1) periodic health evaluations, including tests and
diagnostic procedures ordered in connection with routine
examinations, such as annual physicals; (2) routine prenatal
and well-child care; (3) immunizations; (4) tobacco cessation
programs; (5) obesity weight-loss programs; and (6) screening
services (such as screening for cancer, heart and vascular
diseases, infectious diseases, mental health conditions and
substance abuse, metabolic, nutritional, and endocrine
conditions, musculoskeletal disorders, obstetric and
gynecologic conditions, pediatric conditions, and vision and
hearing disorders).
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\434\Notice 2004-23, 2004-1 C.B. 725. See also Notice 2004-50,
2004-33 I.R.B. 196, August 16, 2004; Notice 2008-59, 2008-29 I.R.B.
123, July 21, 2008; Notice 2013-57, 2013-40 I.R.B. 293, September 30,
2013; Notice 2018-12, 2018-12 I.R.B. 441, March 19, 2018; Notice 2019-
45, 2019-32 I.R.B. 593, August 5, 2019; and Notice 2024-75, 2024-44
I.R.B. 1026, October 28, 2024.
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Although the guidance provides that preventive care does
not generally include any service or benefit intended to treat
an existing illness, injury or condition (with the exception of
chronic conditions, as described below), any treatment that is
incidental or ancillary to a safe harbor preventive care
service or screening (in situations where it would be
unreasonable or impracticable to perform another procedure to
treat the condition), such as the removal of polyps during a
diagnostic colonoscopy, also falls within the safe harbor. In
addition, drugs or medications are considered to be preventive
care when taken by a person who has developed risk factors for
a disease that has not yet manifested itself or not yet become
clinically apparent, or to prevent the reoccurrence of a
disease from which a person has recovered.
A 2019 executive order included a requirement that Treasury
issue guidance to expand the ability of patients to select an
HDHP that could be used with an HSA to cover, before the
deductible, low-cost preventive care for individuals with
chronic conditions.\435\ The IRS then issued guidance expanding
the list of preventive care benefits permitted to be provided
by an HDHP, without a deductible, to include limited preventive
care for specified chronic conditions (including congestive
heart failure, diabetes, coronary artery disease, osteoporosis
and/or osteopenia, hypertension, asthma, diabetes, liver
disease and/or bleeding disorders, heart disease, and
depression).\436\
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\435\Executive Order 13877, ``Improving Price and Quality
Transparency in American Healthcare to Put Patients First,'' 84 Fed.
Reg. 30849, June 27, 2019.
\436\Notice 2019-45, 2019-32 I.R.B. 593, August 5, 2019. The IRS
further updated its understanding of preventive care in Notice 2024-75,
2024-44 I.R.B. 1026, October 28, 2024.
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Preventive care also encompasses such services that are
required to be included by a group health plan or health
insurance issuer offering group or individual health insurance
coverage under section 2713 of the PHS Act.\437\
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\437\Notice 2013-57, 2013-40 I.R.B. 293, September 30, 2013.
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REASONS FOR CHANGE

The Committee believes that on-site employee clinics can be
an important way for employees and their spouses to access low-
cost health care. Employers may be hesitant to offer on-site
clinics, however, because of uncertainty as to whether access
to on-site clinics may prevent employees and their families
from contributing to HSAs. Therefore, the Committee believes it
is important to specify that on-site clinics may offer a
variety of standard items and services while not disqualifying
employees and their spouses from contributing to HSAs.

EXPLANATION OF PROVISION

Under the provision, qualified items and services an
otherwise eligible individual is eligible to receive at (1) a
health care facility located at a facility owned or leased by
the eligible individual's employer (or the employer of the
individual's spouse) or (2) at a health care facility operated
primarily for the benefit of employees of the individual's
employer (or the employees of the individual's spouse's
employer) are not treated as coverage under a health plan for
purposes of determining the individual's eligibility to
contribute to an HSA. Qualified items and services include: (1)
physical examinations, (2) immunizations, including injections
of antigens provided by employees, (3) drugs or biologicals
other than a prescribed drug, (4) treatment for injuries
occurring in the course of the individual's employment, (5)
preventive care for chronic conditions,\438\ (6) drug testing,
and (7) hearing or vision screenings and related services.
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\438\Defined as any item or service specified in the Appendix of
Notice 2019-45 (including any amendment, addition, removal or other
modification made by the Secretary to that Appendix subsequent to the
date Notice 2019-45 was published) which is prescribed to treat an
individual diagnosed with an associated chronic condition for the
purpose of preventing (1) the exacerbation of such condition or (2) the
development of a secondary condition.
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All entities treated as a single employer\439\ under the
Code are treated as a single employer under this provision.
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\439\Under sec. 414(b), (c), (m), or (o).
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EFFECTIVE DATE

The provision applies to months in taxable years beginning
after December 31, 2025.

Certain Amounts Paid for Physical Activity, Fitness, and Exercise
Treated as Amounts Paid for Medical Care (sec. 110208 of the bill and
sec. 223 of the Code)

PRESENT LAW

For a general description of HSAs and HDHPs, see Section D
of this Part.
Sports and fitness expenses, such as membership fees at a
fitness facility or costs associated with participation or
instruction in a program of physical exercise or physical
activity, generally are not treated as medical care.\440\
Therefore, tax-advantaged distributions from an HSA are
generally not available to pay for these expenses.
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\440\See, e.g., CCA 201622031, May 27, 2016. Under guidance,
certain expenses may be treated as medical care. For example, taxpayers
may deduct the cost of a weight loss program if the individual is
diagnosed as obese or is directed by a doctor to lose weight as
treatment for a specific disease. See Rev. Rul. 2002-19, 2002-16 I.R.B.
778.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that physical fitness activities and
exercise are key components of a healthy lifestyle. However,
individuals and families generally cannot use HSAs to pay for
these activities. The Committee therefore believes it is
appropriate to encourage physical fitness and exercise by
permitting individuals to use HSAs to pay for physical fitness
activities and exercise.

EXPLANATION OF PROVISION

The provision amends the Code to expand the definition of
qualified medical expenses for HSA purposes to include certain
sports and fitness expenses paid for the purpose of
participating in a physical activity, including (1) membership
at a fitness facility and (2) participation or instruction in
physical exercise or physical activity.
For this purpose, a fitness facility means a facility
providing instruction in a program of physical exercise,
offering facilities for the preservation, maintenance,
encouragement, or development of physical fitness, or serving
as the site of such a program of a State or local government:
(1) which is not a private club owned and operated by its
members; (2) which does not offer golf, hunting, sailing, or
riding facilities; (3) the health or fitness facility component
of which is not incidental to its overall function and purpose;
and (4) which is fully compliant with applicable State and
Federal anti-discrimination laws. In the case of any program
that includes physical exercise or physical activity and also
other components (such as travel or accommodations), expenses
paid for other components may not be taken into account.\441\
---------------------------------------------------------------------------
\441\Rules similar to those applied under section 213(d)(6) are
specified for this purpose.
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Amounts paid for videos, books, or similar materials are
not treated as qualifying expenses, nor are amounts paid for
one-on-one personal training. Amounts paid for remote or
virtual instruction in physical exercise or activity are not
qualifying expenses unless the virtual or remote instruction is
provided live in real-time. Amounts also do not qualify unless,
in the case of a membership at a fitness facility, the
membership lasts for more than one day, and, in the case of a
participation or instruction in physical exercise or physical
activity, the amount paid constitutes payment for more than one
occasion of the participation or instruction.
The provision limits distributions from an HSA for sport
and physical activity expenses for any taxable year to $500 for
single taxpayers and $1,000 in the case of a joint or head of
household return. These amounts are indexed to inflation. The
limit for every month is 1/12th of the relevant total amount.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Allow Both Spouses to Make Catch-up Contributions to the Same Health
Savings Account (sec. 110209 of the bill and sec. 223 of the Code)

PRESENT LAW

Health savings accounts

For a general description of HSAs, see Section D of this
Part.
Within limits, contributions to an HSA made by or on behalf
of an eligible individual (with the exception of contributions
by the individual's employer) are deductible by the individual.
For 2025, the basic limit on annual contributions that can be
made to an HSA is $4,300 in the case of self-only coverage and
$8,550 in the case of family coverage.\442\ The basic annual
contributions limits are increased by $1,000 for individuals
who have attained age 55 by the end of the taxable year
(referred to as ``catch-up'' contributions).\443\ If eligible
individuals are married to each other and either spouse has
family coverage, both spouses are treated as having only family
coverage, so that the coverage limit for family coverage
applies. The contribution limit, after being reduced by the
aggregate amount paid to the Archer Medical Savings Accounts
(``Archer MSAs'') of the spouses but without regard to any
catch-up contribution amounts, is divided equally between the
spouses unless they agree to a different division.\444\
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\442\Rev. Proc. 2022-24, 2022-20 I.R.B. 1075.
\443\Sec. 223(b)(3).
\444\Sec. 223(b)(5).
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If both spouses of a married couple are eligible
individuals, each may contribute to an HSA, but they cannot
have a joint HSA.\445\ Under the rule described above, however,
the spouses may divide their basic contribution limit for the
year by allocating the entire amount to one spouse to be
contributed to that spouse's HSA.\446\ However, this allocation
rule does not apply to catch-up contribution amounts. Thus, if
both spouses are at least age 55 and eligible to make catch-up
contributions, each must make the catch-up contribution to his
or her own HSA.\447\
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\445\Notice 2004-50, 2004-2 C.B. 196, Q&A-63.
\446\Notice 2004-50, 2004-2 C.B. 196, Q&A-32. Funds from the
spouse's HSA may be used to pay qualified medical expenses for either
spouse on a tax-free basis. Notice 2004-50, Q&A-36.
\447\Notice 2004-50, 2004-2 C.B. 196, Q&A-22.
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REASONS FOR CHANGE

The Committee believes that HSAs are a useful tool to allow
and encourage individuals and families to cover current and
future health care expenses. The Committee further believes
that there should be fewer barriers for those wishing to
contribute to their HSAs.
Therefore, the Committee believes that spouses should be
allowed to make catch-up contributions to the same HSA, without
requiring each spouse to make the catch-up contribution to his
or her own HSA.

EXPLANATION OF PROVISION

Under the provision, if both spouses of a married couple
are eligible for catch-up contributions (i.e., both spouses are
at least age 55) and either has family coverage under a high
deductible health plan as of the first day of any month, the
annual contribution limit that can be allocated between them
(after being reduced by the aggregate amount paid to the Archer
MSAs of the spouses) includes the catch-up contribution amounts
of both spouses. Thus, for example, the spouses may agree to
have their combined basic and catch-up contribution amounts
allocated to one spouse to be contributed to that spouse's HSA.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

FSA and HRA Terminations or Conversions to Fund HSAs (sec. 110210 of
the bill and secs. 106 and 223 of the Code)

PRESENT LAW

Flexible spending arrangements

A flexible spending arrangement (an ``FSA'') generally is
defined as a benefit program which provides employees with
coverage under which specific incurred expenses may be
reimbursed (subject to reimbursement maximums and other
conditions) and the maximum amount of reimbursement reasonably
available is less than 500 percent of the value of such
coverage.\448\ An FSA under a cafeteria plan\449\ allows an
employee to make salary reduction contributions for use in
receiving reimbursements for certain incurred expenses.\450\
The arrangement can also include non-elective employer
contributions (known as employer flex-credits) that the
employer makes available for every employee eligible to
participate in the employer's cafeteria plan, to be used only
for certain tax-excludable benefits (but not as cash or a
taxable benefit).\451\ Types of expenses that may be reimbursed
under an FSA in a cafeteria plan include medical expenses (a
``health FSA'') and dependent care expenses.
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\448\See sec. 106(c)(2) and Prop. Treas. Reg. sec. 1.125-5(a).
\449\A cafeteria plan is a separate written plan of an employer
under which all participants are employees, and participants are
permitted to choose among at least one permitted taxable benefit (for
example, current cash compensation) and at least one qualified benefit.
Sec. 125(d). Qualified benefits are generally employer-provided
benefits that are not includible in gross income by reason of an
express provision of the Code. Sec. 125(f). Examples of qualified
benefits include employer-provided health coverage (including a health
FSA), group term life insurance coverage not in excess of $50,000, and
benefits under a dependent care assistance program.
\450\Sec. 125 and Prop. Treas. Reg. sec. 1.125-5.
\451\Prop. Treas. Reg. sec. 1.125-5(b).
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FSAs that are funded on a salary reduction basis are
subject to the requirements for cafeteria plans, including a
requirement that amounts remaining in a health FSA at the end
of a plan year generally must be forfeited by the employee
(referred to as the ``use-it-or-lose-it rule'').\452\ However,
a cafeteria plan may allow a grace period not to exceed two and
one-half months immediately following the end of the plan year
during which unused amounts may be paid or reimbursed to
participants for qualified expenses incurred during the grace
period.\453\ Alternatively, a cafeteria plan may permit up to
$660 (for 2025) of unused amounts remaining in a health FSA at
the end of a plan year to be paid or reimbursed to plan
participants for qualifying medical expenses during the
following plan year.\454\ Such a carryover is not permitted in
a dependent care FSA. A cafeteria plan may permit a carryover
of amounts in a health FSA only if the plan does not also allow
a grace period with respect to the health FSA.
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\452\Sec. 125(d)(2).
\453\Notice 2005-42, 2005-1 C.B. 1204, and Prop. Treas. Reg. sec.
1.125-1(e).
\454\Rev. Proc. 2024-40, 2024-45 I.R.B. 1100. See also Notice 2020-
33, 2020-22 I.R.B. 868, May 26, 2020; Notice 2013-71, 2013-47 I.R.B.
532, November 18, 2013.
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Health FSAs
In order for coverage and reimbursements under a health FSA
to qualify for tax-favored treatment, the health FSA must
qualify as an accident and health plan.\455\ Under the Code,
the value of employer-provided health coverage under an
accident or health plan is generally excludable from gross
income,\456\ as are reimbursements under the plan for medical
care expenses for employees, their spouses, and their
dependents.\457\ A health FSA may reimburse only medical
expenses as defined in section 213(d), but may not be used to
reimburse health insurance premiums.\458\
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\455\Secs. 105 and 106; Prop. Treas. Reg. sec. 1.125-5(k)(1).
\456\Sec. 106. Health coverage provided to active members of the
uniformed services, military retirees, and their dependents are
excludable from gross income under section 134. That section provides
an exclusion for ``qualified military benefits,'' defined as benefits
received by reason of status or service as a member of the uniformed
services and which were excludable from gross income on September 9,
1986, under any provision of law, regulation, or administrative
practice then in effect.
\457\Sec. 105(b).
\458\Prop. Treas. Reg. sec. 1.125-5(k)(2).
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A benefit provided under a cafeteria plan through employer
contributions to a health FSA is not treated as a qualified
benefit unless the cafeteria plan provides that an employee may
not elect salary reduction contributions in excess of $2,500,
adjusted for inflation, for any taxable year.\459\ For taxable
year 2025, the limit is $3,300.
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\459\Sec. 125(i).
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Health reimbursement arrangements

As described in greater detail in Section A of this Part,
Health reimbursement arrangements (``HRAs'') operate in a
manner similar to health FSAs, in that they are employer-
maintained arrangements that reimburse employees and their
dependents\460\ for medical expenses. Some of the rules
applicable to HRAs and health FSAs are similar (e.g., the
amounts in the arrangements can be used only to reimburse
medical expenses), but the rules are not identical. In
particular, HRAs cannot be funded on a salary reduction basis
and the use-it-or-lose-it rule does not apply. Thus, amounts
remaining in an HRA at the end of the year may be carried
forward to be used to reimburse medical expenses in following
years.\461\ Unlike a health FSA, an HRA is permitted to
reimburse an employee for health insurance premiums.
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\460\As defined in sec. 152.
\461\Guidance with respect to HRAs, including the interaction of
FSAs and HRAs in the case of an individual covered under both, is
provided in Notice 2002-45, 2002-2 C.B. 93.
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Health savings accounts and high deductible health plans

For a general description of HSAs and HDHPs, see Section D
of this Part.
Interactions of HSAs with FSAs and HRAs
Individuals who are covered by a health plan that is not an
HDHP generally are not eligible to contribute to an HSA. Under
IRS guidance, a health FSA and an HRA are generally considered
health plans under this definition.\462\ However, FSA and HRA
terminations could be used to fund HSAs within a certain period
(as described further below). In addition, an individual does
not fail to be an eligible individual for the purpose of making
contributions to an HSA if the individual is covered under the
following HSA-compatible arrangements (or some combination of
the following arrangements): (1) a limited-purpose health FSA
that pays or reimburses only permitted coverage or preventive
care services, (2) a limited-purpose HRA that pays or
reimburses benefits for permitted insurance, permitted
coverage, or preventive care services, (3) a suspended HRA that
does not pay or reimburse any medical expense incurred during
the suspension period except permitted insurance, permitted
coverage, or preventive care services, or (4) a post-deductible
health FSA or HRA, which does not pay or reimburse medical
expenses incurred below the minimum annual deductible for a
plan to be an HDHP.\463\
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\462\Rev. Rul. 2004-45, 2004-1 C.B. 971.
\463\As defined in sec. 223(c)(2)(A)(i). Rev. Rul. 2004-45, 2004-1
C.B. 971.
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If a general purpose health FSA allows reimbursement for
expenses incurred during a grace period following the end of
the plan year, a participant in the health FSA is generally not
eligible to make contributions to an HSA until the first day of
the first month following the end of the grace period.\464\
However, this rule does not apply if the participant has a zero
balance in the general purpose health FSA on the last day of
the health FSA plan year (as determined on a cash
basis\465\).\466\ Thus, in that case the individual's health
FSA coverage during the grace period does not cause the
individual to fail to be eligible to contribute to an HSA, and
the individual (if otherwise eligible) would be eligible to
contribute to the HSA as of the first day after the end of the
health FSA plan year. Similarly, an individual with a zero
balance in a general purpose HRA, determined on a cash basis,
on the last day of the HRA plan year, does not fail to be an
eligible individual on the first day of the immediately
following HRA plan year, as long as certain requirements are
satisfied.\467\ Coverage by an HSA-compatible health FSA or HRA
does not affect an employee's eligibility to contribute to an
HSA, including during a health FSA grace period.\468\
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\464\Notice 2005-42, 2005-1 C.B. 1204.
\465\``Cash basis'' means the balance as of any date, without
taking into account expenses incurred that have not been reimbursed as
of that date. Thus, pending claims, claims submitted, claims received
or claims under review that have not been paid as of a date are not
taken into account for purposes of determining the account balance as
of that date.
\466\Sec. 223(c)(1)(B)(iii)(I).
\467\One of the following requirements must be satisfied: (1)
effective on the first of the immediately following HRA plan year, the
employee elects to waive participation in the HRA, or (2) effective on
or before the first day of the following HRA plan year, the employer
terminates the general purpose HRA with respect to all employees, or
(3) effective on or before the first day of the following HRA plan
year, with respect to all employees, the employer converts the general
purpose HRA to an HSA-compatible HRA. See Rev. Rul. 2004-45, 2004-1
C.B. 971.
\468\Rev. Rul. 2004-45, 2004-1 C.B. 971.
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FSA and HRA terminations to fund HSAs
The Health Opportunity Empowerment Act of 2006\469\ amended
the Code to allow for certain amounts in a health FSA or HRA to
be rolled over into an HSA with favorable tax treatment
(``qualified HSA distributions''). However, such distributions
were permitted only for contributions made to an HSA before
January 1, 2012.\470\
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\469\The Health Opportunity Patient Empowerment Act of 2006,
included in the Tax Relief and Health Care Act of 2006, Pub. L. No.
109-432, sec. 302, December 20, 2006.
\470\Sec. 106(e)(2)(B).
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As implemented by the IRS, a plan implementing the
provision must be amended in writing, the employee must elect
the rollover, and the year-end balance must be frozen.\471\ The
amount of the qualified HSA distribution may not exceed the
lesser of the balance in the health FSA or HRA on September 21,
2006 or the date of distribution.\472\ Funds must be
transferred by the employer within two and a half months after
the end of the plan year and result in a zero balance in the
health FSA or HRA.\473\
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\471\Notice 2007-22, 2007-1 C.B. 670.
\472\Sec. 106(e)(2)(A).
\473\The IRS provided guidance on special transition relief for
amounts remaining at the end of 2006. See Notice 2007-22, 2007-1 C.B.
670.
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In addition, a qualified HSA distribution must be
contributed directly to the HSA trustee by the employer.\474\
Only one qualified HSA distribution is allowed with respect to
each health FSA or HRA of an individual. Qualified HSA
distributions are not taken into account in applying the annual
limit for HSA contributions. Qualified HSA distributions are
treated as rollovers, and thus are not deductible.
---------------------------------------------------------------------------
\474\Sec. 106(e)(2)(B).
---------------------------------------------------------------------------
If an employee fails to remain HSA-eligible for 12 months
(the ``testing period'')\475\ following the distribution, the
employee is not eligible directly following the distribution,
and the amount of the rollover is included in gross income and
is subject to an additional 20-percent tax unless the
individual dies or becomes disabled.\476\ Failure to remain an
eligible individual does not require the withdrawal of the
qualified HSA distribution, and the amount is not an excess
contribution.
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\475\The testing period is defined to be the period beginning with
the month in which the qualified HSA distribution is contributed to the
HSA and ending on the last day of the 12th month following that month.
\476\Sec. 106(e)(3).
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An individual making a qualified HSA distribution from a
health FSA does not fail to be eligible to participate in an
HSA at the beginning of the next plan year merely because the
health FSA includes a grace period, provided that the qualified
HSA distribution equals the remaining balance in the FSA at the
end of the FSA plan year and is made at the end of such plan
year.\477\
---------------------------------------------------------------------------
\477\Sec. 223(c)(1)(B)(iii)(II); Notice 2007-22, 2007-1 C.B. 670.
---------------------------------------------------------------------------

REASONS FOR CHANGE

In order to improve access to savings in health care costs
through HSAs, the Committee believes it is important to
increase flexibility in enrollment in HSAs. Therefore, the
Committee believes that individuals who wish to convert their
health FSA or HRA to an HSA should be permitted to do so.

EXPLANATION OF PROVISION

The provision amends the provision permitting certain
amounts in a health FSA or HRA to be rolled over into an HSA by
no longer requiring such rollovers to be completed by January
1, 2012. Rather, under the provision, a ``qualified HSA
distribution'' is a distribution from an employee's health FSA
or HRA contributed directly to an employee's HSA if (1) such
distribution is made in connection with the employee
establishing coverage under an HDHP, and (2) during the four-
year period preceding the establishment of such coverage, the
employee was not covered under an HDHP. In addition, if the
qualified HSA distribution is made before the end of the plan
year, the health FSA or HRA from which the distribution is made
must be converted to an HSA-compatible FSA or HRA, as
applicable, for the portion of the plan year after the
distribution is made, if the individual remains enrolled in the
health FSA or HRA.
Under the provision, the aggregate amount of qualified HSA
distributions may not exceed the total annual limit on FSA
contributions ($3,300 in 2025)\478\ or twice this amount in the
case of an eligible individual who has family coverage under an
HDHP. The provision does not limit individuals to one qualified
HSA distribution, as under the prior standard. Qualified HSA
distributions also reduce the amount of contributions that an
individual is permitted to make to an HSA during the taxable
year.\479\
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\478\See sec. 125(i).
\479\The deductible contribution limit with respect to an HSA is
reduced by so much of any qualified HSA distribution made by an
individual during the taxable year that does not exceed the aggregate
increases in the balance of the arrangement from which the distribution
is made that occur during the portion of the plan year preceding the
distribution (other than any balance carried over to such plan year and
determined without regard to any decrease in the balance during such
portion of the plan year).
---------------------------------------------------------------------------
The provision also specifies that if a general purpose
health FSA or HRA is converted to an HSA-compatible FSA or HRA,
coverage under this health FSA or HRA for the portion of the
plan year after a qualified HSA distribution is made is
disregarded in determining whether the individual is eligible
to make deductible contributions to an HSA.
Finally, the provision provides that the amount of any
qualified HSA distribution is to be included on the information
to be reported on Form W-2.\480\
---------------------------------------------------------------------------
\480\Sec. 6051(a).
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EFFECTIVE DATE

The provision is effective for distributions made after
December 31, 2025.

Special Rule for Certain Medical Expenses Incurred Before Establishment
of Health Savings Account (sec. 110211 of the bill and sec. 223 of the
Code)

PRESENT LAW

Health savings accounts and high deductible health plans

For a general description of HSAs and HDHPs, see Section D
of this Part.
In order for a distribution from an HSA to be excludable as
a payment for a qualified medical expense, the medical expense
must be incurred on or after the date that the HSA is
established.\481\ Thus, a distribution from an HSA is not
excludable as a payment for a qualified medical expense if the
medical expense is incurred after a taxpayer enrolls in a high
deductible health plan but before the taxpayer establishes an
HSA.
---------------------------------------------------------------------------
\481\Notice 2004-2, 2004-1 C.B. 269, Q&A-26.
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REASONS FOR CHANGE

The Committee believes connecting consumers to their health
care dollars through consumer-directed health plans, including
HDHPs, reduces health care costs. The Committee further
believes that HSAs are an important tool used in conjunction
with HDHPs to permit consumers to set aside funds and provide
such consumers a choice on how to spend those funds to pay for
medical care.
The Committee believes that allowing an HSA to be treated
as established on the date coverage under an HDHP begins will
expand access to and enhance the utility of HSAs.

EXPLANATION OF PROVISION

Under the provision, if an HSA is established during the
60-day period beginning on the date that an individual's
coverage under an HDHP begins, then, solely for purposes of
determining whether an amount paid is used for a qualified
medical expense, the HSA is treated as having been established
on the date that coverage under the HDHP begins. Thus, if a
taxpayer establishes an HSA within 60 days of the date that the
taxpayer's coverage under an HDHP begins, any distribution from
an HSA used as a payment for a qualified medical expense
incurred during that 60-day period after the HDHP coverage
began is excludable from gross income as a payment for a
qualified medical expense even though the expense was incurred
before the date that the HSA was established.

EFFECTIVE DATE

The provision is effective with respect to coverage
beginning after December 31, 2025.

Contributions Permitted if Spouse Has Health Flexible Spending
Arrangement (sec. 110212 of the bill and sec. 223 of the Code)

PRESENT LAW

Flexible spending arrangements

For a description for FSAs, see Section J of this Part.

Health savings accounts and high deductible health plans

For a general description of HSAs and HDHPs, see Section D
of this Part.

REASONS FOR CHANGE

The Committee wishes to help working families by improving
access to tax-advantaged accounts such as HSAs. The Committee
believes that an individual should not be ineligible for an HSA
merely because the individual's spouse is covered under a
health FSA. Thus, the Committee believes that a spouse's
coverage under a health FSA should not prevent an individual
from being eligible for an HSA, provided that the spouse's FSA
is not used to cover the individual's medical expenses.

EXPLANATION OF PROVISION

The provision provides that for purposes of determining
whether an individual is eligible to contribute to an HSA,
coverage under the employee's spouse's health FSA for any plan
year of such FSA is disregarded, provided that certain
requirements are met. In order to qualify for this exception,
the aggregate reimbursements under the health FSA for the plan
year must not exceed the aggregate expenses that would be
eligible for reimbursement under the FSA if the expenses were
determined without regard to any expenses paid or incurred with
respect to the otherwise HSA-eligible individual.

EFFECTIVE DATE

The provision is effective for plan years beginning after
December 31, 2025.

Increase in Health Savings Account Contribution Limitation for Certain
Individuals (sec. 110213 of the bill and sec. 223 of the Code)

PRESENT LAW

Health savings accounts and high deductible health plans

For a general description of HSAs and HDHPs, see Section D
of this Part.
Within limits, contributions to an HSA made by or on behalf
of an eligible individual (with the exception of contributions
by the individual's employer) are deductible by the individual.
The annual HSA contribution limit for an individual is
generally the sum of the limits determined separately for each
month (i.e., 1/12 of the limit for the year, including the
catch-up limit, if applicable), based on the individual's
status and health plan coverage as of the first day of the
month.\482\ For 2025, the basic limit on annual contributions
that can be made to an HSA is $4,300 in the case of self-only
coverage and $8,550 in the case of family coverage.\483\ The
basic annual contribution limits are increased by $1,000 for
individuals who have attained age 55 by the end of the taxable
year (referred to as ``catch-up'' contributions).\484\
---------------------------------------------------------------------------
\482\Sec. 223(b).
\483\Rev. Proc. 2024-25, 2024-22 I.R.B. 1333.
\484\Sec. 223(b)(3).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that HSAs are a useful tool to allow
and encourage individuals and families to cover current and
future health care expenses. However, the Committee believes
that annual HSA contribution limits are too low, given the
significant increases in medical costs, particularly for lower-
income individuals and families.
Therefore, the Committee believes that the HSA contribution
limit for lower-income individuals and families should be
increased to better reflect the actual health care costs that
individuals and families may have to cover.

EXPLANATION OF PROVISION

Subject to limitations based on income, the provision
increases the limit on deductions related to aggregate HSA
contributions for a year by $4,300 for taxpayers with self-only
coverage and by $8,550 for those with family coverage. These
amounts are subject to an inflation adjustment.
The increased amount is phased out above certain income
levels.\485\ For eligible individuals with self-only coverage
or filing a return as a single filer, married filing
separately, or head of household, the increased amount phases
out ratably over a range beginning at $75,000 and ending at
$100,000 of adjusted gross income. For eligible individuals
with family coverage and who are filing as married filing
jointly the increased amount phases out ratably over a range
beginning at $150,000 and ending at $200,000 of adjusted gross
income. These income limitations are subject to inflation
adjustment.
---------------------------------------------------------------------------
\485\Sec. 223(b)(9)(B).
---------------------------------------------------------------------------
For purposes of the income limitation and phaseout,
adjusted gross income is determined in the same manner as under
section 219(g), related to retirement plan contributions,
except that this amount excludes any deduction allowed for a
contribution to an HSA.\486\
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\486\Under section 219(g), adjusted gross income is determined
after application of sections 86 and 469, and without regard to
sections 85(c), 135, 137, 221, 911, and the deduction allowed under
section 219. Sec. 219(g)(3)(A). Adjusted gross income is defined in
section 62.
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The increased limit applies only to the deductible amount.
There is no increase in the limit for employer contributions to
an employee's HSA, including contributions made under a
cafeteria plan.\487\
---------------------------------------------------------------------------
\487\Sec. 106(d)(1).
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Regulations (sec. 110214 of the bill)

The provision provides that the Secretary of the Treasury
may prescribe such rules and other guidance as may be necessary
or appropriate to carry out the amendments by this Part of
Subtitle A, including provisions related to CHOICE arrangements
and HSAs.

SUBTITLE B--MAKE RURAL AMERICA AND MAIN STREET GROW AGAIN

PART I--EXTENSION OF TAX CUTS AND JOBS ACT REFORMS FOR RURAL AMERICA
AND MAIN STREET

Extension of Special Depreciation Allowance for Certain Property (sec.
111001 of the bill and sec. 168(k) of the Code)

PRESENT LAW

A taxpayer generally must capitalize the cost of property
used in a trade or business or held for the production of
income and recover the cost over time through annual deductions
for depreciation or amortization.\488\ The period for
depreciation or amortization generally begins when the asset is
placed in service by the taxpayer.\489\ Tangible property
generally is depreciated using the modified accelerated cost
recovery system (``MACRS''), which determines depreciation for
different types of property based on an assigned applicable
depreciation method, recovery period, and convention.\490\
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\488\See secs. 263(a) and 167. In general, only the tax owner of
property (i.e., the taxpayer with the benefits and burdens of
ownership) is entitled to claim cost recovery deductions for the
property. Where property is not used exclusively in a taxpayer's
business, the amount eligible for a deduction must be reduced by the
amount related to personal use. See, e.g., sec. 280A.
\489\See Treas. Reg. secs. 1.167(a)-10(b), -3, -14, and 1.197-2(f).
See also Treas. Reg. sec. 1.167(a)-11(e)(1)(i).
\490\Sec. 168.
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Bonus depreciation

An additional first-year depreciation deduction equal to
100 percent of the adjusted basis of qualified property\491\ is
allowed for property acquired after September 27, 2017,\492\
and placed in service before January 1, 2023 (January 1, 2024
for certain property with a recovery period of at least 10
years, or certain transportation property\493\ and
aircraft\494\). The 100 percent allowance is phased down by 20
percentage points per calendar year for property acquired after
September 27, 2017, and placed in service after December 31,
2022 (after December 31, 2023, for longer production period
property and certain aircraft).\495\ This additional first-year
depreciation is commonly referred to as ``bonus depreciation.''
The bonus depreciation applicable percentages for qualified
property acquired and placed in service after September 27,
2017 (as well as for specified plants which are planted or
grafted after September 27, 2017 (described below)) are as
follows.
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\491\Sec. 168(k). The bonus depreciation deduction is generally
subject to the rules regarding whether a cost must be capitalized under
section 263A. For a description of section 263A, see Joint Committee on
Taxation, Present Law and Background Regarding the Federal Income
Taxation of Small Businesses (JCX-10-23), June 5, 2023, pp. 15-17. This
document can be found on the Joint Committee on Taxation website at
www.jct.gov.
\492\For a description of section 168(k) as it applies to qualified
property acquired before September 28, 2017, as well as a transition
rule that permits a taxpayer to elect to apply a 50-percent allowance
instead of the 100 percent allowance for a taxable year that includes
September 28, 2017, see Joint Committee on Taxation, General
Explanation of Public Law No. 115-97 (JCS-1-18), December 2018, pp.
115-128. This document can be found on the Joint Committee on Taxation
website at www.jct.gov.
\493\Property qualifying for the extended placed-in-service date
must have a recovery period of at least 10 years or constitute
transportation property, have an estimated production period exceeding
one year, and have a cost exceeding $1 million. Transportation property
generally is defined as tangible personal property used in the trade or
business of transporting persons or property. Sec. 168(k)(2)(B).
Property defined in section 168(k)(2)(B) is hereinafter collectively
referred to as ``longer production period property.''
\494\Certain aircraft which is not transportation property, other
than for agricultural or firefighting uses, also qualifies for the
extended placed-in-service date, if at the time of the contract for
purchase, the purchaser made a nonrefundable deposit of the lesser of
10 percent of the cost or $100,000, and which has an estimated
production period exceeding four months and a cost exceeding $200,000.
Sec. 168(k)(2)(C).
\495\Sec. 168(k)(6)(A) and (B).
\496\In the case of specified plants, this is the year of planting
or grafting, as discussed below.
\497\20 percent applies to the adjusted basis attributable to its
manufacture, construction, or production before January 1, 2027. The
remaining adjusted basis does not qualify for bonus depreciation. 20
percent applies to the entire adjusted basis of certain aircraft
described in section 168(k)(2)(C) and placed in service in 2027.

------------------------------------------------------------------------
Bonus depreciation applicable
percentage
---------------------------------------
Placed in service year496 Longer production
Qualified property period property
in general/ and certain
specified plants aircraft
------------------------------------------------------------------------
Sept. 28, 2017-Dec. 31, 2022.... 100 percent....... 100 percent
2023............................ 80 percent........ 100 percent
2024............................ 60 percent........ 80 percent
2025............................ 40 percent........ 60 percent
2026............................ 20 percent........ 40 percent
2027............................ None.............. 20 percent497
2028 and thereafter............. None.............. None
------------------------------------------------------------------------

The bonus depreciation deduction is allowed for both
regular tax and alternative minimum tax purposes, but is not
allowed in computing earnings and profits.\498\ The basis of
the property and the depreciation allowances in the placed in
service year and later years are adjusted to reflect the bonus
depreciation deduction.\499\ The amount of the bonus
depreciation deduction is not affected by a short taxable
year.\500\ A taxpayer may elect out of bonus depreciation for
any class of property for any taxable year.\501\ An election
out of bonus depreciation may be revoked only with the consent
of the Secretary.\502\
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\498\Secs. 56A(c)(13), 168(k)(2)(G), and 312(k)(3).
\499\Sec. 168(k)(1).
\500\Treas. Reg. sec. 1.168(k)-2(e)(1)(ii).
\501\For the definition of a class of property, see Treas. Reg.
sec. 1.168(k)-2(f)(1)(ii). Treas. Reg. sec. 1.168(k)-2(f)(1) provides
the procedures for making an election not to deduct bonus depreciation.
\502\Sec. 168(k)(7). See also Treas. Reg. sec. 1.168(k)-2(f)(5).
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Qualified property
Property qualifying for the bonus depreciation deduction
must meet the following requirements:
The property must be:
1. property to which MACRS applies with an
applicable recovery period of 20 years or less,
2. computer software other than computer
software required to be amortized under section
197,
3. water utility property,\503\ or
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\503\As defined in sec. 168(e)(5).
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4. a qualified film, television, or live
theatrical production,\504\ for which a
deduction otherwise would have been allowable
under section 181 without regard to the dollar
limitation or termination of that section;\505\
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\504\As defined in sec. 181(d) and (e).
\505\Under section 181, a taxpayer may generally elect to deduct up
to $15 million of the aggregate production costs ($20 million in the
case of productions in certain areas) of any qualified film, television
or live theatrical production, commencing prior to January 1, 2026, in
the year the costs are paid or incurred by the taxpayer, in lieu of
capitalizing the costs and recovering them through depreciation
allowances once the production is placed in service. The costs of the
production in excess of the applicable dollar limitation are
capitalized and recovered under the taxpayer's method of accounting for
the recovery of such property once placed in service (e.g., under
section 168(k) if eligible). For a description of section 181, see
Joint Committee on Taxation, General Explanation of Certain Tax
Legislation Enacted in the 116th Congress (JCS-1-22), February 2022,
pp. 480-482. This document can be found on the Joint Committee on
Taxation website at www.jct.gov.
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Either (i) the original use of the property
must commence with the taxpayer,\506\ or (ii) the
property must not have been used by the taxpayer at any
time before acquisition and the acquisition must meet
the requirements of section 179(d)(2)(A)-(C) and
(3)\507\ and
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\506\See Treas. Reg. sec. 1.168(k)-2(b)(3)(ii).
\507\Thus, used property must be purchased in an arm's length
transaction. The property must not be acquired (i) from a member of the
taxpayer's family, including a spouse, ancestors, and lineal
descendants, or from another related entity as defined in section 267;
(ii) from a person who controls, is controlled by, or is under common
control with, the taxpayer; nor (iii) in a nontaxable exchange such as
a reorganization. The property must not be received as a gift or from a
decedent. In the case of trade-ins, like-kind exchanges, or involuntary
conversions, bonus depreciation applies only to any money paid in
addition to the traded-in property or in excess of the adjusted basis
of the replaced property. See sec. 179(d)(2)(A)-(C) and (3); Treas.
Reg. secs. 1.168(k)-2(b)(3)(iii) and 1.179-4(c) and (d). A special rule
applies in the case of a syndication transaction. See sec.
168(k)(2)(E)(iii); Treas. Reg. sec. 1.168(k)-2(b)(3)(vi).
---------------------------------------------------------------------------
The property must be placed in service
before January 1, 2027.\508\
---------------------------------------------------------------------------
\508\A qualified production is considered placed in service, and
thus eligible for the bonus depreciation allowance, at the time of
initial release, broadcast, or live staged performance. Sec.
168(k)(2)(H); Treas. Reg. sec. 1.168(k)-2(b)(4)(iii).
---------------------------------------------------------------------------
The bonus depreciation deduction is not allowed for any
property that is required to be depreciated under the
alternative depreciation system (``ADS''),\509\ or for listed
property in respect of which the business use is not greater
than 50 percent (as determined under section 280F(b)).\510\
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\509\See sec. 168(g) (determined without regard to an election to
use ADS under section 168(g)(7)). See also Treas. Reg. sec. 1.168(k)-
2(b)(2)(ii)(B). ADS is required to be used for tangible property used
predominantly outside the United States, certain tax-exempt use
property, tax-exempt bond financed property, certain imported property
covered by an Executive order, and certain property held by either a
real property trade or business or a farming business electing out of
the business interest limitation under section 163(j). In addition, an
election to use ADS is available to taxpayers for any class of property
for any taxable year. Under ADS, all property is depreciated using the
straight line method and the applicable convention over recovery
periods which generally are equal to the class life of the property,
with certain exceptions.
\510\Sec. 168(k)(2)(D). For a description of section 280F, see
Joint Committee on Taxation, General Explanation of Public Law No. 115-
97 (JCS-1-18), December 2018, pp. 128-130. This document can be found
on the Joint Committee on Taxation website at www.jct.gov.
---------------------------------------------------------------------------
In the case of longer production period property and
certain aircraft, the property must also be acquired (or
acquired pursuant to a written binding contract entered into)
before January 1, 2027, and placed in service before January 1,
2028.\511\ With respect to such property that is manufactured,
constructed, or produced by the taxpayer for use by the
taxpayer, the taxpayer must begin the manufacture,
construction, or production of the property before January 1,
2027.\512\ Additionally, a special rule limits the amount of
costs of longer production period property eligible for bonus
depreciation. With respect to this property, only the portion
of the basis that is properly attributable to the costs
incurred before January 1, 2027 (``progress expenditures'') is
eligible for the bonus depreciation deduction.\513\
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\511\Sec. 168(k)(2)(B)(i)(II) and (III).
\512\Sec. 168(k)(2)(E)(i).
\513\Sec. 168(k)(2)(B)(ii). See also Treas. Reg. sec. 1.168(k)-
2(e)(1)(iii).
---------------------------------------------------------------------------
Exception for certain businesses not subject to the
limitation on interest expense
Qualified property eligible for the bonus depreciation
deduction does not include any property which is primarily used
in the trade or business of the furnishing or sale of (1)
electrical energy, water, or sewage disposal services, (2) gas
or steam through a local distribution system, or (3)
transportation of gas or steam by pipeline, if the rates for
such furnishing or sale, as the case may be, have been
established or approved by a State or political subdivision
thereof, by any agency or instrumentality of the United States,
by a public service or public utility commission or other
similar body of any State or political subdivision thereof, or
by the governing or ratemaking body of an electric
cooperative.\514\
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\514\Secs. 168(k)(9)(A) and 163(j)(7)(A)(iv). See also Treas. Reg.
sec. 1.168(k)-2(b)(2)(ii)(F).
---------------------------------------------------------------------------
Qualified property also does not include any property used
in a trade or business that has had floor plan financing
indebtedness\515\ if the floor plan financing interest related
to the indebtedness was taken into account to increase the
taxpayer's section 163(j) interest limitation under section
163(j)(1)(C).\516\
---------------------------------------------------------------------------
\515\As defined in sec. 163(j)(9).
\516\Sec. 168(k)(9)(B). See also Treas. Reg. sec. 1.168(k)-
2(b)(2)(ii)(G).
---------------------------------------------------------------------------
Special rules
Passenger automobiles
The limitation under section 280F on the amount of
depreciation deductions allowed with respect to certain
passenger automobiles is increased in the first year by $8,000
for automobiles that qualify for (and for which the taxpayer
does not elect out of) bonus depreciation.\517\ While the
underlying section 280F limitation is indexed for
inflation,\518\ the section 280F increase amount is not indexed
for inflation.
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\517\Sec. 168(k)(2)(F). See Rev. Proc. 2019-13, 2019-09 I.R.B. 744,
for a safe harbor method of accounting for determining depreciation
deductions for passenger automobiles that qualify for bonus
depreciation and are subject to the section 280F depreciation
limitations.
\518\Sec. 280F(d)(7). See Rev. Proc. 2025-16, 2025-11 I.R.B. 1100,
for the section 280F limitations that apply to passenger automobiles
placed in service during calendar year 2025.
---------------------------------------------------------------------------
Certain plants bearing fruits and nuts
A farming business\519\ is allowed a special election in
respect of certain costs of planting or grafting certain plants
bearing fruits and nuts.\520\ Under the election, the
applicable percentage of the adjusted basis of a specified
plant which is planted or grafted after September 27, 2017, and
before January 1, 2027, is deductible for regular tax and
alternative minimum tax purposes in the year planted or grafted
by the taxpayer in the ordinary course of the taxpayer's
farming business (rather than in the year the specified plant
is placed in service by the taxpayer\521\), and the adjusted
basis is reduced by the amount of the deduction.\522\ The
applicable percentage is 100 percent for specified plants
planted or grafted after September 27, 2017, and before January
1, 2023, and then is phased down by 20 percentage points per
calendar year beginning in 2023.\523\ Thus, the applicable
percentage is 80 percent for 2023, 60 percent for 2024, 40
percent for 2025, and 20 percent for 2026.
---------------------------------------------------------------------------
\519\For this purpose, the term ``farming business'' means the
trade or business of farming, including the trade or business of
operating a nursery or sod farm, the raising or harvesting of trees
bearing fruit, nuts, or other crops, or ornamental trees (other than
evergreen trees that are more than six years old at the time they are
severed from their roots). Sec. 263A(e)(4).
\520\Sec. 168(k)(5). Treas. Reg. sec. 1.168(k)-2(f)(2) provides the
procedures for making a section 168(k)(5) election.
\521\In the case of any tree or vine bearing fruits or nuts, the
placed in service date generally does not occur until the tree or vine
first reaches an income-producing stage. See Treas. Reg. sec. 1.46-
3(d)(2). See also Rev. Rul. 80-25, 1980-1 C.B. 65; and Rev. Rul. 69-
249, 1969-1 C.B. 31.
\522\Any amount deducted under this election is not subject to
capitalization under section 263A. Sec. 263A(c)(7).
\523\Sec. 168(k)(6)(C).
---------------------------------------------------------------------------
A specified plant is (i) any tree or vine that bears fruits
or nuts, and (ii) any other plant that will have more than one
crop or yield of fruits or nuts and which generally has a pre-
productive period of more than two years from the time of
planting or grafting to the time it begins bearing a marketable
crop or yield of fruits or nuts.\524\ A specified plant does
not include any property that is planted or grafted outside of
the United States. If the election is made with respect to any
specified plant, the plant is not treated as qualified property
eligible for bonus depreciation in the subsequent taxable year
in which it is placed in service.\525\ Once made, the election
is revocable only with the consent of the Secretary.\526\
---------------------------------------------------------------------------
\524\Sec. 168(k)(5)(B).
\525\Sec. 168(k)(5)(D). However, when placed in service, the
remaining adjusted basis of the specified plant may be eligible for
expensing under section 179.
\526\Sec. 168(k)(5)(C). See also Treas. Reg. sec. 1.168(k)-2(f)(5).
---------------------------------------------------------------------------
Long-term contracts--percentage-of-completion method
In general, in the case of a long-term contract, the
taxable income from the contract is determined under the
percentage-of-completion method.\527\ Solely for purposes of
determining the percentage of completion under section
460(b)(1)(A), the cost of qualified property with a MACRS
recovery period of seven years or less is taken into account as
a cost allocated to the contract as if bonus depreciation had
not been enacted for property placed in service before January
1, 2027 (January 1, 2028, in the case of longer production
period property).\528\
---------------------------------------------------------------------------
\527\Sec. 460.
\528\Sec. 460(c)(6).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that restoring 100 percent expensing
for qualified property and specified plants will result in
capital investment, modernization, productivity, and economic
growth. The Committee also believes that 100 percent expensing
promotes neutrality between business investment and other
business expenses and helps reduce tax disadvantages faced by
capital intensive businesses.

EXPLANATION OF PROVISION

The provision extends and modifies the additional first-
year depreciation deduction through 2029 (through 2030 for
longer production period property and certain aircraft). The
allowance is increased to 100 percent for property acquired and
placed in service after January 19, 2025, and before January 1,
2030 (January 1, 2031, for longer production period property
and certain aircraft),\529\ as well as for specified plants
planted or grafted after January 19, 2025, and before January
1, 2030.
---------------------------------------------------------------------------
\529\One-hundred percent bonus depreciation applies to the adjusted
basis attributable to manufacture, construction, or production before
January 1, 2030, and the remaining adjusted basis does not qualify for
bonus depreciation.
---------------------------------------------------------------------------
The provision makes permanent the rules under the
percentage-of-completion method for the allocation of bonus
depreciation to a long-term contract.

EFFECTIVE DATE

The provision generally applies to property acquired\530\
and placed in service after January 19, 2025, and to specified
plants planted or grafted after such date.
---------------------------------------------------------------------------
\530\Property is treated as acquired not after the date on which a
written binding contract is entered into for such acquisition. See
Treas. Reg. sec. 1.168(k)-2(b)(5).
---------------------------------------------------------------------------

Deduction of Domestic Research and Experimental Expenditures (sec.
111002 of the bill and sec. 174 and new sec. 174A of the Code)

PRESENT LAW

For taxable years beginning after December 31, 2021,
taxpayers must capitalize and amortize specified research or
experimental expenditures ratably over a five-year period (or,
in the case of expenditures attributable to research that is
conducted outside of the United States, over a 15-year
period),\531\ beginning with the midpoint of the taxable year
in which those costs are paid or incurred.\532\ Specified
research or experimental expenditures are research or
experimental expenditures paid or incurred in connection with a
taxpayer's trade or business.\533\
---------------------------------------------------------------------------
\531\For this purpose, the term ``United States'' includes the
United States, the Commonwealth of Puerto Rico, and any possession of
the United States. Sec. 174(a)(2)(B), by reference to sec. 41(d)(4)(F).
\532\Sec. 174(a)(2)(B).
\533\Sec. 174(b).
---------------------------------------------------------------------------
Research or experimental expenditures generally include all
costs incurred in the experimental or laboratory sense incident
to developing or improving a product,\534\ including
software.\535\ Qualifying experimental or laboratory activities
are those intended to discover information that eliminates
uncertainty concerning product development or improvement.\536\
Uncertainty exists when information available to the taxpayer
is insufficient to ascertain the capability or method for
developing, improving, or appropriately designing the
product.\537\
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\534\Treas. Reg. sec. 1.174-2(a)(1) and (2). Product is defined to
include any pilot model, process, formula, invention, technique,
patent, or similar property, and includes products to be used by the
taxpayer in its trade or business as well as products to be held for
sale, lease, or license. Treas. Reg. sec. 1.174-2(a)(11), Example 10,
provides an example of new process development costs for which the cost
recovery rules of section 174 apply.
\535\Sec. 174(c)(3).
\536\Treas. Reg. sec. 1.174-2(a)(1).
\537\Ibid.
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Whether expenditures qualify as research depends on the
nature of the activity to which the costs relate, not the
nature of the product or improvement or the level of
technological advancement.\538\ The ultimate success, failure,
sale, or other use of research or property is irrelevant.\539\
Examples of qualifying costs include salaries for those engaged
in research or experimentation efforts, overhead incurred to
operate and maintain research facilities (e.g., utilities,
depreciation, and rent), and materials and supplies used and
consumed in the course of research or experimentation
(including amounts incurred in conducting trials).\540\
---------------------------------------------------------------------------
\538\Ibid.
\539\Ibid.
\540\See Treas. Reg. sec. 1.174-4(c). The definition of research or
experimental expenditures also includes the costs to obtain a patent
such as attorneys' fees incurred to make and perfect a patent
application. Treas. Reg. sec. 1.174-2(a)(1).
---------------------------------------------------------------------------
Research or experimental expenditures exclude expenditures
for (1) quality control testing;\541\ (2) efficiency surveys;
(3) management studies; (4) consumer surveys; (5) advertising
or promotions; (6) the acquisition of another's patent, model,
production, or process; or (7) research in connection with
literary, historical, or similar projects.\542\ Also excluded
are expenditures incurred to acquire or improve land, for
depreciable or depletable property used in connection with the
research or experimentation,\543\ and exploration expenditures
incurred for ore or other minerals (including oil and
gas).\544\
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\541\Quality control testing means testing to determine whether
units of materials or products conform to specified parameters but does
not include testing to determine if the design of the product is
appropriate. Treas. Reg. sec. 1.174-2(a)(7).
\542\Treas. Reg. sec. 1.174-2(a)(6).
\543\Sec. 174(c)(3). However, depreciation and depletion allowances
may be considered section 174 expenditures. Ibid.
\544\Sec. 174(c)(2).
---------------------------------------------------------------------------
In the case of retired, abandoned, or disposed property
with respect to which specified research or experimental
expenditures are paid or incurred, any remaining basis may not
be recovered in the year of retirement, abandonment, or
disposal, but instead must continue to be amortized over the
remaining recovery period.\545\
---------------------------------------------------------------------------
\545\Sec. 174(d).
---------------------------------------------------------------------------
If a taxpayer's research credit under section 41 exceeds
the amount allowed as a deduction under section 174 for that
taxable year, the taxpayer must reduce the amount chargeable to
capital account by that excess amount.\546\ A taxpayer may
instead elect to claim a reduced research credit amount under
section 41.\547\ Under this election, the research credit is
reduced by an amount equal to the amount of the credit
multiplied by the highest corporate tax rate.\548\
---------------------------------------------------------------------------
\546\Sec. 280C(c)(1).
\547\Sec. 280C(c)(2)(A).
\548\Sec. 280C(c)(2)(B).
---------------------------------------------------------------------------
Research or experimental expenditures under section 174 are
not required to be capitalized under either section 263(a)\549\
or section 263A.\550\
---------------------------------------------------------------------------
\549\Sec. 263(a)(1)(B).
\550\Sec. 263A(c)(2).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee recognizes that immediate expensing of
domestic research or experimental expenditures, including
software development costs, improves cash flow for critical
domestic research and development. Forcing businesses to
capitalize and amortize these expenditures erodes their value,
increases the cost of important research, and inhibits
innovation and investment by a broad spectrum of industries.
The Committee believes that allowing businesses to
immediately deduct wages, supplies, and equipment attributable
to research performed in the United States and U.S. territories
will enable them to expand domestic research programs. Lowering
the cost of domestic research will also incentivize
multinationals to onshore research activities back to the
United States.

EXPLANATION OF PROVISION

The provision suspends required capitalization of domestic
research or experimental expenditures for amounts paid or
incurred in taxable years beginning after December 31, 2024,
and before January 1, 2030. Under the provision, taxpayers may
(1) deduct domestic research or experimental expenditures,\551\
(2) elect to capitalize and recover domestic research or
experimental expenditures ratably over the useful life of the
research (but in no case less than 60 months)\552\ beginning
with the midpoint of the taxable year in which such
expenditures are paid or incurred, or (3) elect to capitalize
and recover domestic research or experimental expenditures over
10 years beginning with the taxable year of the
expenditure.\553\ Taxpayers must continue to capitalize and
amortize foreign research or experimental expenditures over 15
years\554\ beginning with the midpoint of the taxable year in
which they pay or incur the expenditures.
---------------------------------------------------------------------------
\551\The provision defines ``domestic research or experimental
expenditures'' as research or experimental expenditures paid or
incurred by the taxpayer in connection with its trade or business that
are not attributable to foreign research as defined by section
41(d)(4)(F) (i.e., any research conducted outside the United States,
the Commonwealth of Puerto Rico, or any possession of the United
States).
\552\The election does not apply to property subject to the
depreciation allowance under section 167 or depletion under section
611.
\553\Taxpayer may only recover domestic research or experimental
expenditures charged to capital account under the rules of proposed
section 174A(c) or section 59(e)(2). After the provision terminates,
taxpayers will be required to capitalize domestic research or
experimental expenditures and recover them over five years beginning
with the midpoint of the taxable year in which such expenditures are
paid or incurred under section 174(a)(2).
\554\The provision clarifies that taxpayers must recover both
domestic and foreign research or experimental expenditures over 10
years for alternative minimum tax purposes under section 56(b)(2).
---------------------------------------------------------------------------
Taxpayers may recover domestic capitalized research or
experimental expenditures upon the disposition, retirement, or
abandonment with respect to which such expenditures are paid or
incurred. However, taxpayers may not recover foreign
capitalized research or experimental expenditures, either as a
deduction or a reduction to the amount realized for any
property disposed, retired, or abandoned after the date of
introduction (i.e., May 12, 2025).\555\
---------------------------------------------------------------------------
\555\The modification to the disposition rule in section 174(d) is
permanent.
---------------------------------------------------------------------------
The provision requires taxpayers to reduce their domestic
research or experimental expenditures (whether expensed or
capitalized) by the amount of the research credit allowed under
section 41 for taxable years beginning after December 31, 2024,
and before January 1, 2030.\556\ Similar to current law,
taxpayers may instead elect to claim a reduced section 41
research credit.
---------------------------------------------------------------------------
\556\Assume that a taxpayer (1) elects to capitalize and amortize
$1,000 of domestic research or experimental expenditures and (2) claims
a $100 section 41 research credit. Absent an election under proposed
section 280C(c)(2), the taxpayer must reduce the amount it charges to
capital account to $900 ($1,000 less $100 credit). Similarly, a
taxpayer that opts to expense domestic research or experimental
expenditures must reduce the amount it expenses to $900 ($1,000 less
$100 credit).
---------------------------------------------------------------------------
The provision treats the requirement to capitalize and
amortize research or experimental expenditures paid or incurred
in taxable years beginning after December 31, 2029 (i.e., after
the temporary provision terminates), as an automatic accounting
method change on a cutoff basis (i.e., no section 481(a) catch-
up adjustment).

EFFECTIVE DATE

The provision is generally effective for amounts paid or
incurred in taxable years beginning after December 31, 2024,
and before January 1, 2030. The conforming amendments, apart
from the change to section 280C(c), are permanent.
A transition rule requires taxpayers to adopt the changes
to domestic research or experimental expenditures as an
automatic accounting method change on a cutoff basis for
taxable years beginning after December 31, 2024. The provision
authorizes the Secretary to prescribe rules for short taxable
years that begin after December 31, 2024, and end before the
date of enactment.

Modified Calculation of Adjusted Taxable Income for Purposes of
Business Interest Deduction (sec. 111003 of the bill and sec. 163(j) of
the Code)

PRESENT LAW

Limitation on deduction of business interest expense

Interest paid or accrued by a business generally is
deductible in the computation of taxable income, subject to a
number of limitations.\557\ The deduction for business interest
expense\558\ is generally limited to the sum of (1) business
interest income of the taxpayer for the taxable year,\559\ (2)
30 percent of the adjusted taxable income of the taxpayer for
the taxable year (not less than zero), and (3) the floor plan
financing interest\560\ of the taxpayer for the taxable
year.\561\ Thus, other than floor plan financing interest,
business interest expense in excess of business interest income
is generally deductible only to the extent of 30 percent of
adjusted taxable income.\562\
---------------------------------------------------------------------------
\557\Sec. 163(a). Interest deductions limitations that are not
described in this document include: denial of the deduction for the
disqualified portion of the original issue discount on an applicable
high yield discount obligation (sec. 163(e)(5)), denial of deduction
for interest on certain obligations not in registered form (sec.
163(f)), reduction of the deduction for interest on indebtedness with
respect to which a mortgage credit certificate has been issued under
section 25 (sec. 163(g)), disallowance of deduction for interest on
debt with respect to certain life insurance contracts (sec. 264(a)),
and disallowance of deduction for interest relating to tax-exempt
income (sec. 265(a)(2)). In some circumstances, interest expense is
required to be capitalized. See, e.g., secs. 263A(f) (capitalization of
interest incurred to produce certain tangible property) and 263(g)
(capitalization of certain interest and carrying costs in the case of
straddles). Section 385 also recharacterizes as equity some instruments
that are purported to be indebtedness with the results that payments on
the interest are treated as nondeductible dividends rather than
deductible interest.
\558\Business interest means any interest paid or accrued on
indebtedness properly allocable to a trade or business and does not
include investment interest (within the meaning of section 163(d)).
Sec. 163(j)(5). Section 163(j) applies only to business interest that
would otherwise be deductible in the current taxable year, absent the
application of section 163(j). Treas. Reg. sec. 1.163(j)-3(b)(1). Thus,
section 163(j) applies after the application of provisions that subject
interest to deferral, capitalization, or other limitation (e.g.,
sections 163(e)(3), 163(e)(5)(A)(ii), 246A, 263A, 263(g), 267, 1277,
and 1282), but before application of sections 461(l), 465, and 469. See
Treas. Reg. sec. 1.163(j)-3(b)(2)-(6).
\559\Business interest income means the amount of interest
includible in the gross income of the taxpayer for the taxable year
that is properly allocable to a trade or business and does not include
investment income (within the meaning of section 163(d)). Sec.
163(j)(6).
\560\Floor plan financing interest means interest paid or accrued
on floor plan financing indebtedness. Floor plan financing indebtedness
means indebtedness used to finance the acquisition of motor vehicles
held for sale or lease to retail customers and secured by the inventory
so acquired. A motor vehicle means a motor vehicle that is: (1) any
self-propelled vehicle designed for transporting person or property on
a public street, highway, or road; (2) a boat; or (3) farm machinery or
equipment. Sec. 163(j)(9).
\561\These rules were modified for taxable years beginning in 2019
or 2020 to permit certain taxpayers to deduct more business interest
than would be allowed under the rules described herein. See sec.
163(j)(10).
\562\The business interest limitation does not apply in certain
cases. The business interest limitation does not apply to any taxpayer
(other than a tax shelter prohibited from using the cash method under
section 448(a)(3)) that meets the $25 million gross receipts test of
section 448(c). At a taxpayer's election, (1) any real property
development, redevelopment, construction, reconstruction, acquisition,
conversion, rental, operation, management, leasing, or brokerage trade
or business (referred to as an ``electing real property trade or
business'') or (2) any farming business or any business engaged in the
trade or business of a specified agricultural or horticultural
cooperative (referred to as an ``electing farming business'') is not
treated as a trade or business for purposes of the limitation. The
limitation does not apply to certain regulated public utilities. See
sec. 163(j)(7).
---------------------------------------------------------------------------
The limitation generally applies at the taxpayer level
(although special rules apply in the case of partnerships,
described below). In the case of a group of affiliated
corporations that file a consolidated return, the limitation
applies at the consolidated tax return filing level.\563\ The
amount of any business interest expense not allowed as a
deduction for any taxable year is generally treated as business
interest expense paid or accrued by the taxpayer in the
succeeding taxable year. This business interest expense may be
carried forward indefinitely.\564\
---------------------------------------------------------------------------
\563\See Treas. Reg. sec. 1.163(j)-4(d) (providing that a
consolidated group has a single sec. 163(j) limitation and generally
treating all members of the consolidated group as a single taxpayer for
sec. 163(j) purposes).
\564\Sec. 163(j)(2). With respect to corporations, any carryforward
of disallowed business interest of a corporation is an item taken into
account in the case of certain corporate acquisitions described in
section 381 and is subject to limitation under section 382. Secs.
381(c)(20) and 382(d)(3).
---------------------------------------------------------------------------
Application to passthrough entities
In general
In the case of a partnership, the section 163(j) interest
limitation is generally applied at the partnership level.\565\
A partner generally must apply section 163(j) separately to any
business interest expense it incurs. To prevent double
counting, the business interest income and adjusted taxable
income of each partner are generally determined without regard
to the partner's distributive share of any items of income,
gain, deduction, or loss of the partnership.\566\ However, in
cases in which the partnership has an excess amount of business
interest income, an excess amount of adjusted taxable income,
or both, section 163(j) partnership items generally may support
additional business interest expense deductions by the
partnership's partners. Specifically, a partner's business
interest deduction limitation is increased by the sum of the
partner's distributive share of the partnership's excess
business interest income and 30 percent of the partner's
distributive share of the partnership's excess taxable
income.\567\
---------------------------------------------------------------------------
\565\Sec. 163(j)(4)(A)(i).
\566\Sec. 163(j)(4)(A)(ii)(I); Treas. Reg. sec. 1.163(j)-6(e)(1).
\567\Sec. 163(j)(4)(A)(ii)(II); Treas. Reg. sec. 1.163(j)-6(e)(1).
---------------------------------------------------------------------------
Similar rules apply to an S corporation and its
shareholders.\568\
---------------------------------------------------------------------------
\568\Sec. 163(j)(4)(D).
---------------------------------------------------------------------------
Carryforward rules for partnerships
Special rules for the carryforward of disallowed business
interest expense apply only to partnerships and their
partners.\569\ In the case of a partnership, the general
taxpayer-level carryforward rule does not apply. Instead, any
business interest expense that is not allowed as a deduction to
the partnership for the taxable year (referred to as ``excess
business interest expense'') is allocated to the partners.\570\
A partner may not deduct excess business interest expense in
the year in which it is allocated to a partner. A partner may
deduct its share of the partnership's excess business interest
expense in any future year, but only in an amount that is based
on the partner's distributive share of excess business interest
income and excess taxable income of the partnership the
activities of which gave rise to the disallowed business
interest expense carryforward.\571\ Any amount that is not
allowed as a deduction generally continues to be carried
forward.\572\
---------------------------------------------------------------------------
\569\Sec. 163(j)(4)(B).
\570\Sec. 163(j)(4)(B)(i)(II).
\571\Sec. 163(j)(4)(B)(ii)(I); Treas. Reg. sec. 1.163(j)-6(g)(2).
See also Joint Committee on Taxation, General Explanation of Public Law
115-97 (JCS-1-18), December 2018, pp. 175-178 (describing section
163(j)(4) as it was intended to work).
\572\Sec. 163(j)(4)(B)(ii)(II).
---------------------------------------------------------------------------
When excess business interest expense is allocated to a
partner, the partner's basis in its partnership interest is
reduced (but not below zero) by the amount of the allocation,
even though the excess business interest expense does not give
rise to a deduction in the year of the basis reduction.\573\
The partner's deduction in a subsequent year for excess
business interest expense does not reduce the partner's basis
in its partnership interest. If the partner disposes of a
partnership interest the basis of which has been reduced by an
allocation of excess business interest expense, the partner's
basis in the interest is increased immediately before the
disposition by the amount by which the basis reduction exceeds
any amount of excess business interest expense that has been
treated as business interest expense paid or accrued by the
partner as a result of an allocation of excess business
interest income or excess taxable income by the same
partnership.\574\ This rule applies to both total and (on a
proportionate basis) partial dispositions of a partnership
interest.\575\
---------------------------------------------------------------------------
\573\Sec. 163(j)(4)(B)(iii)(I); Treas. Reg. sec. 1.163(j)-6(h)(2).
\574\Sec. 163(j)(4)(B)(iii)(II); Treas. Reg. sec. 1.163(j)-6(h)(3).
The special rule for dispositions also applies to transfers of a
partnership interest (including by reason of death) in transactions in
which gain is not recognized in whole or in part. Id. No deduction is
allowed to the transferor or transferee for any disallowed business
interest resulting in a basis increase under this rule. Id.
\575\Ibid.
---------------------------------------------------------------------------
The special carryforward rules do not apply to S
corporations or their shareholders.\576\ Rather, any disallowed
business interest expense is carried forward by the S
corporation (as opposed to the shareholder) to the succeeding
taxable year.\577\
---------------------------------------------------------------------------
\576\Sec. 163(j)(4)(D).
\577\Treas. Reg. sec. 1.163(j)-6(l)(5).
---------------------------------------------------------------------------

Adjusted taxable income

For purposes of the section 163(j) interest limitation,
adjusted taxable income means the taxable income of the
taxpayer computed without regard to: (1) any item of income,
gain, deduction, or loss that is not properly allocable to a
trade or business; (2) any business interest or business
interest income; (3) the amount of any net operating loss
deduction; or (4) the amount of any deduction allowed under
section 199A.
For taxable years beginning before January 1, 2022,
adjusted taxable income also is computed without regard to any
deduction allowable for depreciation, amortization, or
depletion.\578\ This definition of adjusted taxable income
generally corresponds with the financial accounting concept of
earnings before interest, taxes, depreciation, and
amortization, or ``EBITDA'' (hereinafter referred to as the
``EBITDA limitation'').
---------------------------------------------------------------------------
\578\Sec. 163(j)(8)(A). Treasury regulations provide other
adjustments to the definition of adjusted taxable income. Sec.
163(j)(8)(B); Treas. Reg. sec. 1.163(j)-1(b)(1).
---------------------------------------------------------------------------
For taxable years beginning after December 31, 2021,
adjusted taxable income is computed to include deductions
allowable for depreciation, amortization, or depletion. This
definition of adjusted taxable income generally corresponds
with the financial accounting concept of earnings before
interest and taxes, or ``EBIT.''

REASONS FOR CHANGE

The Committee understands that a combination of high
interest rates and restrictions on interest deductions under
current law curtails business investment and growth. The EBIT
limitation imposes a cost on investment that impairs the
ability of businesses to finance new equipment, machinery, and
structures and expand operations. The Committee believes that
reinstating the EBITDA limitation will alleviate this burden on
businesses and reduce barriers to domestic investment.
The Committee understands that certain RV trailers are
excluded from the definition of ``motor vehicles'' for purposes
of the floor plan financing exception. The Committee believes
that this exclusion was inadvertent and has created higher tax
burdens and increased complexity for RV dealers.

EXPLANATION OF PROVISION

The provision reinstates the EBITDA limitation under
section 163(j) for taxable years beginning after December 31,
2024, and before January 1, 2030. Therefore, for purposes of
the section 163(j) interest deduction limitation for these
years, adjusted taxable income is computed without regard to
the deduction for depreciation, amortization, or depletion.
The provision also modifies the definition of ``motor
vehicle,'' for purposes of the floor plan financing interest
and floor plan financing indebtedness definitions, to include
any trailer or camper which is designed to provide temporary
living quarters for recreational, camping, or seasonal use and
is designed to be towed by, or affixed to, a motor vehicle.
The provision allows the Secretary of Treasury to provide
such rules as are necessary or appropriate to provide for the
application of the provision for taxable years of less than 12
months that begin after the effective date and end before the
date of enactment.

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2024. The Secretary of Treasury may provide such
rules as are necessary or appropriate to provide for the
application of the provision for taxable years of less than 12
months that begin after December 31, 2024, and end before the
date of enactment.

Extension of Deduction for Foreign-Derived Intangible Income and Global
Intangible Low-Taxed Income (sec. 111004 of the bill and sec. 250 of
the Code)

PRESENT LAW

Global intangible low-taxed income (``GILTI'')

A U.S. shareholder of a controlled foreign corporation
(``CFC'')\579\ must include in gross income its GILTI. GILTI is
the excess of the shareholder's net CFC tested income over the
shareholder's net deemed tangible income return. The
shareholder's net deemed tangible income return equals the
excess of 10 percent of the aggregate of its pro rata share of
the qualified business asset investment (``QBAI'') of each CFC
over certain interest expense.
---------------------------------------------------------------------------
\579\U.S. shareholders are U.S. persons that own at least 10
percent (measured by vote or value) of the stock of a foreign
corporation. A CFC generally is any foreign corporation in which U.S.
shareholders own (directly, indirectly, or constructively) more than 50
percent of the corporation's stock (measured by vote or value). See
secs. 951(b), 957, 958.
---------------------------------------------------------------------------
The formula for GILTI is:

GILTI = Net CFC Tested Income - [(10% QBAI) -
Interest Expense]

Net CFC tested income
Net CFC tested income means the excess of the aggregate of
a U.S. shareholder's pro rata share of the tested income of
each CFC over the aggregate of its pro rata share of the tested
loss of each CFC.\580\ In other words, GILTI is calculated on a
worldwide basis.
---------------------------------------------------------------------------
\580\Sec. 951A(c)(1). Pro rata shares are determined under subpart
F principles (i.e., the rules of section 951(a)(2) and the regulations
thereunder).
---------------------------------------------------------------------------
The tested income of a CFC is the excess of the gross
income of the CFC determined without regard to certain amounts
that are exceptions to tested income (referred to in this
document as ``gross tested income'') over deductions (including
taxes) properly allocable to such gross tested income. The
exceptions to tested income are: (1) any effectively connected
income described in section 952(b); (2) any gross income taken
into account in determining the CFC's subpart F income;\581\
(3) any gross income excluded from foreign base company income
or insurance income by reason of the high-tax exception under
section 954(b)(4);\582\ (4) any dividend received from a
related person (as defined in section 954(d)(3)); and (5) any
foreign oil and gas extraction income (as defined in section
907(c)(1)).
---------------------------------------------------------------------------
\581\Earnings of a CFC may constitute income to U.S. shareholders
under the traditional anti-deferral regime of subpart F of the Code,
which applies to certain passive income and certain other related-party
income that is readily movable from one jurisdiction to another.
Subpart F income is taxed at full rates with related foreign income
taxes generally eligible for the foreign tax credit.
\582\In general, if a taxpayer so elects, subpart F income and
tested income for purposes of determining GILTI inclusions exclude any
item of income if the taxpayer establishes that the income was subject
to an effective foreign income tax rate greater than 90 percent of the
maximum U.S. corporate income tax rate (i.e., currently greater than 90
percent of 21 percent, or 18.9 percent). See sec. 954(b)(4) and Treas.
Reg. secs. 1.954-1(d) and 1.951A-2(c)(7).
---------------------------------------------------------------------------
The tested loss of a CFC means the excess of deductions
(including taxes) properly allocable to the CFC's gross tested
income over the amount of such gross tested income.
Qualified business asset investment
QBAI means, with respect to any CFC for a taxable year, the
average of the aggregate of the CFC's adjusted basis in
specified tangible property that is both used in its trade or
business and of a type with respect to which a deduction is
generally allowable under section 167.\583\
---------------------------------------------------------------------------
\583\Sec. 951A(d)(1).
---------------------------------------------------------------------------
Specified tangible property means any property used in the
production of tested income.\584\
---------------------------------------------------------------------------
\584\Sec. 951A(d)(2). Specified tangible property does not include
property used in the production of tested loss; thus, a CFC with a
tested loss in a taxable year does not have QBAI for such taxable year.
---------------------------------------------------------------------------
Preferential rate on GILTI
A preferential rate on GILTI is achieved by allowing
corporations a deduction equal to 50 percent\585\ of their
GILTI (including the corresponding section 78 gross-up
amount).\586\ For taxable years beginning after December 31,
2025, the deduction for GILTI is reduced to 37.5 percent.\587\
---------------------------------------------------------------------------
\585\In other words, for taxable years beginning before January 1,
2026, the effective U.S. tax rate (i.e., taking into account the effect
of the deduction) on GILTI is 10.5 percent.
\586\Sec. 250(a)(1)(B). Under section 78, a taxpayer claiming the
foreign tax credit with respect to foreign-source income generally must
include in income the amount of the related foreign taxes paid.
\587\Sec. 250(a)(3)(B). For taxable years beginning after December
31, 2025, the effective U.S. tax rate on GILTI rises to 13.125 percent.
---------------------------------------------------------------------------
Basis adjustments
A U.S. shareholder's basis in the stock of a CFC (and basis
in property by reason of which the U.S. shareholder is treated
as owning stock of the CFC) is increased by the amount of the
shareholder's subpart F and GILTI inclusions in respect of the
CFC stock (but not any section 78 gross-up amounts). The basis
in the stock is decreased by the amount of any distributions
received from the CFC that are excluded from the shareholder's
income as previously taxed income and, for purposes of
determining the amount of loss on a disposition of the stock of
the CFC, the amount of any dividends-received deductions
(``DRDs'') under section 245A (unless the basis was already
reduced for any such DRD under section 1059).\588\
---------------------------------------------------------------------------
\588\Secs. 951A(f)(1)(A), 961(a), (b), and (d). Similar rules apply
to dividends and deemed dividends from lower-tier CFCs. See secs.
961(c) and 964(e)(4).
---------------------------------------------------------------------------

Foreign tax credit

Subject to certain limitations, U.S. citizens or resident
individuals, as well as domestic corporations, are allowed a
credit for foreign income taxes paid. In addition, a domestic
corporation is allowed a credit for foreign income taxes paid
by a CFC with respect to income included by the corporation as
subpart F income and GILTI; such taxes are deemed to have been
paid by the domestic corporation for purposes of calculating
the foreign tax credit.\589\
---------------------------------------------------------------------------
\589\Secs. 901 and 960.
---------------------------------------------------------------------------
The foreign tax credit generally is limited to a taxpayer's
U.S. tax liability on its foreign- source taxable income. The
limit is intended to ensure that the credit mitigates double
taxation of foreign-source income without offsetting U.S. tax
on U.S.-source income.\590\ Generally, the limit is computed by
multiplying a taxpayer's total pre-credit U.S. tax liability
for the year by the ratio of the taxpayer's foreign-source
taxable income for the year to the taxpayer's total taxable
income for the year.\591\ This limitation is applied separately
to different categories of foreign-source income (as discussed
below). If the total amount of foreign income taxes paid and
deemed paid for the year exceeds the taxpayer's foreign tax
credit limitation for the year, the taxpayer may (in certain
cases) carry back the excess foreign taxes to the previous year
or carry forward to any of the succeeding 10 years.\592\ No
carryback or carryover of excess foreign tax credits are
allowed in the GILTI foreign tax credit limitation category (as
discussed below).
---------------------------------------------------------------------------
\590\Secs. 901 and 904.
\591\Sec. 904(a).
\592\Sec. 904(c).
---------------------------------------------------------------------------
Deemed-paid taxes
For any subpart F income included in the gross income of a
domestic corporation, the corporation is deemed to have paid
foreign taxes equal to the aggregate foreign income taxes paid
or accrued with respect to such income by the CFC.\593\
---------------------------------------------------------------------------
\593\Sec. 960(a).
---------------------------------------------------------------------------
For any GILTI included in the gross income of a domestic
corporation, the corporation is deemed to have paid foreign
taxes equal to 80 percent of the corporation's inclusion
percentage multiplied by the aggregate foreign income taxes
paid or accrued with respect to tested income (but not tested
loss) by each CFC with respect to which the domestic
corporation is a U.S. shareholder.\594\
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\594\Sec. 960(d)(1). The inclusion percentage means, with respect
to any domestic corporation, the ratio of such corporation's GILTI
divided by the aggregate amount of its pro rata share of the tested
income (but not tested loss) of each CFC with respect to which it is a
U.S. shareholder.
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Allocation and apportionment of expenses
To determine its foreign tax credit limitation, a taxpayer
must first determine its taxable income from foreign sources by
allocating and apportioning deductions between U.S.-source
gross income and foreign-source gross income in each limitation
category. In general, deductions are allocated and apportioned
to the gross income to which the deductions factually
relate.\595\ However, subject to certain exceptions, deductions
for interest expense, stewardship expenses, and research and
experimental expenses, as well as certain other deductions, are
apportioned based on certain ratios.\596\ For example, interest
expense is apportioned based on the ratio of the corporation's
foreign or domestic (as applicable) assets to its worldwide
assets.\597\
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\595\Treas. Reg. sec. 1.861-8(b) and (c) and Temp. Treas. Reg. sec.
1.861-8T(c).
\596\Treas. Reg. sec. 1.861-8 through Temp. Treas. Reg. sec. 1.861-
14T and Treas. Reg. sec. 1.861-17 set forth detailed rules relating to
the allocation and apportionment of expenses.
\597\Sec. 864(e)(2).
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Limitation categories (``baskets'')
The foreign tax credit limitation is applied separately to
GILTI, foreign branch income,\598\ passive category income, and
general category income.\599\ For this purpose, GILTI and
foreign branch income include only income that is not passive
category income. Passive category income includes passive
income, such as portfolio interest and dividend income, and
certain other specified types of income.\600\ Dividends (and
subpart F inclusions), interest, rents, and royalties received
by a U.S. shareholder from a CFC are assigned to the passive
category to the extent the payments or inclusions are allocable
to passive category income of the CFC.\601\ Dividends received
by a 10-percent corporate shareholder of a foreign corporation
that is not a CFC are also categorized on a look-through
basis.\602\ All other income (i.e., income other than GILTI,
foreign branch, and passive income) is in the general category.
Passive income is treated as general category income if earned
by a qualifying financial services entity or if highly taxed
(i.e., if the foreign tax rate is determined to exceed the
highest tax rate specified in section 1 or 11, as
applicable).\603\
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\598\Foreign branch income is defined for this purpose as ``the
business profits of [the U.S. taxpayer] which are attributable to 1 or
more qualified business units (as defined in section 989(a)) in 1 or
more foreign countries.'' Sec. 904(d)(2)(J).
\599\Sec. 904(d); Treas. Reg. sec. 1.904-4(a). The foreign tax
credit limitation is also applied separately to certain additional
separate categories. See Treas. Reg. sec. 1.904-4(m).
\600\Sec. 904(d)(2)(A)(i) and (B).
\601\Sec. 904(d)(3).
\602\Sec. 904(d)(4).
\603\Sec. 904(d)(2)(B).
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Special rules apply to the allocation of income and losses
from foreign and U.S. sources within each category of
income.\604\ Foreign losses from one category first offset
foreign-source income from other categories. Any remaining
overall foreign loss offsets U.S.-source income. The same
principle applies to losses from U.S. sources. In subsequent
years, any losses deducted against another category or source
of income are recaptured. That is, an equal amount of income
from the same category or source that generated a loss in a
prior year is recharacterized as income from the other category
or source against which the loss was deducted. Foreign-source
income in a particular category may be fully recharacterized as
income in another category, whereas only up to 50 percent of
income from one source in any subsequent year may be
recharacterized as income from the other source.
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\604\Sec. 904(f) and (g).
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A taxpayer's ability to claim a foreign tax credit may be
further limited by a matching rule that prevents the separation
of creditable foreign taxes from the associated foreign income.
Under this rule, a foreign tax generally is not taken into
account for U.S. tax purposes, and thus no foreign tax credit
is available with respect to that foreign tax, until the
taxable year in which the related income is taken into account
for U.S. tax purposes.\605\
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\605\Sec. 909.
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Foreign-Derived Intangible Income (``FDII'')

Domestic corporations generally are taxed at preferential
rates on their foreign-derived intangible income
(``FDII'').\606\ The preferential rate is achieved by allowing
corporations a deduction equal to 37.5 percent of their
FDII.\607\ For taxable years beginning after December 31, 2025,
the deduction for FDII is reduced to 21.875 percent.\608\
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\606\Sec. 250(a)(1)(A).
\607\Sec. 250(a)(1)(A). For taxable years beginning before January
1, 2026, the effective U.S. tax rate (i.e., taking into account the
effect of the deduction) on FDII is 13.125 percent.
\608\Sec. 250(a)(3)(A). For taxable years beginning after December
31, 2025, the effective U.S. tax rate on FDII is 16.406 percent.
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FDII is calculated by multiplying a corporation's ``deemed
intangible income'' by the percentage of its ``deduction
eligible income'' that is derived from serving foreign markets
(i.e., ``foreign-derived deduction eligible income'').\609\ A
corporation's deemed intangible income equals the excess, if
any, of its deduction eligible income over a 10-percent return
on its qualified business asset investment (``QBAI'').\610\ The
formula for FDII can be expressed as the following:
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\609\Sec. 250(b)(1).
\610\Sec. 250(b)(2). If the quantity in this formula is negative,
deemed intangible income is zero.

For purposes of computing FDII, a domestic corporation's
QBAI is the average of the aggregate of its adjusted basis,
determined as of the close of each quarter of the taxable year,
in specified tangible property\611\ used in its trade or
business and of a type with respect to which a deduction is
allowable under section 167.\612\ The adjusted basis in any
property generally must be determined using the alternative
depreciation system under section 168(g) as in effect on
December 22, 2017.
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\611\Specified tangible property means any tangible property used
in the production of deduction eligible income. For this reason, the
adjusted basis of tangible depreciable property held by a foreign
branch generally is excluded from QBAI because foreign branch income is
excluded from gross deduction eligible income.
\612\The definition of QBAI for purposes of computing FDII relies
on the definition of QBAI for purposes of computing GILTI under section
951A(d), determined by substituting ``deduction eligible income'' for
``tested income'' in section 951A(d)(2) and without regard to whether
the corporation is a controlled foreign corporation. Sec. 250(b)(2)(B).
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Deduction eligible income and foreign-derived deduction
eligible income
Deduction eligible income means, with respect to any
domestic corporation, the excess (if any) of the gross income
of the corporation determined without regard to certain amounts
that are excluded from deduction eligible income over
deductions (including taxes) properly allocable to such gross
income.\613\
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\613\Sec. 250(b)(3)(A). The amounts excluded from deduction
eligible income are: (1) subpart F income; (2) GILTI; (3) financial
services income; (4) any dividend received from a CFC with respect to
which the corporation is a U.S. shareholder; (5) any domestic oil and
gas extraction income of the corporation; and (6) any foreign branch
income.
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Foreign-derived deduction eligible income means, with
respect to a taxpayer for its taxable year, any deduction
eligible income of the taxpayer that is derived in connection
with (1) property that is sold\614\ by the taxpayer to any
person who is not a U.S. person and that the taxpayer
establishes to the satisfaction of the Secretary is for a
foreign use\615\ or (2) services provided by the taxpayer that
the taxpayer establishes to the satisfaction of the Secretary
are provided to any person, or with respect to property, not
located within the United States.\616\
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\614\For purposes of determining FDII, the terms ``sold,''
``sells,'' and ``sale'' include any lease, license, exchange, or other
disposition. Sec. 250(b)(5)(E).
\615\If property is sold by a taxpayer to a person who is not a
U.S. person and after such sale the property is subject to manufacture,
assembly, or other processing (including the incorporation of such
property, as a component, into a second product by means of production,
manufacture, or assembly) outside the United States by such person,
then the property is for a foreign use.
\616\Sec. 250(b)(4).
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Foreign use means any use, consumption, or disposition that
is not within the United States.\617\ Special rules for
determining foreign use apply to transactions that involve
property or services provided to domestic intermediaries or to
certain related parties.\618\
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\617\Sec. 250(b)(5)(A).
\618\Sec. 250(b)(5)(B) and (C).
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Special rules apply with respect to property or services
provided to domestic intermediaries\619\ and with respect to
certain related party transactions.\620\
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\619\Sec. 250(b)(5)(B).
\620\Sec. 250(b)(5)(C).
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Taxable income limitation on deduction for GILTI and FDII

If the sum of a domestic corporation's FDII and GILTI
(including GILTI-attributable section 78 gross-up amounts)
exceeds its taxable income determined without regard to this
provision, then the amount of FDII and GILTI (including GILTI-
attributable section 78 gross-up) for which a deduction is
allowed is reduced (but not below zero) by an amount determined
by such excess.\621\
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\621\Sec. 250(a)(2).
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REASONS FOR CHANGE

The Committee believes that the scheduled reductions in the
corporate deduction percentages for GILTI and FDII are
unnecessary and potentially harmful to the global
competitiveness of U.S. multinational groups. Furthermore, the
Committee believes that the permanence of the deduction
percentages under the proposal offers these U.S. multinational
groups the predictability necessary to encourage investment and
innovation.

EXPLANATION OF PROVISION

The provision lowers the preferential rates on GILTI and
FDII by increasing the deduction for corporations for taxable
years beginning after December 31, 2025, from 37.5 percent to
50 percent of their GILTI (including the corresponding section
78 gross-up amount) and from 21.875 percent to 37.5 percent of
their FDII.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Extension of Base Erosion Minimum Tax Amount (sec. 111005 of the bill
and sec. 59A of the Code)

PRESENT LAW

The base erosion and anti-abuse tax (the ``BEAT'') is an
additional tax imposed on certain corporations that are members
of a multinational group with respect to payments to foreign
affiliates.\622\
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\622\Sec. 59A.
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The BEAT applies only to corporate taxpayers that are
members of an aggregate group with average gross receipts in
excess of $500 million and is determined, in part, by the
extent to which a taxpayer has made payments to foreign related
parties.\623\ The BEAT generally does not apply to taxpayers
that are members of an aggregate group for which reductions to
taxable income (``base erosion tax benefits'') arising from
payments to foreign related parties (``base erosion payments'')
are less than three percent of total deductions (i.e., a ``base
erosion percentage'' of less than three percent).
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\623\For this purpose, a related party is, with respect to the
taxpayer, any 25-percent owner of the taxpayer; any person who is
related (within the meaning of sections 267(b) or 707(b)(1)) to the
taxpayer or any 25-percent owner of the taxpayer; and any other person
who is related (within the meaning of section 482) to the taxpayer.
Sec. 59A(g). The 25-percent ownership threshold is determined by vote
or value.
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For a taxpayer subject to the BEAT (an ``applicable
taxpayer''), the additional tax (the ``base erosion minimum tax
amount'' or ``BEAT liability'') for the year generally equals
the excess, if any, of 10 percent of its modified taxable
income over an amount equal to its regular tax liability
reduced (but not below zero) by the sum of a certain tax
credits.\624\
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\624\Sec. 59A(b).
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Base erosion payments and base erosion tax benefits

A base erosion tax benefit generally reflects the reduction
in taxable income arising from the associated base erosion
payment.
A base erosion payment generally is any amount paid or
accrued by a taxpayer to a foreign person that is a related
party of the taxpayer and with respect to which a deduction is
allowable.\625\ A base erosion payment includes any amount paid
or accrued by the taxpayer to a foreign related party in
connection with the acquisition by the taxpayer from the
related party of property of a character subject to the
allowance for depreciation (or amortization in lieu of
depreciation).\626\
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\625\Sec. 59A(d)(1).
\626\Sec. 59A(d)(2).
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Base erosion payments generally do not include any amount
that constitutes a reduction in gross receipts, including
payments for cost of goods sold. Certain other payments are
excluded from the definition of base erosion payments,
including certain payments for services\627\ and qualified
derivative payments.\628\ A payment for a service by a U.S.
corporation to a foreign related party is a base erosion
payment, except to the extent that the services in question
meet most requirements for the ``services cost method''\629\ of
transfer pricing and the payment does not include a markup
component. In final regulations, the Secretary provided that a
portion of a payment meeting these standards is not treated as
a base erosion payment. Instead, only the portion of the
outbound payment that exceeds actual costs incurred by the
recipient of the payment (i.e., the markup component of the
price charged) is a base erosion payment.\630\
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\627\Sec. 59A(d)(5).
\628\Sec. 59A(h).
\629\Treas. Reg. sec. 1.482-9.
\630\Treas. Reg. sec. 1.59A-3(b)(3)(i).
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The BEAT treats as a base erosion payment any reinsurance
premium payment paid by a U.S. life insurance company or by a
U.S. property and casualty insurance company to a related
foreign reinsurer (e.g., a U.S. insurer pays a reinsurance
premium to a related foreign reinsurer to cover risk of storm
damage in the United States).\631\ It also may apply to payment
by a U.S. reinsurer to a related foreign insurer on the
occurrence of a covered event (e.g., a U.S. reinsurer pays a
related foreign insurer when a claim is made for earthquake
damage in a foreign country). Such base erosion payments are
not reduced for the receipt by the U.S. insurer of reinsurance
recovered (e.g., the related foreign reinsurer pays the U.S.
insurer when a claim is made for storm damage in the United
States), nor for the reinsurance premium paid by a foreign
insurer to a related U.S. reinsurer (e.g., the related foreign
insurer pays the reinsurance premium to the U.S. reinsurer to
cover earthquake risk in a foreign country).
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\631\Secs. 59A(d)(3), 803(a)(1)(B), and 832(b)(4)(A).
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Taxpayers are permitted to waive deductions and thus avoid
the ``base erosion tax benefits'' of such deduction to reduce
exposure to the BEAT. The Secretary adopted a rule permitting
taxpayers to waive the right to deductions for payments
otherwise within the scope of base erosion payments.\632\ The
waiver extends to insurance-related payments that were
reductions from gross premiums and other consideration.
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\632\Treas. Reg. sec. 1.59A-3(c)(6).
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Calculation of BEAT liability

BEAT liability generally equals the excess, if any, of 10
percent of the taxpayer's modified taxable income over the
amount of regular tax liability\633\ reduced (but not below
zero) by the sum of certain tax credits. The amount of regular
tax liability is reduced (and the base erosion minimum tax
amount increased) by all income tax credits except for the
research credit\634\ and a certain portion of applicable
section 38 credits.\635\ Modified taxable income is the
taxpayer's regular taxable income increased by any base erosion
tax benefit with respect to any base erosion payment and a
portion of the taxpayer's NOL deduction, if any.\636\
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\633\As defined in sec. 26(b).
\634\Sec. 41(a).
\635\Sec. 59A(b)(4). Applicable section 38 credits are credits
allowed under section 38 for the taxable year that are properly
allocable to the low-income housing credit (sec. 42(a)), the renewable
energy production credit (sec. 45(a)), and the energy investment credit
(sec. 48). In general, no more than 80 percent of the amount of
applicable section 38 credits for a taxable year can be used to reduce
an applicable taxpayer's base erosion minimum tax liability and in no
case can applicable section 38 credits reduce the taxpayer's base
erosion minimum tax liability by more than 80 percent. Sec.
59A(b)(1)(B)(ii)(II).
\636\Specifically, modified taxable income is increased by the base
erosion percentage of any NOL deduction allowed under section 172 for
such taxable year. Sec. 59A(c)(1).
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Special rules for taxable years beginning after December
31, 2025
For taxable years beginning after December 31, 2025, the
10-percent rate on modified taxable income is increased to 12.5
percent and regular tax liability is reduced (and the base
erosion minimum tax amount is therefore increased) by the sum
of all the taxpayer's income tax credits for the taxable
year.\637\
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\637\Sec. 59A(b)(2).
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Special rules for banks and securities dealers
An applicable taxpayer that is a member of an affiliated
group that includes a bank (as defined in section 581) or
securities dealer registered under section 15(a) of the
Securities Exchange Act of 1934 is subject to a tax rate on its
modified taxable income that is one percentage point higher
than the generally applicable tax rate.\638\ In addition, for
purposes of determining whether they are subject to the BEAT,
banks and securities dealers are subject to a base erosion
percentage threshold of two percent (rather than three
percent).\639\
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\638\Sec. 59A(b)(3).
\639\Sec. 59A(e)(1)(C).
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REASONS FOR CHANGE

The Committee believes that the scheduled changes to the
BEAT rate are unnecessary and potentially harmful to the
promotion of increased investment in the United States.

EXPLANATION OF PROVISION

Under the provision, the special rules of subsection
59A(b)(2), which would have increased the rate to 12.5 percent
and reduced regular tax liability by all credits, are repealed.
Other conforming amendments to reflect renumbering of certain
paragraphs are also made.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

PART II--ADDITIONAL TAX RELIEF FOR RURAL AMERICA AND MAIN STREET

Special Depreciation Allowance for Qualified Production Property (sec.
111101 of the bill and sec. 168 of the Code)

PRESENT LAW

Real property

Recovery period and depreciation method
The applicable recovery period for an asset is determined
in art by statute\640\ and in part by historic Treasury
guidance.\641\ The ``type of property'' of an asset is used to
determine the ``class life'' of the asset, which in turn
dictates the applicable recovery period for the asset. The
recovery periods for most real property are 39 years for
nonresidential real property and 27.5 years for residential
rental property.\642\ The straight-line depreciation method is
required for the aforementioned real property.\643\
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\640\See sec. 168(e) and (g).
\641\Exercising authority granted by Congress, the Secretary issued
Rev. Proc. 87-56, 1987-2 C.B. 674, laying out the framework of recovery
periods for enumerated classes of assets. The Secretary clarified and
modified the list of asset classes in Rev. Proc. 88-22, 1988-1 C.B.
785. In November 1988, Congress revoked the Secretary's authority to
modify the class lives of depreciable property. Rev. Proc. 87-56, as
modified, remains in effect except to the extent that the Congress has,
since 1988, statutorily modified the recovery period for certain
depreciable assets, effectively superseding any administrative guidance
regarding such property.
\642\Sec. 168(c).
\643\Sec. 168(b)(3)(A) and (B).
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For depreciation purposes, residential rental property is
defined as a building or structure with respect to which 80
percent or more of the gross rental income is rental income
from dwelling units.\644\ The term ``dwelling unit'' means a
house or apartment used to provide living accommodations, but
does not include a unit in a hotel, motel or other
establishment more than one-half of the units in which are used
on a transient basis. If any portion of the building or
structure is occupied by the taxpayer, the gross rental income
from such property includes the rental value of the portion so
occupied. Alternatively, the term ``nonresidential real
property'' means section 1250 property that is not residential
rental property or property with a class life of less than 27.5
years.\645\
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\644\Sec. 168(e)(2)(A).
\645\Sec. 168(e)(2)(B).
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Qualified improvement property
Qualified improvement property is any improvement made by
the taxpayer to an interior portion of a building that is
nonresidential real property if such improvement is placed in
service by the taxpayer after the date such building was first
placed in service by any taxpayer.\646\ Qualified improvement
property does not include any improvement for which the
expenditure is attributable to the enlargement of the building,
any elevator or escalator, or the internal structural framework
of the building.\647\ Qualified improvement property is
generally depreciable using the straight line method,\648\
half-year convention,\649\ and a 15-year recovery period.\650\
Improvements made to residential rental property do not meet
the definition of qualified improvement property. Hence, the
cost of an improvement to residential rental property is
generally recovered over 27.5 years using the straight-line
method and mid-month convention.
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\646\Sec. 168(e)(6)(A).
\647\Sec. 168(e)(6)(B).
\648\Sec. 168(b)(3)(G).
\649\Sec. 168(d)(1). The half-year convention treats all property
placed in service during any taxable year (or disposed of during any
taxable year) as placed in service (or disposed of) on the mid-point of
such taxable year. Sec. 168(d)(4)(A). However, if substantial property
is placed in service during the last three months of a taxable year, a
special rule requires use of the mid-quarter convention, which treats
all property placed in service (or disposed of) during any quarter as
placed in service (or disposed of) on the mid-point of such quarter.
Sec. 168(d)(3) and (d)(4)(C). The mid-quarter convention does not apply
to nonresidential real property or residential rental property; thus,
such property is not taken into account in determining if the mid-
quarter convention applies. Sec. 168(d)(3)(B); Treas. Reg. sec.
1.168(d)-1.
\650\Sec. 168(e)(3)(E)(vii). Note that as 15-year property,
qualified improvement property is generally eligible for the additional
first-year depreciation deduction under section 168(k) (this additional
first-year depreciation is commonly referred to as ``bonus
depreciation''). Qualified improvement property is also eligible for
section 179 expensing. See sec. 179(e)(1). Note that the amount of the
bonus depreciation deduction is determined after basis adjustments for
any section 179 expensing. See Treas. Reg. sec. 1.168(k)-1(a)(2)(iii).
For a discussion of expensing under sections 168(k) and 179, see Joint
Committee on Taxation, Tax Incentives for Domestic Manufacturing (JCX-
8-24), March 18, 2024, pp. 7-14.
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Recapture rules

In general
Upon disposition of most depreciable or amortizable
property used in a trade or business, the characterization of
the resulting gain or loss as ordinary or capital depends on
whether there is a net gain or a net loss under section
1231.\651\ If there is a net gain, then, subject to the
depreciation recapture rules, long-term capital gain treatment
generally results.\652\ If there is a net loss, the loss is
fully deductible against ordinary income.\653\
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\651\Section 1231 applies to gains and losses on the sale,
exchange, or involuntary conversion of certain assets used in the
taxpayer's trade or business. These assets are not capital assets, as
that term is generally defined in the Code (see sec. 1221(a)). The
assets eligible for this treatment include depreciable property or real
property held for more than one year and used in a trade or business
(if not includible in inventory, held primarily for sale to customers
in the ordinary course of business, or property described in section
1221(a)(3) or (5)). Also included are certain special assets, such as
interests in timber, coal, domestic iron ore, certain livestock, and
certain unharvested crops.
\652\Sec. 1231(a)(1). However, net section 1231 gain is converted
into ordinary income to the extent net section 1231 losses in the
previous five years were treated as ordinary losses. Sec. 1231(c). In
addition, net gains may be denied capital gains treatment (and taxed as
ordinary income) if the transaction is between certain related
taxpayers. Sec. 1239.
\653\Sec. 1231(a)(2).
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The depreciation recapture rules require taxpayers to
recognize ordinary income in an amount equal to all or a
portion of the gain realized because of the disposition of
property. In addition, sections 1245 and 1250 generally
override various nonrecognition provisions in the Code.\654\
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\654\See Treas. Reg. secs. 1.1245-6(b) and 1.1250-1(c)(2).
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Section 1245
Depreciable personal property, whether tangible or
intangible, and certain depreciable real property disposed of
at a gain are subject to depreciation recapture under section
1245.\655\ In addition to depreciation under section 167, the
section 1245 recapture rules apply to other cost recovery
provisions, including first-year expensing provisions.\656\ For
example, any deduction allowed under section 179 or 181 is
treated as if it were a deduction allowable for amortization.
Similarly, for recapture purposes, an amortizable section 197
intangible is considered section 1245 property and is subject
to the section 1245 recapture rules.\657\
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\655\Sec. 1245(a)(3); Treas. Reg. sec. 1.1245-3.
\656\Secs. 1245(a)(2)(C) and (a)(3)(C).
\657\Secs. 196(f)(7) and 1245(b)(8).
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When a taxpayer disposes of section 1245 property, the
taxpayer must recapture the gain on disposition of the property
as ordinary income to the extent of earlier depreciation or
amortization deductions taken with respect to the asset.\658\
Any remaining gain recognized upon the sale of section 1245
property is generally treated as section 1231 gain.
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\658\Sec. 1245(a)(1). Generally, all depreciation or amortization
adjustments allowed or allowable must be taken into account. However,
if a taxpayer can establish by adequate records or other sufficient
evidence that the amount allowed for depreciation or amortization for
any period was less than the amount allowable for such period, the
taxpayer may take into account only the amount allowed. Treas. Reg.
sec. 1.1245-2(a)(7).
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Section 1250
Depreciable real property, other than that included within
the definition of section 1245 property, disposed of at a gain
is known as section 1250 property.\659\ For example,
depreciable residential rental property is section 1250
property. Gain on the disposition of section 1250 property is
treated as ordinary income, rather than capital gain, only to
the extent of the excess depreciation or amortization taken
over what would have been available under the straight line
method.\660\ However, if section 1250 property is held for one
year or less, all depreciation is recaptured, regardless of
whether it exceeds the depreciation that would have been
available under the straight line method.\661\ Special rules
phase out the recapture for certain types of property held over
a specified period of time.\662\
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\659\Sec. 1250(c); Treas. Reg. sec. 1.1250-1(e).
\660\Sec. 1250(a).
\661\Sec. 1250(b)(1).
\662\Sec. 1250(a)(1)(B). The special phase-out rule applies to
residential low-income rental property, certain types of subsidized
housing, and property for which rapid depreciation of rehabilitation
expenditures was claimed under section 167(k) as in effect on the date
before the date of the enactment of the Revenue Reconciliation Act of
1990.
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Since section 1250 recaptures only the excess of
accelerated depreciation taken over straight-line depreciation
and MACRS requires straight line depreciation for
nonresidential real property and residential rental property
placed in service after 1986, such property placed in service
after 1986 generally will not be subject to recapture under
section 1250 (except to the extent that section 291(a) applies
in the case of a corporation (discussed below)). However, bonus
depreciation allowed or allowable with respect to qualified
improvement property or land improvements constitutes
additional depreciation for purposes of computing section 1250
recapture (i.e., the bonus depreciation deduction is not a
straight-line method).\663\
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\663\See Treas. Reg. sec. 1.168(k)-2(g)(3). Similarly, in the case
of qualified real property (e.g., qualified improvement property) for
which the unadjusted basis is reduced by a section 179 deduction, the
amount of such reduction is treated as section 1245 property, and the
remaining unadjusted basis is treated as section 1250 property. See
Notice 2013-59, 2013-40 I.R.B. 297, for special rules for determining
the portion of the gain that is attributable to section 1245 property
upon the sale or other disposition of qualified real property.
---------------------------------------------------------------------------
For corporations, under section 291(a), the amount treated
as ordinary income on the disposition of section 1250 property
is increased by 20 percent of the additional amount that would
be treated as ordinary income if the property were subject to
recapture under the rules for section 1245 property. For
example, if a corporation sells residential rental property
that it held for more than one year, even though the
corporation did not claim accelerated depreciation, it is
required to recognize ordinary income equal to 20 percent of
the lesser of the total amount of depreciation deducted or the
gain on the sale. While no separate rate structure exists for
corporate capital gains,\664\ a corporation may not deduct the
amount of capital losses in excess of capital gains for any
taxable year. Disallowed capital losses may be carried back
three years or carried forward five years.\665\
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\664\Income of a corporation is generally taxed at 21 percent (sec.
11).
\665\Sec. 1212(a).
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For individuals, estates, and trusts, any capital gain that
would be treated as ordinary income if the property were
subject to recapture under the rules for section 1245 property
is generally taxed at a maximum rate of 25 percent.\666\ This
is referred to as ``unrecaptured section 1250 gain.''\667\ The
amount of unrecaptured section 1250 gain (before the reduction
for the net loss) attributable to the disposition of property
to which section 1231 applies may not exceed the net section
1231 gain for the year.\668\ Any gain in excess of unrecaptured
section 1250 gain is eligible for the 15 percent capital gains
rate.\669\
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\666\Sec. 1(h)(1)(E) and (h)(6)(A).
\667\See section 1(h)(6), which defines ``unrecaptured 1250 gain''
as any long-term capital gain from the sale or exchange of section 1250
property held more than one year to the extent of the gain that would
have been treated as ordinary income if section 1250 applied to all
depreciation, reduced by the net loss (if any) attributable to the
items taken into account in computing 28-percent rate gain of an
individual.
\668\Sec. 1(h)(6)(B).
\669\Sec. 1(h)(1)(C).
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REASONS FOR CHANGE

The Committee believes that the 39-year depreciation period
for nonresidential real discourages business investment in
factories, buildings, and other structures in the United
States. The Committee believes that allowing businesses to
elect to immediately expense certain nonresidential property
used in manufacturing, agricultural production, chemical
production, and refining will strengthen the industrial
capacity of the United States, promote capital investment and
modernization, and facilitate job creation. The Committee also
believes that 100 percent expensing promotes neutrality between
business investment and other business expenses and helps
reduce tax disadvantages faced by capital intensive businesses.

EXPLANATION OF PROVISION

100 percent depreciation allowance for qualified production property

The provision provides for an elective 100 percent
depreciation allowance for qualified production property.
Qualified production property is that portion of any
nonresidential real property that meets the following
requirements:
1. subject to depreciation under section 168,
2. used by the taxpayer as an integral part of a
qualified production activity,
3. placed in service in the United States or any
possession of the United States,
4. original use commences with the taxpayer,
5. construction begins after January 19, 2025, and
before January 1, 2029,
6. subject to an election by the taxpayer to treat
such portion as qualified production property, and
7. placed in service after the date of enactment and
before January 1, 2033.
Qualified production property does not include the portion
of any nonresidential real property used for offices,
administrative services, lodging, parking, sales activities,
software engineering activities, or other functions unrelated
to manufacturing, production, or refining of tangible personal
property.
A qualified production activity is the manufacturing,
production, or refining of a qualified product. Such activities
of the taxpayer must result in a substantial transformation of
the property comprising the product. Production does not
include activities other than agricultural production and
chemical production.
A qualified product is any tangible personal property.
Qualified production property does not include any property
subject to a special allowance for bonus depreciation,\670\
qualified second generation biofuel plant property,\671\ or
qualified reuse and recycling property.\672\ For the purposes
of the elections not to apply the provisions for accelerated
depreciation for bonus depreciation,\673\ qualified second
generation biofuel plant property,\674\ or qualified reuse and
recycling property,\675\ qualified production property is
treated as a separate class of property.
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\670\Sec. 168(k).
\671\Sec. 168(l).
\672\Sec. 168(m).
\673\Sec. 168(k)(7).
\674\Sec. 168(l)(3)(D).
\675\Sec. 168(m)(2)(B)(iii).
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Qualified production property does not include any property
to which the alternative depreciation system applies. For the
purposes of election to use the alterative deprecation
system,\676\ qualified production property is treated as a
separate class of property.
---------------------------------------------------------------------------
\676\Sec. 168(g)(7)(A).
---------------------------------------------------------------------------

Special rule for certain property not previously used in qualifying
production activities

For property acquired by the taxpayer after January 19,
2025, and before January 1, 2029, the original use requirement
and the beginning of construction requirement are treated as
satisfied if such property was not used in a qualified
production activity by any person at any time between January
1, 2021, and the date of introduction. For the purposes of the
special rule, the determination of whether property was
previously used in a qualified production activity is made
without regard to whether the activities of any taxpayer result
in a substantial transformation of the property.
For purposes of determining whether property previously not
used in qualifying activities is acquired after December 31,
2024, such property is treated as acquired not later than the
date that the taxpayer enters into a written binding contract
for acquisition. For purposes of determining whether such
property is acquired after January 1, 2030, such property is
treated as acquired not earlier than the date that the taxpayer
enters into a written binding contract for acquisition.

Recapture

Generally, qualified production property disposed of at a
gain is subject to depreciation recapture under section 1245.
Special recapture rules apply if at any time during the 10-
year period beginning on the date that any qualified production
property is placed in service by the taxpayer, such property
(1) ceases to be used by the taxpayer as an integral part of a
qualified production activity, and (2) is used by the taxpayer
in a productive use other than a use that is an integral part
of a qualified production activity. If such a change in use
occurs, section 1245 is applied to treat such property as
disposed of by the taxpayer the first time a change in use
occurs with respect to such property. The amount treated as
ordinary income under section 1245 equals 100 percent of the
amount of depreciation allowable for qualified production
property. Such amount increases the taxpayer's basis in such
property.

EFFECTIVE DATE

The provision applies to property placed in service after
the date of enactment.

Renewal and Enhancement of Opportunity Zones (sec. 111102 of the bill
and secs. 1400Z-1, 1400Z-2, 6011, and 6724 and new secs. 6039K, 6039L,
and 6726 of the Code)

PRESENT LAW

Overview

Investments in qualified opportunity funds are entitled to
three tax benefits, at the taxpayer's election: (1) a temporary
deferral of the capital gain reinvested in the qualified
opportunity zone (the ``rollover gain''); (2) a permanent 10 or
15 percent reduction in the amount of such gain that must be
recognized if the investment is held for five or seven years,
respectively; and (3) a permanent exclusion of future gains
resulting from the investment in the opportunity zone if the
investment is held for at least 10 years.\677\ To qualify, the
rollover gain is generally required to be invested in the
qualified opportunity fund during a 180-day period that begins
on the date of the sale or exchange that generated the gain.
---------------------------------------------------------------------------
\677\Sec. 1400Z-2.
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A qualified opportunity fund is an investment vehicle
organized as a corporation or a partnership for the purpose of
investing in qualified opportunity zone property. The number of
communities designated as opportunity zones may be up to 25
percent of the total number of a State's low-income
communities, as designated by the governor of a State.\678\
---------------------------------------------------------------------------
\678\Sec. 1400Z-1.
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A taxpayer may elect to temporarily defer and partially
exclude capital gains from gross income to the extent that the
taxpayer invests the amount of those gains in a qualified
opportunity fund. The maximum amount of the deferred gain is
equal to the amount invested in a qualified opportunity fund by
the taxpayer during the 180-day period beginning on the date of
the asset sale that produced the gain to be deferred. Capital
gains in excess of the deferred amount must be recognized and
included in gross income as under present law.
In the case of any investment in a qualified opportunity
fund, only a portion of which consists of the investment of
gain with respect to which an election is made, such investment
is treated as two separate investments, consisting of one
investment that includes only amounts to which the election
applies (herein ``deferred-gain investment''), and a separate
investment consisting of other amounts. The temporary deferral
and permanent exclusion provisions do not apply to the separate
investment. For example, if a taxpayer sells stock at a gain
and invests the entire sale's proceeds (capital and return of
basis) in a qualified opportunity zone fund, an election may be
made only with respect to the capital gain amount. No election
may be made with respect to amounts attributable to a return of
basis, and no special tax benefits apply to such amounts.
The basis of a deferred-gain investment in a qualified
opportunity zone fund immediately after its acquisition is
zero. If the deferred-gain investment in the qualified
opportunity zone fund is held by the taxpayer for at least five
years, the basis in the deferred-gain investment is increased
by 10 percent of the original deferred gain. If the opportunity
zone asset or investment is held by the taxpayer for at least
seven years, the basis in the deferred gain investment is
increased by an additional five percent of the original
deferred gain. Some or all of the deferred gain is recognized
on the earlier of (i) the date on which the qualified
opportunity zone investment is disposed of, or (ii) December
31, 2026. The amount of gain recognized is the excess of (i)
the lesser of the amount deferred or the current fair market
value of the investment, over (ii) the taxpayer's basis in the
investment. The taxpayer's basis in the investment is increased
by the amount of gain recognized. No election under the
provision may be made after December 31, 2026, or with respect
to a disposition if an election previously made is in effect.
The post-acquisition capital gains on deferred-gain
investments in opportunity zone funds that are held for at
least 10 years are excluded from gross income. Specifically, in
the case of the sale or exchange of an investment in a
qualified opportunity zone fund held for more than 10 years, a
further election is allowed by the taxpayer to modify the basis
of such deferred-gain investment in the hands of the taxpayer
to be the fair market value of the deferred-gain investment at
the date of such sale or exchange.
In the case of a fund organized as a pass-through entity,
investors recognize gains and losses associated with both
deferred-gain and nondeferred-gain investments in the fund,
under the rules generally applicable to pass-through entities.
Thus, for example, investor-partners in a fund organized as a
partnership would recognize income and increase their basis
with respect to their distributive share of the fund's taxable
income.

Qualifying geography

To obtain the deferral and exclusion benefits of the
qualified opportunity zone provisions, the taxpayer must invest
in qualified opportunity zones. The Code allowed for the
designation of certain low-income community population census
tracts as qualified opportunity zones. The designation remains
in effect beginning on the date of the designation and ending
at the end of the tenth calendar year following such
designation.\679\ The Secretary designated qualified
opportunity zones in Notice 2018-48.\680\ Thus, the
designations are in effect until December 31, 2028.
---------------------------------------------------------------------------
\679\Sec. 1400Z-1(f).
\680\2018-28 I.R.B. 9 (June 20, 2018).
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For purposes of the designation, the term ``low-income
communities'' has the same meaning as that term is used in the
new markets tax credit provisions under section 45D of the
Code. For both the new markets tax credit provisions and the
opportunity zone provisions, a low-income community is either a
population census tract that meets certain criteria, or
specific areas designated by the Secretary. Specifically, a
low-income community is a population census tract with either
(1) a poverty rate of at least 20 percent, or (2) median family
income which does not exceed 80 percent of the greater of
metropolitan area median family income or statewide median
family income (for a nonmetropolitan census tract, this does
not exceed 80 percent of statewide median family income). In
the case of a population census tract located within a high
migration rural county, low-income is defined by reference to
85 percent (as opposed to 80 percent) of statewide median
family income. For this purpose, a high migration rural county
is any county that, during the 20-year period ending with the
year in which the most recent census was conducted, has a net
out-migration of inhabitants from the county of at least 10
percent of the population of the county at the beginning of
such period.
The Secretary is also authorized to designate ``targeted
populations'' as low-income communities. For this purpose, a
``targeted population'' is defined by reference to section
103(20) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (the ``Act'') to mean individuals, or
an identifiable group of individuals, including an Indian
tribe, who are low-income persons or otherwise lack adequate
access to loans or equity investments. Section 103(17) of the
Act provides that ``low-income'' means (1) for a targeted
population within a metropolitan area, less than 80 percent of
the area median family income; and (2) for a targeted
population within a nonmetropolitan area, less than the greater
of 80 percent of the area median family income or 80 percent of
the statewide nonmetropolitan area median family income. A
targeted population is not required to be within any census
tract. In addition, a population census tract with a population
of less than 2,000 is treated as a low-income community for
purposes of the qualified opportunity zone rules if such tract
is within an empowerment zone, the designation of which is in
effect under section 1391, and is contiguous to one or more
low-income communities.
In addition to low-income communities, a limited number of
other census tracts that are not low-income communities can be
so designated if they are contiguous to a designated low-income
community and the median family income of such tracts does not
exceed 125 percent of the median family income of the
contiguous low-income community. The designation of a
population census tract as a qualified opportunity zone remains
in effect for the period beginning on the date of the
designation and ending at the close of the tenth calendar year
beginning on or after the date of designation.
The chief executive officer of the State, possession, or
the District of Columbia (i.e., Governor, or mayor in the case
of the District of Columbia) may submit nominations for a
limited number of qualified opportunity zones to the Secretary
for certification and designation. If the number of low-income
communities in a State is less than 100, the Governor may
designate up to 25 tracts, otherwise the Governor may designate
tracts not exceeding 25 percent of the number of low-income
communities in the State. There is a special rule for Puerto
Rico such that each population census tract in Puerto Rico that
is a low-income community is deemed certified and designated as
a qualified opportunity zone, effective on the date of
enactment of Public Law 115-97 (i.e., December 22, 2017).

Project structure and steps required to obtain benefits

As discussed, the opportunity zones provisions allow a
taxpayer to make an election when investing in a qualified
opportunity fund that results in three tax benefits. To take
advantage of the election, a taxpayer generally sells capital
assets and then contributes the realized gain to a qualified
opportunity fund within 180 days of the sale. The taxpayer can
contribute funds in excess of the realized gain, but those
funds will not be eligible for the tax benefits. The qualified
opportunity fund contributes the amount received to a directly
owned qualified opportunity zone business, a corporation in
exchange for qualified opportunity zone stock, or a partnership
in exchange for a qualified opportunity zone partnership
interest.
A qualified opportunity fund is an investment vehicle
organized as a corporation or a partnership for the purpose of
investing in qualified opportunity zone property (other than
another qualified opportunity fund) that holds at least 90
percent of its assets in qualified opportunity zone property.
Qualified opportunity zone property means: (1) qualified
opportunity zone stock, (2) qualified opportunity zone
partnership interests, and (3) qualified opportunity zone
business property.
If a qualified opportunity fund fails to meet the 90
percent requirement, unless the fund establishes reasonable
cause, the fund is required to pay a monthly penalty equal to
the excess of the amount equal to 90 percent of its aggregate
assets, over the aggregate amount of qualified opportunity zone
property held by the fund multiplied by the underpayment rate
in the Code. If the fund is a partnership, the penalty is taken
into account proportionately as part of each partner's
distributive share.
Qualified opportunity zone stock consists of stock in a
domestic corporation that is a qualified opportunity zone
business. There are three requirements that must be met for
property to be considered qualified opportunity zone stock.
First, the stock must be acquired at original issuance
(directly or indirectly through an underwriter) solely for cash
after December 31, 2017. Second, the corporation must have been
a qualified opportunity zone business when the stock was issued
(or, for a new corporation, was being organized to be a
qualified opportunity zone business). Third, the corporation
must qualify as a qualified opportunity zone business during
substantially all of the qualified opportunity fund's holding
period for the stock.
Qualified opportunity zone partnership interests consist of
capital or profits interests in a domestic partnership that is
a qualified opportunity zone business. There are three
requirements that must be met for property to be considered a
qualified opportunity zone partnership interest. First, the
interest must be acquired from the partnership solely for cash
after December 31, 2017. Second, the partnership must have been
a qualified opportunity zone business when the interest was
acquired (or, for a new partnership, was being organized to be
a qualified opportunity zone business). Third, the partnership
must qualify as a qualified opportunity zone business during
substantially all of the qualified opportunity fund's holding
period for the interest.
Qualified opportunity zone business property consists of
tangible property used in the trade or business of a qualified
opportunity fund or qualified opportunity zone business. There
are three main requirements that must be met for property to be
considered qualified opportunity zone business property. First,
the property must be acquired by purchase after December 31,
2017. Second, the original use of the property in the qualified
opportunity zone must begin with the qualified opportunity fund
or qualified opportunity zone business, or the qualified
opportunity fund or qualified opportunity zone business must
substantially improve the property. Only new or substantially
improved property qualifies as opportunity zone business
property. Third, substantially all of the property must be in a
qualified opportunity zone during substantially all of the
qualified opportunity funds' or qualified opportunity zone
business' holding period for the property. Property is treated
as substantially improved only if capital expenditures on the
property in the 30 months after acquisition exceed the
property's adjusted basis on the date of acquisition.
A qualified opportunity zone business is any trade or
business in which substantially all of the underlying value of
the tangible property owned or leased by the business is
qualified opportunity zone business property.
In addition, (1) at least 50 percent of the total gross
income of the trade or business must be derived from the active
conduct of business in the qualified opportunity zone, (2) a
substantial portion of the business's intangible property must
be used in the active conduct of business in the qualified
opportunity zone, and (3) less than five percent of the average
of the aggregate adjusted basis of the property of the business
is attributable to nonqualified financial property.
Nonqualified financial property means debt, stock, partnership
interests, annuities, and derivative financial instruments
(including options, futures, forward contracts, and notional
principal contracts), other than (1) reasonable amounts of
working capital held in cash, cash equivalents, or debt
instruments with a term of no more than 18 months, and (2)
accounts or notes receivable acquired in the ordinary course of
a trade or business for services rendered or from the sale of
inventory property.\681\ The business cannot be a golf course,
country club, massage parlor, hot tub or suntan facility,
racetrack or other facility used for gambling, or store whose
principal business is the sale of alcoholic beverages for
consumption off premises.\682\
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\681\Sec. 1397C(e).
\682\Treas. Reg. sec. 1.400Z2(d)-1.
---------------------------------------------------------------------------
Tangible property that ceases to be qualified opportunity
zone business property continues to be treated as qualified
opportunity zone business property for the lesser of five years
after the date on which such tangible property ceases to be so
qualified, or the date on which such tangible property is no
longer held by the qualified opportunity zone business.

Information reporting and data reporting

The Code does not specifically provide rules for
information reporting or data reporting from qualified
opportunity funds or qualified opportunity zone businesses. The
Code provides the Secretary with the authority to prescribe
regulations as necessary to carry out the purposes of the
section, including (1) rules for the certification of qualified
opportunity funds; (2) rules to ensure a qualified opportunity
fund has a reasonable period of time to reinvest the return of
capital from investments in qualified opportunity zone stock
and qualified opportunity zone partnership interests, and to
reinvest proceeds received from the sale or disposition of
qualified opportunity zone property; and (3) rules to prevent
abuse.\683\
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\683\Sec. 1400Z-2(e)(4). Three forms require reporting relating to
opportunity zones: Form 8996, Qualified Opportunity Fund; Form 8949,
Sales and Other Dispositions of Capital Assets, and Form 8997; Initial
and Annual Statement of Qualified Opportunity Fund Investments. A
corporation or partnership organized as a qualified opportunity fund
uses Form 8996 to certify that it is organized to invest in qualified
opportunity zone property and to report that the qualified opportunity
fund meets the investment standard of the Code or to calculate the
penalty if it fails to meet the investment standard. Taxpayers use Form
8949 to report the election to defer capital gain invested in a
qualified opportunity fund. Taxpayers use Form 8997 to report qualified
opportunity fund investments held at the beginning and end of the year,
capital gains for the year that were deferred, and investments disposed
of during the year.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee wants to build off the success of the initial
qualified opportunity zones program, by extending the program
in a way that targets more underserved low-income communities
and rural areas. The Committee believes that the existing
opportunity zone program can often neglect areas with
persistent poverty, especially those in rural areas, in favor
of those in urban centers that are rapidly gentrifying. The
opportunity zone program has the potential to unleash economic
growth in high poverty communities across the country--
communities that investors too often overlook. The Committee
believes that tightening up eligible requirements and focusing
investment incentives in rural communities will help restore
the original promise of opportunity zones by steering private
capital to reinvest in underserved communities that have been
historically left behind. The Committee further believes that
strong transparency and accountability measures are required
such as taxpayer information reporting and data reporting by
the Secretary to ensure the original program and its expansion
to rural areas functions as intended.

EXPLANATION OF PROVISION

In general

The provision allows for the designation of additional
qualified opportunity zones under a modified definition of low-
income community and modifies the opportunity zone investment
incentives. Also, the provision requires information reporting
from qualified opportunity funds, qualified rural opportunity
funds (as defined), qualified opportunity zone businesses, and
qualified rural opportunity zone businesses (as defined), and
imposes penalties for failing to comply with these
requirements. Finally, the provision requires the Secretary to
publicly report various data on qualified opportunity funds and
qualified rural opportunity funds.

Qualifying geography

The provision modifies the designation period for the
initial qualified opportunity zones by ending the designation
on December 31, 2026 rather than on December 31, 2028.
The provision allows for the designation of additional
qualified opportunity zones, in effect from January 1, 2027,
through December 31, 2033, under rules similar to those for the
initial designation.
For purposes of the additional qualified opportunity zones,
the provision modifies the definition of a low-income community
to be a population census tract with either (1) a poverty rate
of at least 20 percent, or (2) median family income which does
not exceed 70 percent (from 80 percent) of the greater of
metropolitan area median family income or statewide median
family income (for a nonmetropolitan census tract, the median
family income does not exceed 70 percent of statewide median
family income). In addition, a low-income community is no
longer a low-income community if the median family income
equals or exceeds 125 percent of the metropolitan area median
family income (for a nonmetropolitan census tract, the median
family income does not equal or exceed 125 percent of statewide
median family income).
Under rules similar to current law, the Secretary is
required to designate tracts nominated by the governors of the
States. The Secretary may designate 25 percent of the number of
low-income communities (under the modified definition) in each
State as qualified opportunity zones. However, at a minimum,
the ``applicable percentage'' of the total number of qualified
opportunity zone designations is required to be of low-income
communities which are comprised entirely of a rural area, as
determined by the Secretary in consultation with the Secretary
of Agriculture.\684\ The applicable percentage, for any
calendar year during which a designations made, is the greater
of 33 percent or the percentage of the United States population
living within a rural area for the preceding calendar year. If
a State does not have enough low-income communities that are
comprised entirely of a rural area to meet such requirement,
then all low-income communities that are comprised entirely of
a rural area within a State are required to be designated. In
contrast to current law, tracts contiguous with low-income
communities are not eligible to be designated.
---------------------------------------------------------------------------
\684\A rural area, as defined in the Consolidated Farm and Rural
Development Act, is a city or town that has a population of fewer than
50,000 inhabitants or any urbanized area contiguous and adjacent to
such a city or town.
---------------------------------------------------------------------------
Finally, for purposes of the additional qualified
opportunity zones, the provision modifies the timing for the
election for tax benefits and for the recognition of deferred
gain from December 31, 2026, to December 31, 2033.

Modification of opportunity zone investment incentives

The provision also modifies the opportunity zone investment
incentives. As with the initial qualified opportunity zones,
the basis of a deferred-gain investment in a qualified
opportunity zone fund immediately after its acquisition is
zero. If the deferred-gain investment in the qualified
opportunity zone fund is held by the taxpayer for at least five
years, the basis in the deferred-gain investment is increased
by 10 percent of the original deferred gain. However, there is
no additional five percent increase. Some or all of the
deferred gain is recognized on the earlier of (1) the date on
which the qualified opportunity zone investment is disposed of,
or (2) December 31, 2033. The amount of gain recognized is the
excess of (1) the lesser of the amount deferred or the current
fair market value of the investment, over (2) the taxpayer's
basis in the investment. The taxpayer's basis in the investment
is increased by the amount of gain recognized. No election
under the provision may be made after December 31, 2033, or
with respect to a disposition if an election previously made is
in effect.
A different rule applies for investments in qualified rural
opportunity funds, defined as a qualified opportunity fund that
holds at least 90 percent of its assets in qualified
opportunity zone business property which is either (1)
qualified opportunity zone business property substantially all
of the use of which, during substantially all of the fund's
holding period for such property, is in a qualified opportunity
zone comprised entirely of a rural area; or (2) qualified
opportunity zone stock, or a qualified opportunity zone
partnership property interest, in a qualified opportunity zone
business in which substantially all of the tangible property
owned or leased is qualified opportunity zone business property
and substantially all the use of which is in a qualified
opportunity zone comprised entirely of a rural area. For these
investments, the basis increase at year five is 30 percent
rather than 10 percent of the original deferred gain.
Finally, the provision allows the taxpayer to elect to
invest up to $10,000 of ordinary income invested in a qualified
opportunity fund. The $10,000 limitation is an aggregate
limitation for the taxpayer over the life of the opportunity
zone program. The zero initial basis and basis increase
provisions do not apply with respect to the ordinary income
investment. However, there is a permanent exclusion of future
gains resulting from the investment in the opportunity zone if
the investment is held for at least 10 years.

Reporting on qualified opportunity funds, qualified rural opportunity
funds, qualified opportunity zone businesses, and qualified
rural opportunity zone businesses

The provision requires information reporting from (1)
qualified opportunity funds and qualified rural opportunity
funds, and (2) qualified opportunity zone businesses and
qualified rural opportunity zone businesses. The provision
requires that the qualified opportunity funds and qualified
rural opportunity funds electronically file their returns on
magnetic media or machine-readable form. The provision states
that any term used in these information reporting sections has
the same meaning as used in current law governing qualified
opportunity zones.
Qualified opportunity funds
The provision requires every qualified opportunity fund to
file an annual return (at such time and in such manner as the
Secretary may prescribe) containing the following information:
the name, address, and TIN of the qualified
opportunity fund;
whether the qualified opportunity fund is
organized as a corporation or a partnership;
the value of the total assets held by the
qualified opportunity fund as of each date described in
section 1400Z-2(d)(1);
the value of all qualified opportunity zone
property held by the qualified opportunity fund on each
such date;
with respect to each investment held by the
qualified opportunity fund in qualified opportunity
zone stock or a qualified opportunity zone partnership
interest:
the name, address, and TIN of
the corporation in which such stock is held or
the partnership in which such interest is held,
each North American Industry
Classification System (``NAICS'') code that
applies to the trades or businesses conducted
by such corporation or partnership,
the population census tracts in
which the qualified opportunity zone business
property of such corporation or partnership is
located,
the amount of the investment in
such stock or partnership interest as of each
date described in section 1400Z-2(d)(1) of the
Code,
the value of tangible property
held by such corporation or partnership on each
date which is owned by such corporation or
partnership,
the approximate number of
residential units (if any) for any real
property held by such corporation or
partnership, and
the approximate average monthly
number of full-time equivalent employees of
such corporation or partnership for the year
(within numerical ranges identified by the
Secretary) or such other indication of the
employment impact of such corporation or
partnership as determined appropriate by the
Secretary;
with respect to the items of qualified
opportunity zone business property held by the
qualified opportunity fund:
the NAICS code that applies to
the trades or businesses in which such property
is held,
the population census tract in
which the property is located,
whether the property is owned or
leased,
the aggregate value of the items
of qualified opportunity zone property held by
the qualified opportunity fund as of such date
described in section 1400Z-2(d)(1) of the Code,
and
in the case of real property,
the number of residential units (if any);
the approximate average monthly number of
full-time equivalent employees for the year of the
trades or businesses of the qualified opportunity fund
in which qualified opportunity zone business property
is held (within numerical ranges identified by the
Secretary) or such other indication of the employment
impact of such trades or businesses as determined
appropriate by the Secretary;
with respect to each person who disposed of
an investment in the qualified opportunity fund during
the year:
the name and TIN of such person,
the date(s) on which the
investment disposed was acquired, and
the date(s) on which any such
investment was disposed, and the amount of the
investment disposed of; and
such other information as the Secretary may
require.
Every qualified opportunity fund required to file an
information return with the IRS as discussed above is also
required to provide a written statement to each person whose
name is required to be provided on the return because the
person disposed of an investment in the qualified opportunity
fund during the year. The written statement is required to
show:
the name, address and phone number of the
information contact of the qualified opportunity fund
required to file the return, and
the following information with respect to
the person who disposed of the investment:
the name and TIN of the person,
the date(s) on which the
investment disposed was acquired, and
the date(s) on which any such
investment was disposed of, and the amount of
the investment disposed of.
The provision treats this statement as a payee statement
under the Code, subject to information reporting penalties as
discussed below.
For purposes of this information reporting requirement, the
term ``full-time equivalent employees'' means with respect to
any month, the sum of: (1) the number of full-time employees
(as defined in section 4980H(c)(4)), for the month plus (2) the
number of employees determined (under rules similar to the
rules of section 4980H(e)(2)(E)) by dividing the aggregate
number of hours of service of employees who are not full-time
employees for the month by 120.
Qualified rural opportunity funds
The provision applies the above information reporting
requirements for qualified opportunity funds to qualified rural
opportunity funds. Thus, qualified rural opportunity funds are
required to file an annual return with the IRS and provide
statements to persons who dispose of their investment in the
qualified rural opportunity fund during the year.
Qualified opportunity zone businesses
The provision requires every applicable qualified
opportunity zone business to provide to the qualified
opportunity fund a written statement in such manner and setting
forth such information as the Secretary may prescribe for
purposes of enabling the qualified opportunity fund to meet its
information return reporting requirements. The term
``applicable qualified opportunity zone business'' means any
qualified opportunity zone business: (1) which is a trade or
business of a qualified opportunity fund, (2) in which a
qualified opportunity fund holds qualified opportunity zone
stock, or (3) in which a qualified opportunity fund holds a
qualified opportunity zone partnership interest. The provision
treats this statement as a payee statement under the Code,
subject to information reporting penalties as discussed below.
Qualified rural opportunity zone businesses
The provision applies the information reporting
requirements for qualified opportunity zone businesses to
qualified rural opportunity zone businesses. Thus, applicable
qualified rural opportunity zone businesses are required to
provide to the qualified rural opportunity fund a written
statement in such manner and setting for such information as
the Secretary may prescribe.

Failure to comply with information reporting requirements relating to
qualified opportunity funds and qualified rural opportunity
funds

The provision provides penalties for qualified opportunity
funds and qualified rural opportunity funds that do not comply
with appropriate information reporting requirements. The
provision also provides penalties for qualified opportunity
zone businesses and qualified rural opportunity zone businesses
that do not furnish the required statements to the qualified
opportunity funds and the qualified rural opportunity funds.
Qualified opportunity funds and qualified rural opportunity
funds
Any qualified opportunity fund and qualified rural
opportunity fund that fails to file a complete and correct
information return in the time and manner required must pay a
penalty of $500 per day, subject to a maximum penalty with
respect to one return of $10,000. The maximum penalty is
increased to $50,000 for qualified opportunity funds and
qualified rural opportunity funds with gross assets (determined
on the last day of the taxable year) in excess of $10,000,000
(``large funds''). For intentional disregard of the reporting
information requirements, the penalty is $2,500 per day,
subject to a maximum penalty of $50,000, or $250,000 in the
case of large funds.
The penalty amounts are subject to inflation adjustments
for returns required to be filed after calendar year 2024. For
the $500 and $2,500 penalty amounts described in the previous
paragraph, if any penalty increase is not a multiple of $10,
then the total penalty amount is rounded to the next lowest
multiple of $10. For large funds, if any penalty increase is
not a multiple of $10,000, then the total penalty amount is
rounded to the next lowest multiple of $10,000. For any other
dollar amounts, if any penalty increase is not a multiple of
$1,000, then the total penalty amount is rounded to the next
lowest multiple of $1,000.
In addition, the provision imposes penalties on qualified
opportunity funds and qualified rural opportunity funds for (1)
failure to file a complete and correct information return in
the time and manner required, and (2) failure to provide the
written statement to each person whose name is required to be
provided on the return because the person disposed of an
investment in the qualified opportunity fund or qualified rural
opportunity fund during the year.
Qualified opportunity zone businesses and qualified rural
opportunity zone businesses
The provision also imposes the penalties discussed above on
the qualified opportunity zone business and qualified rural
opportunity zone businesses for failure of the qualified
opportunity zone business and qualified rural opportunity zone
business to provide the written statement in such manner and
setting forth such information as the Secretary may prescribe
for purposes of enabling the qualified opportunity fund and
qualified rural opportunity fund to meet its information return
reporting requirements.
Overall, the provision treats the above statements as payee
statements under the Code, and as such, subjects the qualified
opportunity fund, qualified rural opportunity fund, qualified
opportunity fund business, and qualified rural opportunity fund
business to the current information reporting penalties for
failures relating to payee statements.\685\
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\685\A person who fails to furnish correct written statements to
recipients of payments for which information reporting is required is
subject to a penalty of $250 for each statement with respect to which
such a failure occurs, up to a maximum of $3,000,000 in any calendar
year, adjusted for inflation. Sec. 6722. These amounts are subject to
inflation adjustments under section 6722(f). For information statements
due in calendar year 2026, the penalty amount is $340, up to a maximum
of $4,098,500 per year. The penalties are reduced if the failure is
corrected within a specific amount of time. Sec. 6722(b). The penalties
are waived if a person establishes that any failure was due to
reasonable cause and not willful neglect. Sec. 6724(a). These failures
to furnish penalties are reduced for small businesses (sec. 6722(d))
and increased for failures due to intentional disregard (sec. 6722(e)).
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Reporting of data on opportunity zone and rural opportunity zone tax
incentives

As soon as practical after the date of enactment, and
annually thereafter, the Secretary or the Secretary's delegate,
in consultation with the Director of the Bureau of the Census
and such other agencies as the Secretary determines, are
required to publish a report on qualified opportunity funds.
The report is required to include the following information:
(i) the number of qualified opportunities funds;
(ii) the aggregate dollar amount of assets held in
qualified opportunity funds;
(iii) the aggregate dollar amount of investments made
by qualified opportunity funds in qualified opportunity
fund property, stated separately for each NAICS code;
(iv) the percentage of population census tracts
designated as qualified opportunity zones that have
received qualified opportunity fund investments;
(v) for each population census tract designated as a
qualified opportunity zone, the approximate average
monthly number of full-time equivalent employees of the
qualified opportunity zone businesses in such qualified
opportunity zone for the preceding 12-month period
(within numerical wages identified by the Secretary) or
other indication of the employment impact of such
qualified opportunity fund businesses as determined by
the Secretary;
(vi) the percentage of the total amount of
investments made by qualified opportunity funds in (1)
qualified opportunity zone property which is real
property, and (2) other qualified opportunity zone
property;
(vii) for each population census tract, the aggregate
approximate number of residential units resulting from
investments made by qualified opportunity funds in real
property; and
(viii) the aggregate dollar amount of investments
made by qualified opportunity funds in each population
census tract.
In addition to the report described above, for the sixth
year after the date of enactment, the Secretary is required to
include in the report the impacts and outcomes of a designation
of a population census tract as a qualified opportunity zone as
measured by economic indicators, such as job creation, poverty
reduction, new business starts, and other metrics as determined
by the Secretary.
Also, in the sixth year or the 11th year after the date of
enactment, the Secretary is required to include in the report,
for population census tracts designated as a qualified
opportunity zone, a comparison (based on aggregate information)
of the factors described below: (1) between the five-year
period ending on the date of the enactment of Public Law 115-97
(i.e., December 22, 2017) and the most recent five-year period
for which data is available; and (2) for the most recent five-
year period for which data is available between such population
census tracts and similar population census tracts that were
not designated as a qualified opportunity zone. The Secretary
is permitted to combine population census tracts into such
groups as the Secretary determines appropriate for purposes of
making comparisons.
The factors are:
(i) the unemployment rate;
(ii) the number of persons working in the population
census tract, including the percentage of such persons
who were not residents in the population census tract
in the preceding year;
(iii) individual, family, and household poverty
rates;
(iv) median family income of residents of the
population census tract;
(v) demographic information on residents of the
population census tract, including age, income,
education, race, and employment;
(vi) the average percentage of income of residents of
the population census tract spent on rent annually;
(vii) the number of residences in the population
census tract;
(viii) the rate of home ownership in the population
census tract;
(ix) the average value of residential property in the
population census tract;
(x) the number of affordable housing units in the
population census tract;
(xi) the number and percentage of residents in the
population census tract that were not employed for the
preceding year;
(xii) the number of new business starts in the
population census tract; and
(xiii) the distribution of employees in the
population census tract by NAICS Code.
The provision requires the Secretary to establish
appropriate procedures to ensure that any amounts reported do
not disclose taxpayer return information that can be associated
with any taxpayer or competitive or proprietary information,
and if necessary to protect taxpayer return information, allows
the Secretary to combine information required with respect to
individual population census tracts into larger geographic
areas.
Reports on qualified rural opportunity funds
The provision requires the Secretary to separately publish
the same reports for qualified rural opportunity funds as those
required above for qualified opportunity funds. For this
purpose, the date of enactment of the provision is substituted
for the date of enactment of Public Law 115-97 (i.e., December
22, 2017).

EFFECTIVE DATES

The provision establishing the designation of additional
qualified opportunity zones applies to amounts invested after
the date of enactment.
The provision relating to information reporting
requirements applies to taxable years beginning after the date
of enactment.
The provision relating to data to be reported by the
Secretary becomes effective on the date of enactment.

Increased Dollar Limitations for Expensing of Certain Depreciable
Business Assets (sec. 111103 of the bill and sec. 179 of the Code)

PRESENT LAW

A taxpayer generally must capitalize the cost of property
used in a trade or business or held for the production of
income and recover such cost over time through annual
deductions for depreciation or amortization.\686\ The period
for depreciation or amortization generally begins when the
asset is placed in service by the taxpayer.\687\ Tangible
property generally is depreciated under the modified
accelerated cost recovery system (``MACRS''), which determines
depreciation for different types of property based on an
assigned applicable depreciation method, recovery period, and
convention.\688\
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\686\See secs. 263(a) and 167. In general, only the tax owner of
property (i.e., the taxpayer with the benefits and burdens of
ownership) is entitled to claim cost recovery deductions with respect
to the property. In addition, where property is not used exclusively in
a taxpayer's business, the amount eligible for a deduction must be
reduced by the amount related to personal use. See, e.g., sec. 280A.
\687\See Treas. Reg. secs. 1.167(a)-10(b), -3, -14, and 1.197-2(f).
See also Treas. Reg. sec. 1.167(a)-11(e)(1)(i).
\688\Sec. 168.
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Election to expense certain depreciable business assets

Subject to certain limitations, a taxpayer may elect under
section 179 to deduct (or ``expense'') the cost of qualifying
property, rather than to recover such costs through
depreciation deductions.\689\ The maximum amount a taxpayer may
expense is $1,000,000 of the cost of qualifying property placed
in service for the taxable year.\690\ The $1,000,000 amount is
reduced (but not below zero) by the amount by which the cost of
qualifying property placed in service during the taxable year
exceeds $2,500,000.\691\
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\689\In the case of property purchased and placed in service by a
partnership (or S corporation), the determination of whether the
property is section 179 property is made at the partnership (or
corporate) level, and the election to expense is made by the
partnership (or S corporation). Treas. Reg. sec. 1.179-1(h).
\690\Sec. 179(b)(1).
\691\Sec. 179(b)(2).
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The $1,000,000 and $2,500,000 amounts are indexed for
inflation for taxable years beginning after 2018.\692\ For
taxable years beginning in 2025, the total amount that may be
expensed is $1,250,000, and the phaseout threshold amount is
$3,130,000.\693\ For example, assume that during 2025 a
calendar year taxpayer purchased and placed in service
$4,080,000 of section 179 property. The $1,250,000 section
179(b)(1) dollar amount for 2025 is reduced by the excess
section 179 property cost amount of $950,000 ($4,080,000-
$3,130,000). The taxpayer's 2025 section 179 expense limitation
is $300,000 ($1,250,000-$950,000).\694\
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\692\Sec. 179(b)(6).
\693\Sec. 3.25 of Rev. Proc. 2024-40, 2024-45 I.R.B. 1100.
\694\The taxpayer's remaining basis in the property may be eligible
for bonus depreciation under section 168(k). See Treas. Reg. sec.
1.168(k)-1(a)(2)(iii).
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In general, qualifying property is depreciable tangible
personal property, off-the-shelf computer software, and
qualified real property\695\ that is purchased for use in the
active conduct of a trade or business.\696\ Qualifying property
excludes property used (1) outside the United States, (2) by
certain tax-exempt organizations, and (3) by governmental units
and foreign persons or entities.\697\
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\695\At the election of the taxpayer. Sec. 179(d)(1)(B)(ii). See
sec. 3.02 of Rev. Proc. 2019-08, 2019-03 I.R.B. 347, January 14, 2019,
for guidance regarding the election to treat qualified real property as
section 179 property.
\696\Sec. 179(d)(1). If section 179 property is not used
predominantly in a trade or business of the taxpayer at any time before
the end of its recovery period, recapture rules apply. Sec. 179(d)(10);
Treas. Reg. sec. 1.179-1(e).
\697\Sec. 179(d)(1) flush language and section 50(b) (other than
paragraph (2) thereof). Thus, section 179 property includes certain
depreciable tangible personal property used predominantly to furnish
lodging or in connection with furnishing lodging (e.g., beds and other
furniture, refrigerators, ranges, and other equipment used in the
living quarters of a lodging facility such as an apartment house,
dormitory, or any other facility (or part of a facility) where sleeping
accommodations are provided and let). Treas. Reg. sec. 1.48-1(h).
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Qualified real property includes (1) qualified improvement
property\698\ and (2) any of the following improvements to
nonresidential real property that are placed in service by the
taxpayer after the date such nonresidential real property was
first placed in service: roofs; heating, ventilation, and air-
conditioning (``HVAC'') property;\699\ fire protection and
alarm systems; and security systems.\700\
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\698\As defined in sec. 168(e)(6).
\699\HVAC property includes all components (whether in, on, or
adjacent to the building) of a central air conditioning or heating
system, including motors, compressors, pipes, and ducts. Treas. Reg.
sec. 1.48-1(e)(2). See also sec. 3.01(1)(b)(iii)(B) of Rev. Proc. 2019-
08, 2019-03 I.R.B. 347.
\700\Sec. 179(e).
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Passenger automobiles subject to the section 280F
limitation are eligible for section 179 expensing only to the
extent of the dollar limitations in section 280F.\701\ For
sport utility vehicles above the 6,000 pound weight rating and
not more than the 14,000 pound weight rating, which are not
subject to the limitation under section 280F, the maximum cost
that may be expensed for any taxable year under section 179 is
$25,000 (the ``sport utility vehicle limitation'').\702\ The
$25,000 amount is indexed for inflation for taxable years
beginning after 2018. For taxable years beginning in 2025, the
sport utility vehicle limitation is $31,300.\703\
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\701\For a description of section 280F, see Joint Committee on
Taxation, General Explanation of Public Law 115-97 (JCS-1-18), December
2018, pp. 128-130. This document can be found on the Joint Committee on
Taxation website at www.jct.gov.
\702\Sec. 179(b)(5). For this purpose, a sport utility vehicle
excludes any vehicle that: (1) is designed for more than nine
individuals sitting behind the driver's seat; (2) is equipped with an
open cargo area, or a covered box not readily accessible from the
passenger compartment, of at least six feet in interior length; or (3)
has an integral enclosure, fully enclosing the driver compartment and
load carrying device, does not have seating rearward of the driver's
seat, and has no body section protruding more than 30 inches ahead of
the leading edge of the windshield.
\703\Sec. 3.25 of Rev. Proc. 2024-40, 2024-45 I.R.B. 1100.
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The amount eligible to be expensed for a taxable year may
not exceed the aggregate taxable income from the active conduct
of any trade or business (determined without regard to section
179).\704\ Any amount that is not allowed as a deduction
because of the taxable income limitation may be carried forward
to succeeding taxable years (subject to limitations).\705\ In
the case of a partnership (or S corporation), the section 179
limitations are applied at the partnership (or corporate) and
partner (or shareholder) levels.\706\
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\704\Sec. 179(b)(3). Wages, salaries, tips, and other compensation
received by a taxpayer as an employee are included in the taxpayer's
aggregate amount of taxable income derived from the active conduct of a
trade or business. Treas. Reg. sec. 1.179-2(c)(6)(iv).
\705\Sec. 179(b)(3)(B).
\706\Sec. 179(d)(8).
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Amounts expensed under section 179 are allowed for both
regular tax and alternative minimum tax purposes.\707\ However,
no general business credit under section 38 is allowed with
respect to any amount for which a deduction is allowed under
section 179.\708\ In addition, if a corporation makes an
election under section 179, the full amount of the deduction
does not reduce earnings and profits. Rather, the expenditures
that are deducted reduce corporate earnings and profits ratably
over a five-year period.\709\
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\707\See Senate Finance Committee Report to Accompany H.R. 3838,
Tax Reform Act of 1986, S. Rep. No. 99-313, May 29, 1985, p. 522. See
also Instructions for Form 6251, Alternative Minimum Tax--Individuals
(2022), p. 5.
\708\Sec. 179(d)(9).
\709\Sec. 312(k)(3)(B).
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An expense election is made under rules prescribed by the
Secretary.\710\ In general, any election made under section
179, and any specification contained therein, may be revoked by
the taxpayer with respect to any property without the consent
of the Commissioner.\711\ Such revocation, once made, is
irrevocable.
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\710\Sec. 179(c)(1).
\711\Sec. 179(c)(2).
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REASONS FOR CHANGE

The Committee believes that section 179 expensing provides
two important benefits for small businesses. First, it lowers
the cost of capital for tangible property used in a trade or
business. With a lower cost of capital, the Committee believes
small businesses will invest in more equipment and employ more
workers. Second, it eliminates depreciation recordkeeping
requirements with respect to expensed property. To increase the
value of these benefits and the number of eligible taxpayers
that may receive these benefits, the provision increases both
the amount allowed to be expensed under section 179 and the
amount of the phase-out threshold.

EXPLANATION OF PROVISION

The provision increases the maximum amount a taxpayer may
expense under section 179 to $2,500,000 and increases the
phaseout threshold amount to $4,000,000. The provision provides
that the maximum amount a taxpayer may expense for taxable
years beginning after 2024 is $2,500,000 of the cost of section
179 property placed in service for the taxable year. The
$2,500,000 amount is reduced (but not below zero) by the amount
by which the cost of section 179 property placed in service
during the taxable year exceeds $4,000,000. The $2,500,000 and
$4,000,000 amounts are indexed for inflation for taxable years
beginning after 2025.

EFFECTIVE DATE

The provision applies to property placed in service in
taxable years beginning after December 31, 2024.

Repeal of Revision to de Minimis Rules for Third Party Network
Transactions (sec. 111104 of the bill and secs. 3406(b)(6) and 6050W(e)
of the Code)

PRESENT LAW

Present law requires persons to file an information return
concerning certain transactions with other persons.\712\ The
person filing an information return is also required to provide
the person for whom the information return is being filed with
a written statement showing the information that was reported
to the IRS, which generally includes aggregate payments made,
and the contact information for the payor.\713\ These returns
are intended to assist taxpayers in preparing their income tax
returns and to help the IRS determine whether such income tax
returns are correct and complete.
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\712\Secs. 6041 through 6050Y.
\713\See, e.g., sec. 6041(d).
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Returns relating to payments made in settlement of payment card and
third party network transactions

Since 2012 (for payments received in 2011), payment
settlement entities are required to report to the IRS and to
businesses that receive these payments the gross amount of
payments made in settlement of payment card transactions and
third party network transactions.\714\
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\714\Sec. 6050W; Pub. L. No. 110-289, sec. 3091(a) enacted sec.
6050W, July 30, 2008, effective generally for returns for calendar
years beginning after December 31, 2010.
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Specifically, any payment settlement entity making a
payment to a participating payee in settlement of reportable
payment transactions must report annually to the IRS and to the
participating payee the gross amount of such reportable payment
transactions, as well as the name, address, and TIN of the
participating payee.\715\ A ``reportable payment transaction''
means any payment card transaction and any third party network
transaction.\716\
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\715\Sec. 6050W(a).
\716\Sec. 6050W(c)(1).
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A ``payment settlement entity'' means, in the case of a
payment card transaction, a merchant acquiring entity (defined
below) and, in the case of a third party network transaction,
the third party settlement organization.\717\ A ``participating
payee'' means, in the case of a payment card transaction, any
person who accepts a payment card as payment and, in the case
of a third party network transaction, any person who accepts
payment from a third party settlement organization in
settlement of such transaction.\718\ A ``person'' includes a
governmental unit. A ``person'' generally does not include
someone with a foreign address.\719\
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\717\Sec. 6050W(b).
\718\Sec. 6050W(d)(1).
\719\Sec. 6050W(d)(1)(B) and (C).
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Returns relating to payments made in settlement of payment
card transactions
For purposes of the reporting requirement, the term
``merchant acquiring entity'' means a bank or other
organization with the contractual obligation to make payments
to participating payees in settlement of payment card
transactions.\720\ A ``payment card transaction'' means any
transaction in which a payment card is accepted as
payment.\721\ A ``payment card'' is defined as any card (e.g.,
a credit card or debit card) which is issued pursuant to an
agreement or arrangement which provides for: (1) one or more
issuers of such cards; (2) a network of persons unrelated to
each other, and to the issuer, who agree to accept such cards
as payment; and (3) standards and mechanisms for settling the
transactions between the merchant acquiring entities and the
persons who agree to accept such cards as payment.\722\ Thus, a
bank that enrolls a business to accept credit cards and
contracts with the business to make payment on credit card
transactions must report to the IRS the business's gross credit
card transactions for each calendar year on a Form 1099-K,
Payment Card and Third Party Network Transactions. The bank
also must provide a copy of the information return to the
business.
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\720\Sec. 6050W(b)(2).
\721\For this purpose, the acceptance as payment of any account
number or other indicia associated with a payment card also qualifies
as a payment card transaction.
\722\Sec. 6050W(d)(2).
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Returns relating to payments made in settlement of third
party network transactions
The statute also requires reporting on a third party
network transaction. The term ``third party network
transaction'' means any transaction which is settled through a
third party payment network.\723\ A ``third party payment
network'' is defined as any agreement or arrangement: (1) that
involves the establishment of accounts with a central
organization by a substantial number of persons (generally
considered to be more than 50) who are unrelated to such
organization, provide goods or services, and agree to settle
transactions for the provision of such goods or services
pursuant to such agreement or arrangement; (2) that provides
for standards and mechanisms for settling such transactions;
and (3) that guarantees persons providing goods or services
pursuant to such agreement or arrangement will be paid for
providing such goods or services.\724\
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\723\Sec. 6050W(c)(3).
\724\Sec. 6050W(d)(3).
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In the case of a third party network transaction, the
payment settlement entity is the third party settlement
organization, which is defined as the central organization
which has the contractual obligation to make payment to
participating payees of third party network transactions.\725\
Thus, an organization generally is required to report if it
provides a network enabling buyers to transfer funds to sellers
who have established accounts with the organization and have a
contractual obligation to accept payment through the network.
However, an organization operating a network which merely
processes electronic payments (such as wire transfers,
electronic checks, and direct deposit payments) between buyers
and sellers, but does not have contractual agreements with
sellers to use such network, is not required to report.
Similarly, an agreement to transfer funds between two demand
deposit accounts will not, by itself, constitute a third party
network transaction.
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\725\Sec. 6050W(b)(3).
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De minimis payment exception
A third party payment network does not include any
agreement or arrangement that provides for the issuance of
payment cards as defined by the provision.\726\ In addition,
there is an exception for de minimis payments that applies to
payments made by third party settlement organizations but not
to payments made by merchant acquiring entities. For calendar
years beginning after December 31, 2021, a third party
settlement organization is required to report third party
network transactions with any participating payee that exceed a
minimum threshold of $600 in aggregate payments, regardless of
the aggregate number of such transactions.\727\ In other words,
there is not a threshold requirement for the number of
transactions. In addition, third party network transactions
only include transactions for the provision of goods or
services. Reporting is not required for other transactions,
including personal gifts, charitable contributions, and
reimbursements.
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\726\Sec. 6050W(d)(3).
\727\Sec. 6050W(e); American Rescue Plan Act, Pub. L. No. 117-2,
Title IX, sec. 9674, March 11, 2021, amending sec. 6050W(e), effective
generally for returns for calendar years beginning after December 31,
2021.
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The previous exception for de minimis payments for calendar
years beginning prior to January 1, 2022, provided that a third
party settlement organization was not required to report unless
the aggregate value of third party network transactions with
respect to a participating payee for the year exceeds $20,000
and the aggregate number of such transactions with respect to a
participating payee exceeds 200.
Notwithstanding the revisions to the de minimis payment
exception, the IRS allowed third party settlement organizations
to delay implementation of the $600 aggregate payment threshold
for calendar years 2022 and 2023.\728\ As a result, for these
years, reporting was not required unless the third party
settlement organization's receipts were over the prior
threshold $20,000 and more than 200 transactions. In addition,
the IRS provided that penalties would not be asserted under
section 6721 or section 6722 for third-party settlement
organizations failing to file or failing to furnish Forms 1099-
K unless the gross amount of aggregate payments required to be
reported exceeded $20,000 and the number of transactions
exceeded 200. The IRS stated that the reason for this delay was
the complexity of the threshold change enacted under the
American Rescue Plan Act.\729\
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\728\Notice 2023-10, 2023-3 I.R.B. 403, January 17, 2023 and Notice
2023-74, 2023-51 I.R.B. 1484, December 18, 2023.
\729\IR-2023-221, Nov. 21, 2023.
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The IRS also provided transition relief for third-party
settlement organizations regarding transactions during calendar
years 2024 and 2025.\730\ Under the IRS guidance,\731\ third-
party settlement organizations are required to report
transactions with respect to a participating payee when the
amount of total payments for those transactions is more than
$5,000, regardless of the number of transactions, in calendar
year 2024, and more than $2,500, regardless of the number of
transactions, in calendar year 2025. In addition, for calendar
year 2024 and calendar year 2025, the IRS will not assert
penalties under section 6721 or 6722 for a third-party
settlement organization failure to file or furnish Forms 1099-K
with respect to a payee unless the gross amount of aggregate
payments to be reported exceeds $5,000 or $2,500, respectively,
regardless of the number of such transactions. For calendar
years beginning after December 31, 2025, a third-party
settlement organization is required to report payments in
settlement of third party network transactions with respect to
any participating payee that exceed a minimum threshold of $600
in aggregate payments, regardless of the number of
transactions.
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\730\IR-2024-299, Nov. 26, 2024.
\731\Notice 2024-85, 2024-51 I.R.B. 1349, November 26, 2024. Notice
2024-84 also provides that, for calendar year 2024, the IRS will not
assert penalties under section 6651 or 6656 with respect to a third-
party settlement organization failure to withhold and pay backup
withholding tax during the calendar year. For calendar year 2025 and
after, however, the IRS will assert penalties under section 6651 or
6656 with respect to a third-party settlement organization's failure to
withhold and pay backup withholding tax.
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Rules regarding reporting requirements
There are also reporting requirements on intermediaries who
receive payments from a payment settlement entity and
distribute such payments to one or more participating
payees.\732\ Such intermediaries are treated as participating
payees with respect to the payment settlement entity and as
payment settlement entities with respect to the participating
payees to whom the intermediary distributes payments. Thus, for
example, in the case of a corporation that receives payment
from a bank for credit card sales conducted at the
corporation's independently-owned franchise stores, the bank is
required to report to the corporation and to the IRS the gross
amount of reportable payment transactions settled with respect
to the corporation (notwithstanding the fact that the
corporation does not accept payment cards and would not
otherwise be treated as a participating payee). In turn, the
corporation, as an intermediary, is required to report the
gross amount of reportable payment transactions allocable to
each franchise store. The bank has no reporting obligation with
respect to payments made by the corporation to its franchise
stores.
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\732\Sec. 6050W(b)(4).
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In addition, if a payment settlement entity contracts with
a third party facilitator to settle reportable payment
transactions on behalf of the payment settlement entity, the
third party facilitator is required to file the annual
information return in lieu of the payment settlement
entity.\733\
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\733\Sec. 6050W(b)(4)(B); Treas. Reg. sec. 1.6050W-1(d)(2).
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The payment settlement entity is required to file
information returns to the IRS on or before February 28 (March
31 if filing electronically) of the year following the calendar
year for which the returns must be filed.\734\ Statements are
required to be furnished to the participating payees on or
before January 31 of the year following the calendar year for
which the return was required to be made.\735\
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\734\Treas. Reg. sec. 1.6050W-1(g). Taxpayers that file these
information returns that report reportable payment transactions are
entitled to a 30-day automatic extension of time to file. Treas. Reg.
sec. 1.6081-8(a) (effective for requests for extension of time to file
certain information returns due after December 31, 2016).
\735\Sec. 6050W(f); Treas. Reg. sec. 1.6050W-1(h).
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The Secretary has exercised authority under these rules to
issue guidance to implement the reporting requirement,
including rules to prevent the reporting of the same
transaction more than once.\736\
---------------------------------------------------------------------------
\736\Treas. Reg. sec. 1.6050W-1(a)(4)(ii).
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The reportable payment transactions subject to information
reporting generally are subject to backup withholding
requirements. In addition, the information reporting penalties
apply for any failure to file a correct information return or
furnish a correct payee statement with respect to the
reportable payment transactions. Any person who is required to
file an information return or furnish a payee statement but who
fails to do so on or before the prescribed due date is subject
to a penalty that varies based on when, if at all, the correct
information return is filed or furnished. Penalties are imposed
for failure to file the information return\737\ or furnish
payee statements.\738\ No penalty is imposed if the failure is
due to reasonable cause.\739\ Both the failure to file and
failure to furnish penalties are adjusted annually to account
for inflation.
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\737\Sec. 6721.
\738\Sec. 6722. Section 6723 also imposes a penalty for failure to
timely comply with a specified information reporting requirement.
However, this penalty applies in narrow circumstances and is unlikely
to apply to payment settlement entities under section 6050W. See Treas.
Reg. sec. 301.6723-1(a)(4).
\739\Sec. 6724(a).
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REASONS FOR CHANGE

The Committee believes that the previous de minimis
reporting threshold should be reinstated because the lower
threshold means that millions of individuals will receive Form
1099-Ks, often in instances where there is no tax liability,
creating significant confusion and administrative challenges.
For example, selling a used piece of furniture for less than
the original purchase price will not create any taxable income.
However, the Committee notes that these transactions may
trigger reporting requirements if the previous threshold is not
reinstated, yielding confusion for online platforms and
taxpayers, which could result in overreporting of income and
therefore overpayment of taxes as well as ineligibility for
certain tax benefits. The Committee believes reverting back to
the previous reporting threshold is necessary to prevent
numerous individuals from having to hire tax professionals and
keep onerous records and receipts, or from being misled into
thinking the arrival of a Form 1099-K represents taxable income
they must report. Separately, it is also clear to the Committee
that The American Rescue Plan Act (ARPA) of 2021 targeted
hardworking Americans by reducing the 1099-K reporting
thresholds from $20,000 in earnings and 200 individual
transactions to only $600, increasing taxes and paperwork
burdens on workers, especially those in the gig economy,
already trying to make ends meet. Moreover, the Committee
recognizes that these new requirements were as unworkable for
the Internal Revenue Service (IRS) as it was for the American
people. This is evidenced by the IRS's refusal to implement
ARPA's 1099-K reporting requirement for over four years
following enactment.

EXPLANATION OF PROVISION

The provision reverts to the previous de minimis reporting
exception for third party settlement organizations, and the
same threshold the IRS has followed for calendar years 2022 and
2023. A third party settlement organization is not required to
report unless the aggregate value of third party network
transactions with respect to a participating payee for the year
exceeds $20,000 and the aggregate number of such transactions
with respect to a participating payee exceeds 200.
The provision does not change the clarification that
reporting is not required on transactions which are not for
goods or services.
The obligations of a merchant acquiring entity are
unchanged. For example, if a company is considered a merchant
acquiring entity, it must issue a Form 1099-K to all
participating payees who have received payments of any amount
starting with the first dollar. On the other hand, if a
business that provides an online marketplace for sales of goods
such as clothing, cars, furniture, etc. is considered a third
party settlement organization, under this provision, it does
not have to provide a Form 1099-K to sellers participating on
its web-based platform who have received payments of $20,000 or
less or to sellers who have engaged in 200 or fewer
transactions.
The provision also makes a conforming change to the backup
withholding dollar threshold\740\ to align with the restoration
of the previous de minimis reporting threshold. However, under
the provision, the de minimis reporting threshold does not
apply with respect to payments to any participating payee
during any calendar year if one or more payments in settlement
of third party network transactions made by the payor to the
participating payee during the preceding calendar year were
reportable payments.
---------------------------------------------------------------------------
\740\Sec. 3406(b)(6).
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EFFECTIVE DATES

The provision with respect to the reinstatement of the
exception for de minimis payments applies as if included in
section 9674 of Public Law No. 117-2, the American Rescue Plan
Act (enacted on March 11, 2021). Thus, the provision applies to
returns for calendar years beginning after December 31, 2021.
The provision with respect to the application of the de
minimis rule for third party network transactions to backup
withholding applies to calendar years beginning after December
31, 2024.

Increase in Threshold for Requiring Information Reporting With Respect
to Certain Payees (sec. 111105 of the bill and secs. 6041, 6041A, and
3406(b)(6) of the Code)

PRESENT LAW

Information reporting requirements

Present law requires persons to file an information return
concerning certain transactions with other persons.\741\ The
person filing an information return (the ``payor'') is also
required to provide the person for whom the information return
is being filed (the ``payee'') with a written statement showing
the information that was reported to the Internal Revenue
Service (``IRS''), which generally includes aggregate payments
made, and the contact information for the payor.\742\ These
returns are intended to assist taxpayers in preparing their
income tax returns and to help the IRS determine whether such
income tax returns are correct and complete.
---------------------------------------------------------------------------
\741\Secs. 6041 through 6050Y.
\742\See, e.g., sec. 6041(d).
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For example, every person engaged in a trade or business
who makes certain payments aggregating $600 or more in any
taxable year to a single payee in the course of such trade or
business must report those payments to the IRS.\743\ This
requirement applies to fixed or determinable payments of income
as well as nonemployee compensation, generally reported on
either Form 1099-MISC, Miscellaneous Information, or Form 1099-
NEC, Nonemployee Compensation. In addition, any service
recipient engaged in a trade or business and paying for
services is required to make a return according to regulations
when aggregate payments equal $600 or more.\744\ Governmental
entities are specifically required to make an information
return,\745\ and in the case of payments by Federal executive
agencies that extends to reporting payments to corporations as
well as individuals.\746\
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\743\Sec. 6041.
\744\Sec. 6041A.
\745\Sec. 6041(A)(d)(2).
\746\Sec. 6041A(d)(3)(A).
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However, these provisions discussed above do not cover
payments for goods or certain enumerated types of payments that
are subject to other specific reporting requirements, such as
provisions covering dividends, interest, and royalties.\747\
Treasury regulations generally provide further exceptions from
the reporting of payments to corporations, exempt
organizations, governmental entities, international
organizations, and retirement plans.\748\
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\747\Section 6041(a) generally excepts from its scope most
interest, royalties, and dividends, which are instead covered by
sections 6049, 6050N, and 6042, respectively.
\748\Treas. Reg. sec. 1.6041-3. Certain for-profit health care
provider corporations are not covered by this general exception,
including those organizations providing billing services for such
companies.
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A person who is required to file information returns but
who fails to do so by the due date for the returns, includes on
the returns incorrect information, or files incomplete returns
generally is subject to a penalty of $250 for each return with
respect to which such a failure occurs, up to a maximum of
$3,000,000 in any calendar year, adjusted for inflation.\749\
Similar penalties apply to failures to furnish correct written
statements to recipients of payments for which information
reporting is required.\750\ The failure to file and failure to
furnish penalties are reduced for small businesses\751\ and
increased for failures due to intentional disregard.\752\
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\749\Sec. 6721. These amounts are adjusted annually for inflation.
For information returns required to be filed in calendar year 2023, the
penalty amount is $290, up to a maximum of $3,532,500 per calendar
year. For information returns required to be filed in calendar year
2024, the penalty amount is $310, up to a maximum of $3,783,000 per
calendar year. The penalties are reduced if the failure is corrected
within a specified amount of time. Sec. 6721(b). The penalties are
waived if a person establishes that any failure was due to reasonable
cause and not willful neglect. Sec. 6724(a).
\750\Sec. 6722. These amounts are also adjusted annually for
inflation. For information statements required to be filed in calendar
year 2023, the penalty amount is $290, up to a maximum of $3,532,500
per calendar year. For information statements required to be filed in
calendar year 2024, the penalty amount is $310, up to a maximum of
$3,783,000 per calendar year. The penalties are reduced if the failure
is corrected within a specified amount of time. Sec. 6722(b). The
penalties are waived if a person establishes that any failure was due
to reasonable cause and not willful neglect. Sec. 6724(a).
\751\Secs. 6721(d) and 6722(d).
\752\Secs. 6721(e) and 6722(e).
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Backup withholding

Generally, a payor is not required to withhold taxes from
payments to the payee. However, a payor may be required to
deduct and withhold income tax on certain ``reportable
payments'' at a rate equal to 24 percent\753\ if: (1) the payee
fails to furnish his or her taxpayer identification number
(``TIN'') to the payor; (2) the IRS notifies the payor that the
payee's TIN is incorrect; (3) a notified payee underreporting
of reportable payments has occurred; or (4) a payee
certification failure with respect to reportable payments has
occurred.\754\ The requirement to deduct and withhold in the
case of a notified payee underreporting or a payee
certification failure applies solely to reportable interest or
dividend payments. These deduction and withholding
requirements\755\ are referred to as backup withholding.
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\753\Sec. 3406(a)(1)(D). The backup withholding rate is the fourth
lowest rate of tax applicable under section 1(c). In 2023, this rate is
24 percent.
\754\Sec. 3406(a)(1).
\755\Sec. 3406.
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Reportable payments are defined as any reportable interest
or dividend payment and any other reportable payment.\756\ A
reportable interest or dividend payment means any payment of a
kind, and to a payee, required to be shown on an information
return required under any of the following sections: (i)
6049(a), relating to payments of interest, (ii) 6042(a),
relating to payments of dividends, or (iii) 6044, relating to
payments of patronage dividends, but only to the extent such
payment is in money and only if 50 percent or more of such
payment is in money. Any other reportable payment means any
payment of a kind, and to a payee, required to be shown on a
return required under any of the following sections: (i) 6041,
relating to certain information at source, (ii) 6041A(a),
relating to payments of remuneration for services, (iii) 6045,
relating to returns of brokers, (iv) 6050A, relating to
reporting requirements of certain fishing boat operators, but
only to the extent such payment is in money and represents a
share of the proceeds of the catch, (v) 6050N, relating to
payments of royalties, or (vi) 6050W, relating to payments made
in settlement of payment card and third party settlement
transactions. Examples of payments that may be subject to
backup withholding include interest, dividends, rents,
royalties, commissions, non-employee compensation, and broker
payments.
---------------------------------------------------------------------------
\756\Sec. 3406(b).
---------------------------------------------------------------------------
In general, a payment is determined to be a reportable
payment, and therefore subject to backup withholding, without
regard to any minimum amount which must be paid before an
information return is required under the applicable information
reporting statute.\757\
---------------------------------------------------------------------------
\757\Sec. 3406(b)(4).
---------------------------------------------------------------------------
For payments required to be shown on a return under section
6041(a) or 6041A(a), relating to certain information at the
source and payments of remuneration for services, a minimum
amount generally must be paid before the payment is subject to
backup withholding.\758\ Such payments are treated as
reportable payments, and therefore subject to backup
withholding, only if (i) the aggregate amount of such payment
and all previous payments described in section 6041(a) or
6041A(a) by the payor to the payee during such calendar year
equals or exceeds $600, (ii) the payor was required under
section 6041(a) or 6041A(a) to file an information return for
the preceding calendar year with respect to payments to the
payee, or (iii) during the preceding calendar year, the payor
made reportable payments to the payee with respect to which
amounts were required to be deducted and withheld under the
backup withholding requirements. Backup withholding generally
applies only to payments made to U.S. persons who have failed
to provide the payor with a valid IRS Form W-9, Request for
Taxpayer Identification Number and Certification; however, it
may also apply to certain payments made to persons in the
absence of valid documentation of foreign status. Backup
withholding does not apply to payments made to exempt
recipients, including tax-exempt organizations, government
entities, and certain other entities.\759\ Thus, a payor of
reportable payments generally must request that a U.S. payee
(other than certain exempt recipients) furnish a Form W-9
providing that person's name and TIN.\760\
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\758\Sec. 3406(b)(6).
\759\Sec. 3406(g); Treas. Reg. sec. 31.3406(g)-1.
\760\Treas. Reg. sec. 31.3406(h)-3.
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REASONS FOR CHANGE

The Committee notes that the thresholds for third-party
information reporting have not been fundamentally reviewed or
adjusted for inflation since 1954. The Committee also notes
that the penalties for failure to properly report are adjusted
for inflation. The Committee believes that the compliance
objectives of third-party information reporting must be
balanced with the resulting additional administrative burden,
specifically that placed on small businesses. Thus, the
Committee believes it is necessary to modernize the information
reporting regime by updating the reporting thresholds to keep
up with inflation and provide relief for small businesses and
individuals subject to these rules.

EXPLANATION OF PROVISION

The provision changes the information reporting threshold
for certain payments to persons engaged in a trade or
business\761\ and payments of remuneration for services\762\ to
$2,000 in a calendar year, with the threshold amount to be
indexed annually for inflation in calendar years after 2026. No
change is made to the information reporting threshold for
direct sales.
---------------------------------------------------------------------------
\761\Sec. 6041(a).
\762\Sec. 6041A(a).
---------------------------------------------------------------------------
The provision also makes a conforming change to the backup
withholding dollar threshold\763\ to align with the new $2,000
reporting threshold. Under the provision, both the information
reporting thresholds and the backup withholding thresholds are
for transactions that equal or exceed $2,000 (indexed for
inflation for calendar years after 2026).
---------------------------------------------------------------------------
\763\Sec. 3406(b)(6).
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision applies with respect to payments made after
December 31, 2025.

Repeal of Excise Tax on Indoor Tanning Services (sec. 111106 of the
bill and sec. 5000B of the Code)

PRESENT LAW

A retail sales tax is imposed on indoor tanning
services.\764\ The tax rate is 10 percent of the amount paid
for such services, including any amount paid by insurance.\765\
If a payment covers charges for indoor tanning services as well
as other goods and services, the charges for other goods and
services may be excluded in computing the tax payable on the
amount paid.\766\
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\764\Sec. 5000B.
\765\The total amount paid is presumed to include the tax if the
tax is not separately stated. Treas. Reg. sec. 48.5000B-1(d)(1)(i).
\766\Treas. Reg. sec. 48.5000B-1(c)(2), (d)(2), and (d)(3).
---------------------------------------------------------------------------
Consumers are liable for the tax, with service providers
being responsible for collecting and remitting the tax to the
Federal Government on a quarterly basis.
Indoor tanning services are services employing any
electronic product designed to induce skin tanning and which
incorporate one or more ultraviolet lamps with wavelengths in
air between 200 and 400 nanometers.\767\ Taxable services do
not include phototherapy services\768\ performed by a licensed
medical professional. There is also an exemption for qualified
physical fitness facilities that meet certain criteria and
offer tanning as an incidental service to members without a
separately identifiable fee.\769\
---------------------------------------------------------------------------
\767\Treas. Reg. sec. 48.5000B-1(c)(1).
\768\Phototherapy services are services that expose an individual
to specific wavelengths of light for the treatment of (i)
dermatological conditions, such as acne, psoriasis, and eczema; (ii)
sleep disorders; (iii) seasonal affective disorder or other psychiatric
disorder; (iv) neonatal jaundice; (v) wound healing; and (vi) other
medical conditions determined by a licensed medical professional to be
treatable by exposing the individual to specific wavelengths of light.
Treas. Reg. sec. 48.5000B-1(c)(3).
\769\Treas. Reg. sec. 48.5000B-1(d)(4).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the tax on indoor tanning
services places a significant and intrusive burden on
individuals who use tanning services and on businesses that are
responsible for collecting and remitting the tax. The Committee
believes that repealing the tax will help small businesses that
offer tanning services.

EXPLANATION OF PROVISION

Under the provision, the excise tax on indoor tanning
services applies for services performed on or prior to the date
of enactment. Thus, the tax does not apply to services
performed after the date of enactment.

EFFECTIVE DATE

The provision is effective for services performed after the
date of enactment.

Exclusion of Interest on Loans Secured by Rural or Agricultural Real
Property (sec. 111107 of the bill and new sec. 139J and sec. 265 of the
Code)

PRESENT LAW

In general

Gross income broadly encompasses all income from whatever
source derived and includes, among other items, interest.\770\
While the Code does not provide an exhaustive list of gross
income inclusions, the courts deem an item as gross income if
it constitutes a clearly realized accession to wealth under the
taxpayer's control unless that item is excepted.\771\
Exceptions include certain types interest income such as
interest on State and local bonds\772\ and interest received
from the Federal Government in connection with an action to
recover property seized by the Internal Revenue Service.\773\
Present law disallows a deduction for certain expenses and
interest on indebtedness incurred to purchase or carry tax-
exempt obligations.\774\
---------------------------------------------------------------------------
\770\Sec. 61(a)(4) and Treas. Reg. sec. 1.61-7. Interest income
includes interest on savings or other bank deposits; interest on coupon
bonds; interest on an open account, a promissory note, a mortgage, or a
corporate bond or debenture; the interest portion of a condemnation
award; usurious interest (unless by State law it is automatically
converted to a payment on the principal); interest on legacies;
interest on life insurance proceeds held under an agreement to pay
interest thereon; and interest on refunds of Federal taxes. Treas. Reg.
sec. 1.61-7(a).
\771\Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 432 (1955).
Sec. 61(b) cross references statutory exclusions from gross income in
sections 101 through 139I.
\772\Sec. 103.
\773\Sec. 139H.
\774\Sec. 265(a).
---------------------------------------------------------------------------

REASONS FOR CHANGE

By lowering the tax burden on interest income earned by
certain lenders on loans secured by rural or agricultural real
property and certain other aquaculture, fishing, and seafood
processing property, the Committee intends to expand low-cost
credit in rural communities. The provision will help farmers,
ranchers, and fishermen obtain affordable loans to finance
their operations. The Committee believes that a robust credit
market in rural communities will promote agricultural
production, strengthen the domestic food supply chain, and
provide critical assistance to rural areas.

EXPLANATION OF PROVISION

The provision allows banks insured under the Federal
Deposit Insurance Act,\775\ domestic entities owned by a bank
holding company,\776\ State or Federally regulated insurance
companies, domestic entities owned by a State law insurance
holding company, and the Federal Agricultural Mortgage
Corporation (``Farmer Mac'')\777\ to exclude from gross income
25 percent of interest income derived from qualified real
estate loans.
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\775\As defined in 12 U.S.C. sec. 1811, et seq.
\776\As defined in section 8 of the International Banking Act (12
U.S.C. sec. 3106).
\777\As established under section 8.1(a) of the Farm Credit Act of
1971 (12 U.S.C. sec. 2279aa-1(a)).
---------------------------------------------------------------------------
Qualified real estate loans are the following types of
original loans\778\ made after the date of enactment and before
January 1, 2029, to a person other than a specified foreign
entity:\779\
---------------------------------------------------------------------------
\778\Qualified real estate loans exclude refinancings of loans made
on or before the date of enactment.
\779\As defined under section 7701(a)(51)(B), as added by the
provision.
---------------------------------------------------------------------------
loans secured by domestic real property that
is substantially used to produce agricultural products
(e.g. farms and ranches) or a leasehold mortgage on
such property;
loans secured by domestic real property that
is substantially used in the trade or business of
fishing or seafood processing or a leasehold mortgage
on such property; and
loans secured by any domestic aquaculture
facility\780\ or a leasehold mortgage on such
facility.\781\
---------------------------------------------------------------------------
\780\An aquaculture facility means any domestic land, structure, or
other appurtenance that is used for aquaculture, including any
hatchery, rearing pond, raceway, pen, or incubator that is in any State
or any territory of the United States,
\781\Farmer Mac is not eligible to exclude from gross income any
interest income received from loans secured by domestic real property
that is substantially used in the trade or business of fishing or
seafood processing, or loans secured by domestic aquaculture
facilities. That is, it may only exclude from gross income 25 percent
of the interest derived from loans secured by domestic real property
that is substantially used to produce agricultural products or a
leasehold mortgage on such property.
---------------------------------------------------------------------------
The provision treats qualified real estate loans as tax-
exempt obligations for purposes of disallowing interest
deductions on indebtedness incurred by qualified lenders to
purchase or carry such loans.

EFFECTIVE DATE

The provision applies to original debt incurred in taxable
years ending after the date of enactment.

Treatment of Certain Qualified Sound Recording Productions (sec. 111108
of the bill and secs. 168 and 181 of the Code)

PRESENT LAW

Expensing of certain qualified film, television, and live theatrical
productions

Under section 181, a taxpayer may elect\782\ to deduct up
to $15 million of the aggregate production costs of any
qualified film, television or live theatrical production that
commences before to January 1, 2026.\783\ Instead of
capitalizing and recovering those production costs through
depreciation allowances once the production is placed in
service, taxpayers deduct the costs when it pays or incurs
them.\784\ The dollar limit is increased to $20 million if a
significant amount of the production costs are incurred in
areas eligible for designation as a low-income community or
eligible for designation by the Delta Regional Authority as a
distressed county or isolated area of distress.\785\
---------------------------------------------------------------------------
\782\See Treas. Reg. sec. 1.181-2 for rules on making (and
revoking) an election under section 181.
\783\For purposes of determining whether a production is eligible
for section 181 expensing, a qualified film or television production is
treated as commencing on the first date of principal photography or in-
between animation. Treas. Reg. sec. 1.181-6(a). The date on which a
qualified live theatrical production commences is the date of the first
public performance of such production for a paying audience. 2015 PATH
Act, Pub. L. No. 114-113, Div. Q, sec. 169(d)(2)(B).
\784\Sec. 181(a)(2)(A). See Treas. Reg. sec. 1.181-1 for rules on
determining eligible production costs. Eligible production costs under
section 181 include participations and residuals, compensation for
services, compensation for property rights, and financing costs. Treas.
Reg. sec. 1.181-1(a)(3)(i). The special rule in section 167(g)(7) that
allows taxpayers using the income forecast method of depreciation to
include participations and residuals that have not satisfied the
economic performance rules (i.e., participations and residuals that
have not been `paid or incurred') in the adjusted basis of property
placed in service does not apply for purposes of section 181. Treas.
Reg. sec. 1.181-1(a)(8). Thus, under section 181, a taxpayer may only
include participations and residuals that it pays or incurs for
eligible production costs. Production costs exclude the cost of
obtaining a production after its initial release or broadcast. See
Treas. Reg. sec. 1.181-1(a)(3)(iii). For this purpose, ``initial
release or broadcast'' means the first commercial exhibition or
broadcast of a production to an audience. Treas. Reg. sec. 1.181-
1(a)(7). Thus, e.g., a taxpayer may not expense the purchase of an
existing film library under section 181. See T.D. 9551, 76 Fed. Reg.
64816, October 19, 2011.
\785\Sec. 181(a)(2)(B).
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A section 181 election may only be made by an owner of the
production.\786\ An owner of a production is any person that is
required under section 263A to capitalize the costs of
producing the production into the cost basis of the production,
or that would be required to do so if section 263A applied to
that person.\787\ In addition, the aggregate production costs
of a qualified production that is co-produced include all
production costs, regardless of funding source, in determining
if the applicable dollar limit is exceeded. Thus, the term
``aggregate production costs'' means all production costs paid
or incurred by any person, whether paid or incurred directly by
an owner or indirectly on behalf of an owner.\788\ Taxpayers
must capitalize and recover production costs that exceed the
applicable dollar limitation under their method of accounting
(e.g., under the income forecast method, or section 168(k) if
eligible, as discussed below).\789\
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\786\Treas. Reg. sec. 1.181-1(a).
\787\Treas. Reg. sec. 1.181-1(a)(2)(i).
\788\Treas. Reg. sec. 1.181-1(a)(4). See Treas. Reg. sec. 1.181-
2(c)(3) for the information required to be provided to the Internal
Revenue Service when more than one person will claim deductions under
section 181 for a production (to ensure that the applicable deduction
limitation is not exceeded).
\789\See Joint Committee on Taxation, General Explanation of Tax
Legislation Enacted in the 110th Congress (JCS-1-09), March 2009, p.
448; Treas. Reg. sec. 1.181-1(c)(2). A production is generally
considered to be placed in service at the time of initial release,
broadcast, or live staged performance (i.e., at the time of the first
commercial exhibition, broadcast, or live staged performance of a
production to an audience). See, e.g., Rev. Rul. 79-285, 1979-2 C.B.
91; and PLR 9010011, March 9, 1990. See also, Treas. Reg. sec. 1.181-
1(a)(7). However, a production is not placed in service if it is only
exhibited, broadcasted or performed for a limited test audience in
advance of the commercial exhibition, broadcast, or performance to
general audiences. See PLR 9010011; Treas. Reg. sec. 1.181-1(a)(7).
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A qualified film or television, or live theatrical
production means any production of a motion picture (whether
released theatrically or directly to video cassette or any
other format), television program, or live staged play if at
least 75 percent of the total compensation, excluding
participations and residuals,\790\ expended on the production
is for services performed in the United States by actors,
directors, producers, and other relevant production
personnel.\791\
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\790\Sec. 181(d)(3)(B). Participations and residuals are defined
as, with respect to any property, costs the amount of which by contract
varies with the amount of income earned in connection with such
property. See also Treas. Reg. sec. 1.181-3(c).
\791\Sec. 181(d)(1) and (e)(1).
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A qualified film or television production means any motion
picture or video tape.\792\ Each episode of a television series
is treated as a separate production, and only the first 44
episodes of a particular series qualify under the
provision.\793\ Qualified film or television productions
exclude sexually explicit productions.\794\
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\792\Secs. 181(d)(2)(A) and 168(f)(3).
\793\Sec. 181(d)(2)(B).
\794\As referenced by 18 U.S.C. section 2257. Sec. 181(d)(2)(C).
---------------------------------------------------------------------------
A qualified live theatrical production means a live staged
production of a play (with or without music) which is derived
from a written book or script and is produced or presented by a
commercial entity in venues of a certain capacity. Generally,
the audience capacity of the venue cannot exceed 3,000 people,
or in the case of a series of venues, the majority of those
venues cannot exceed 3,000 people.\795\ There is a capacity
exception for seasonal productions produced or presented by a
taxpayer for no more than 10 weeks annually in any venue whose
audience capacity does not exceed 6,500 people.\796\ Each live-
staged production is treated as a separate production. Like
qualified film and television productions, qualified live
theatrical productions exclude sexually explicit
productions.\797\
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\795\Sec. 181(e)(2)(A).
\796\Sec. 181(e)(2)(D),
\797\As referenced by 18 U.S.C. section 2257. Sec. 181(e)(2)(E).
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Any deduction allowed under section 181 is treated as an
allowable amortization deduction\798\ subject to ordinary
income recapture in the taxable year in which (1) the taxpayer
revokes a section 181 election, (2) the production fails to
meet the requirements of section 181, or (3) the taxpayer sells
or otherwise disposes of the production.\799\
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\798\Sec. 1245(a)(2)(C). For a discussion of the recapture rules
applicable to depreciation and amortization deductions, see Joint
Committee on Taxation, Tax Incentives for Domestic Manufacturing (JCX-
8-24), March 8, 2024, pp. 14-17. This document can be found on the
Joint Committee on Taxation website at www.jct.gov.
\799\See Treas. Reg. sec. 1.181-4.
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Depreciation of certain intangible property

A taxpayer generally must capitalize the cost of property
used in a trade or business or held produce income and recover
the cost over time through annual depreciation or amortization
deductions.\800\ Depreciation or amortization generally begins
when the asset is placed in service by the taxpayer.\801\
Tangible property generally is depreciated under the modified
accelerated cost recovery system (``MACRS''), which determines
depreciation for different types of property based on an
assigned applicable depreciation method, recovery period, and
placed in service convention.\802\
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\800\See secs. 263(a) and 167. In general, only the tax owner of
property (i.e., the taxpayer with the benefits and burdens of
ownership) is entitled to claim tax benefits such as cost recovery
deductions with respect to the property. In addition, where property is
not used exclusively in a taxpayer's business, the amount eligible for
a deduction must be reduced by the amount related to personal use. See,
e.g., sec. 280A.
\801\See Treas. Reg. secs. 1.167(a)-10(b), -3, -14, and 1.197-2(f).
See also Treas. Reg. sec. 1.167(a)-11(e)(1)(i).
\802\Sec. 168.
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Films, videos, and sound recordings
MACRS does not apply to certain property, including any
motion picture film, video tape, or sound recording, or to any
other property if the taxpayer elects to exclude such property
from MACRS and the taxpayer properly applies a unit-of-
production method or other method of depreciation not expressed
in a term of years.\803\ Thus, the recovery of the cost of a
film, video tape, sound recording, or similar property that is
produced or acquired by the taxpayer may not be determined
under either the MACRS depreciation provisions or under the
section 197 amortization provisions.\804\ The cost recovery of
such property is determined under section 167, which allows a
depreciation deduction for the reasonable allowance for the
exhaustion, wear and tear, or obsolescence of property used in
a trade or business or held to produce of income. In addition,
the costs of motion picture films, video tapes, sound
recordings, copyrights, books, and patents are eligible to be
recovered using the income forecast method of
depreciation.\805\
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\803\Sec. 168(f)(1), (3) and (4).
\804\Under section 197, when a taxpayer acquires intangible assets
held in connection with a trade or business, any value properly
attributable to a ``section 197 intangible'' is amortizable on a
straight-line basis over 15 years. No other depreciation or
amortization deduction (such as bonus depreciation under section
168(k)) is allowable with respect to any section 197 intangible.
Section 197 does not apply to certain intangible property, including
certain property produced by the taxpayer or any interest in a film,
sound recording, video tape, book or similar property not acquired in a
transaction (or a series of related transactions) involving the
acquisition of assets constituting a trade or business or substantial
portion thereof. See sec. 197(c)(2) and (e)(4)(A).
\805\Sec. 167(g)(6).
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Under the income forecast method, a property's depreciation
deduction for a taxable year is determined by multiplying the
adjusted basis of the property by a fraction, the numerator of
which is the gross income generated by the property during the
year, and the denominator of which is the total forecasted or
estimated gross income expected to be generated prior to the
close of the tenth taxable year after the year the property is
placed in service. Any costs that are not recovered by the end
of the tenth taxable year after the property is placed in
service may be depreciated in that year.\806\
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\806\Sec. 167(g)(1). In general, the adjusted basis of property
that may be taken into account under the income forecast method only
includes amounts that have been incurred under the economic performance
requirements of section 461(h). An exception to this rule applies to
participations and residuals. Specifically, solely for purposes of
computing the allowable deduction for property under the income
forecast method of depreciation, participations and residuals may be
included in the adjusted basis of the property beginning in the year
such property is placed in service (even if economic performance has
not yet occurred) if such participations and residuals relate to income
to be derived from the property before the close of the tenth taxable
year following the year the property is placed in service. For this
purpose, participations and residuals are defined as costs the amount
of which, by contract, varies with the amount of income earned in
connection with such property. See sec. 167(g)(7).
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Additional first-year depreciation deduction for certain productions

Under section 168(k), qualified property acquired and
placed in service after September 27, 2017, and before January
1, 2023 (January 1, 2024, for longer production period property
and certain aircraft), as well as specified plants planted or
grafted after September 27, 2017, and before January 1, 2023,
is eligible for an additional first-year depreciation deduction
equal to 100 percent of the adjusted basis of the property. The
100 percent allowance is phased down by 20 percent per calendar
year for qualified property acquired after September 27, 2017,
and placed in service after December 31, 2022 (after December
31, 2023, for longer production period property and certain
aircraft), as well as specified plants planted or grafted after
December 31, 2022. This additional first-year depreciation is
commonly referred to as ``bonus depreciation.''
Qualified property eligible for bonus depreciation under
section 168(k) includes qualified film, television, and live
theatrical productions placed in service after September 27,
2017, and before January 1, 2027, for which a deduction
otherwise would have been allowable under section 181, without
regard to the dollar limitation or termination of such
section.\807\ A qualified production is considered to be placed
in service, and thus eligible for bonus depreciation, at the
time of initial release, broadcast, or live staged
performance.\808\
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\807\See sec. 168(k)(2)(A)(i)(IV) and (V); Treas. Reg. sec.
1.168(k)-(2)(b)(E) and (F).
\808\See Treas. Reg. sec. 1.168(k)-2(b)(4)(iii).
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REASONS FOR CHANGE

The Committee believes that sound recording productions
should generally be subject to similar cost recovery tax rules
as film productions, television productions, and live
theatrical productions. The Committee believes that allowing
musicians, songwriters, technicians, and producers to expense
their recording costs will support music production in the
United States.

EXPLANATION OF PROVISION

The provision expands the special expensing rules for
qualified film, television, and live theatrical productions
under section 181 to include aggregate qualified sound
recording production costs of up to $150,000 per taxable year.
A qualified sound recording production is a sound recording (as
defined in 17 U.S.C. sec. 101)\809\ produced and recorded in
the United States. Like qualified film and television
productions or qualified live theatrical productions, the
section 181 deduction only applies to qualified sound
recordings that commence before January 1, 2026. The practical
impact is that only sound recordings that commence in taxable
years ending after the date of enactment and before January 1,
2026 will be eligible for the section 181 deduction.
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\809\Sound recordings are works that result from the fixation of a
series of musical, spoken, or other sounds, but not including the
sounds accompanying a motion picture or other audiovisual work,
regardless of the nature of the material objects, such as disks, tapes,
or other phonorecords, in which they are embodied.
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The provision also expands the definition of qualified
property eligible for bonus depreciation to include qualified
sound recording productions placed in service before January 1,
2029. A qualified sound recording production is placed in
service at the time of initial release or broadcast.

EFFECTIVE DATE

The provision applies to productions commencing in taxable
years ending after the date of enactment.

Modifications to Low-Income Housing Credit (sec. 111109 of the bill and
sec. 42 of the Code)

PRESENT LAW

A taxpayer may claim the low-income housing credit annually
over a 10-year period for the costs of building or
rehabilitating rental housing occupied by low-income tenants.
To be eligible for the credit, a low-income building must have
received a credit allocation from the State or been financed
with the proceeds of certain tax-exempt bonds that are subject
to the private activity bond volume limit. For any calendar
year, the total amount of housing credits available for
allocation by a State is limited to the State housing credit
ceiling. However, the amount of housing credit allocated to a
low-income building reduces the State housing credit ceiling
only once, in the year the housing credit is allocated.

State housing credit ceiling

The State housing credit ceiling is an amount equal to the
sum of four components: (1) the unused State housing credit
ceiling (if any) for the preceding calendar year (the ``unused
carryforward component''), (2) the population component, (3)
the amount of State housing credit ceiling returned in the
calendar year (the ``returned credit component''), plus (4) the
amount (if any) that the Secretary allocates to the State from
the national pool of unused housing credits (the ``national
pool component'').\810\
---------------------------------------------------------------------------
\810\Sec. 42(h)(3)(C); Treas. Reg. sec. 1.42-14(a)(1).
---------------------------------------------------------------------------
For calendar year 2025, the population component of the
State housing credit ceiling is equal to the greater of (1)
$3.00 multiplied by the State population or (2)
$3,455,000.\811\
---------------------------------------------------------------------------
\811\Rev. Proc. 2024-40. A building does not require an allocation
of credits from the credit ceiling if at least 50 percent of the
aggregate basis of the building and the land on which the building is
located is financed by certain tax-exempt bonds subject to the private
activity bond volume limit. Sec. 42(h)(4)(B).
---------------------------------------------------------------------------

Credit calculations

Determination of applicable percentage
The applicable percentage for non-Federally subsidized
newly constructed housing and non-Federally subsidized
substantial rehabilitation is calculated such that the present
value of the credit amounts is at least 70 percent of a
building's qualified basis, depending on the prevailing
interest rate.\812\ These credits are sometimes referred to as
``nine-percent credits.''
---------------------------------------------------------------------------
\812\See sec. 42(b) and (e). This credit is referred to as the 70-
percent credit. See Joint Committee on Taxation, General Explanation of
the Tax Reform Act of 1986 (JCS-10-87), May 4, 1987. This document can
be found on the Joint Committee on Taxation website at www.jct.gov.
However, under the Housing and Economic Recovery Act of 2008, the
minimum applicable percentage for such credits was temporarily set at
nine percent (the ``nine-percent floor''). The Consolidated
Appropriations Act, 2016 made the nine-percent floor permanent. The
enactment of the nine-percent floor on the credit implies that, under
the statutory formula, the present value is always 70 percent or
greater.
---------------------------------------------------------------------------
The applicable percentage for Federally subsidized newly
constructed housing, Federally subsidized substantial
rehabilitation, and certain housing acquisition costs, is
calculated such that the present value of the credit amounts is
at least 30 percent of a building's qualified basis, depending
on the prevailing interest rate.\813\ These credits are
sometimes referred to as ``four-percent credits.''
---------------------------------------------------------------------------
\813\This credit is referred to as the 30-percent credit. See Joint
Committee on Taxation, General Explanation of the Tax Reform Act of
1986 (JCS-10-87), May 4, 1987. This document can be found on the Joint
Committee on Taxation website at www.jct.gov. However, under the
Consolidated Appropriations Act, 2020, the minimum applicable
percentage for such credits was set at four percent (the ``four-percent
floor''). The enactment of the four-percent floor on the credit implies
that, under the statutory formula, the present value is always 30
percent or greater.
---------------------------------------------------------------------------
Calculation of eligible basis
The qualified basis for purposes of determining the amount
of low-income housing credit to be claimed each year is an
amount equal to the applicable fraction of eligible basis.\814\
The eligible basis of a new building is its adjusted basis as
of the close of the first taxable year of the credit period.
The eligible basis of an existing building is zero unless the
building meets the following requirements: the building is
acquired by purchase; 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; the building was
not previously placed in service by the taxpayer or a related
person; and the building was rehabilitated and is eligible for
the low income housing credit for rehabilitation expenditures
treated as a separate new building.
---------------------------------------------------------------------------
\814\Sec. 42(c)(1)(A).
---------------------------------------------------------------------------
Generally, buildings located in certain census tracts and
difficult development areas, as designated by the Secretary of
Housing and Urban Development, are eligible for increased
housing credit.\815\ The increase in housing credit is effected
by increasing a building's eligible basis from 100 to 130
percent of the otherwise applicable eligible basis (in the case
of a new building) or rehabilitation expenditures (in the case
of an existing building). A building designated by a State
housing credit agency as requiring an increase in credit to be
financially feasible is treated as being located in a difficult
development area.
---------------------------------------------------------------------------
\815\Sec. 42(d)(5).
---------------------------------------------------------------------------

Tax-exempt bond-financed buildings

If 50 percent or more of the aggregate basis of the
building and the land on which the building is located is
financed by the proceeds of tax-exempt bonds, a low-income
housing tax credit is allowable with respect to the entire
eligible basis of the project without an allocation from the
State or local housing credit agency. If less than 50 percent
of the aggregate basis is so financed, a low-income housing tax
credit is allowable only with respect to the portion financed
by the proceeds of tax-exempt bonds. The tax-exempt bonds must
be subject to the volume cap for private activity bonds and
once bond proceeds are used to finance a project, principal
payments on such financing must be applied within a reasonable
period to redeem the bonds.\816\
---------------------------------------------------------------------------
\816\Sec. 42(h)(4)(A).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes the low-income housing credit plays
an important role in encouraging private investment in the
creation and preservation of affordable rental housing. As a
result, the Committee believes it is important to improve and
strengthen the credit. The modifications to the low-income
housing credit in the provision provide increased credit
amounts through increased overall allocations to State and
local allocating agencies and by allowing for increased basis
boosts to certain Indian areas and rural areas. Furthermore,
the Committee believes that the modification to the tax-exempt
bond financing requirement will allow these financing tools to
be used more effectively in conjunction with the low-income
housing credit for affordable housing projects.

EXPLANATION OF PROVISION

Increase State housing credit ceiling amounts
The provision provides an increase in the State housing
credit ceiling for calendar years 2026, 2027, 2028, and 2029.
In each of the calendar years, the population component of the
State housing credit ceiling (after application of the cost-of-
living adjustment) is increased by multiplying the dollar
amounts for that year by 1.125.
Modify tax-exempt bond financing requirement
The provision modifies the tax-exempt bond financing
requirement to allow additional buildings financed with tax-
exempt bonds to qualify for housing credits without receiving a
credit allocation from the State housing credit ceiling. As
under present law, a building may be allowed four-percent
credits without receiving a credit allocation if 50 percent or
more of the aggregate basis of the building and the land on
which the building is located is financed by the proceeds of
one or more tax-exempt bonds. In addition, under the provision,
a building may be allowed four-percent credits without
receiving a credit allocation if at least 25 percent (rather
than 50 percent) of the aggregate basis of the building is
financed with one or more qualified obligations, and one or
more of such obligations (1) are part of an issue the issue
date of which is after December 31, 2025, and (2) provides the
financing for at least five percent of the aggregate basis of
the building and the land on which the building is located. A
qualified obligation is a tax-exempt bond which is part of an
issue the issue date of which is before January 1, 2030.

Temporary inclusion of Indian areas and rural areas as difficult
development areas

The provision provides a temporary increase in housing
credit by expanding the definition of difficult development
areas to include Indian areas and rural areas in the case of
buildings place in service after December 31, 2025 and before
January 1, 2030. Such buildings are eligible for increased
housing credit to be calculated by increasing a building's
eligible basis from 100 to 130 percent of the otherwise
applicable eligible basis (in the case of a new building) or
rehabilitation expenditures (in the case of an existing
building).
An Indian area is defined as in section 4(11) of the Native
American Housing Assistance and Self Determination Act of 1996
(``NAHASDA'')\817\ and any housing area as defined in section
801(5) of such Act.\818\ A building in an Indian area is
treated as being in a difficult development area only if it is
assisted or financed under NAHASDA or the project sponsor is an
Indian tribe,\819\ a tribally designated housing entity\820\ or
wholly owned or controlled by such an Indian tribe or tribally
designated housing entity.
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\817\25 U.S.C. 4103(11).
\818\25 U.S.C. 4221(5).
\819\As defined in sec. 45A(c)(6).
\820\As defined in 25 U.S.C. 4103(22).
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A rural area is defined to be any non-metropolitan area, or
any open country, place, town, village, or city which is not
part of or associated with an urban area and either has low
population or is not contained within a standard metropolitan
statistical area and has a serious lack of mortgage credit for
lower and moderate-income families, as determined by the
Secretary of Agriculture and the Secretary of Housing and Urban
Development\821\ and which is identified by the qualified
allocation plan of the housing credit agency.
---------------------------------------------------------------------------
\821\42 U.S.C. 1490.
---------------------------------------------------------------------------

EFFECTIVE DATE

The increase in State housing ceiling amounts is effective
for calendar years after 2025.
The modification of the tax-exempt bond financing
requirement is effective for buildings placed in service in
taxable years beginning after December 31, 2025. However, in
the case of a building with respect to which any expenditures
are treated as a separate new building under section 42(e),
both the existing building and the separate new building are
treated as having been placed in service on the date the
expenditures are treated as placed in service under section
42(e)(4).
The temporary inclusion of Indian areas and rural areas as
difficult development areas is effective for buildings placed
in service after December 31, 2025.

Increased Gross Receipts Threshold for Small Manufacturing Businesses
(sec. 111110 of the bill and sec. 448 of the Code)

PRESENT LAW

General rule for methods of accounting

Section 446 generally allows a taxpayer to select the
method of accounting to be used to compute taxable income,
provided that such method clearly reflects the income of the
taxpayer. The term ``method of accounting'' includes not only
the overall method of accounting used by the taxpayer, but also
the accounting treatment of any one item.\822\ Permissible
overall methods of accounting include the cash receipts and
disbursements method (``cash method''), an accrual method, or
any other method (including a hybrid method) permitted under
regulations prescribed by the Secretary.\823\ Examples of any
one item for which an accounting method may be adopted include
cost recovery,\824\ revenue recognition,\825\ and the timing of
deductions.\826\ For each separate trade or business, a
taxpayer is entitled to adopt any permissible method, subject
to certain restrictions.\827\
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\822\Treas. Reg. sec. 1.446-1(a)(1).
\823\Sec. 446(c).
\824\See, e.g., secs. 167 and 168.
\825\See, e.g., secs. 451 and 460.
\826\See, e.g., secs. 461 and 467.
\827\Sec. 446(d); Treas. Reg. sec. 1.446-1(d).
---------------------------------------------------------------------------
A taxpayer filing its first return may adopt any
permissible method of accounting in computing taxable income
for such year.\828\ Except as otherwise provided, section
446(e) requires taxpayers to secure the consent of the
Secretary before changing a method of accounting. The
regulations under this section provide rules for determining:
(1) what a method of accounting is, (2) how a method of
accounting is adopted,\829\ and (3) how a change in method of
accounting is effectuated.\830\
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\828\Treas. Reg. sec. 1.446-1(e)(1).
\829\See also Rev. Rul. 90-38, 1990-1 C.B. 57 (holding that a
taxpayer adopts a method of accounting (1) when it uses a permissible
method of accounting on a single tax return, or (2) when it uses the
same impermissible method of accounting on two or more consecutive tax
returns).
\830\Treas. Reg. sec. 1.446-1(e).
---------------------------------------------------------------------------

Cash and accrual methods

Taxpayers using the cash method generally recognize items
of income when actually or constructively received and items of
expense when paid. The cash method is administratively easy and
provides the taxpayer flexibility in the timing of income
recognition. It is the method generally used by most individual
taxpayers, including farm and nonfarm sole proprietorships.
In general, taxpayers using an accrual method generally
accrue items of income when all the events have occurred that
fix the right to receive the income and the amount of the
income can be determined with reasonable accuracy.\831\ For
accrual method taxpayers with applicable financial
statements,\832\ the accrual of income generally occurs not
later than when such amounts are taken into account as revenue
in the taxpayer's applicable financial statements.\833\
Taxpayers using an accrual method of accounting generally may
not deduct items of expense prior to when all the events have
occurred that fix the obligation to pay the liability, the
amount of the liability can be determined with reasonable
accuracy, and economic performance has occurred.\834\ Accrual
methods of accounting generally result in a more accurate
measure of economic income than the cash method. The accrual
method is often used by businesses for financial accounting
purposes.
---------------------------------------------------------------------------
\831\See, e.g., sec. 451.
\832\See sec. 451(b)(3) and Treas. Reg. 1.451-3(a)(5).
\833\See sec. 451(b) and Treas. Reg. secs. 1.451-1 and 1.451-3.
\834\See, e.g., sec. 461.
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A C corporation, a partnership that has a C corporation as
a partner, or a tax-exempt trust or corporation with unrelated
business income generally may not use the cash method. In
addition, the cash method generally may not be used if the
purchase, production, or sale of merchandise is an income
producing factor.\835\ Such taxpayers generally are required to
keep inventories and use an accrual method with respect to
inventory items.\836\ Exceptions are made for farming
businesses, qualified personal service corporations, and the
aforementioned entities to the extent their average annual
gross receipts\837\ do not exceed $25 million for the three
prior taxable-year period (the ``$25 million gross receipts
test'') to use the cash method. Under the $25 million gross
receipts test, the cash method of accounting may be used by
taxpayers, other than tax shelters, that satisfy the gross
receipts test, regardless of whether the purchase, production,
or sale of merchandise is an income-producing factor.
Aggregation rules apply to determine the amount of a taxpayer's
gross receipts under the $25 million gross receipts test.\838\
The cash method may not be used by any tax shelter.\839\
---------------------------------------------------------------------------
\835\Treas. Reg. secs. 1.446-1(c)(2) and 1.471-1.
\836\Sec. 471 and Treas. Reg. secs. 1.446-1(c)(2) and 1.471-1.
\837\For this purpose, gross receipts are taken into account in the
taxable year in which they are properly recognized under the taxpayer's
method of accounting used in that taxable year. Gross receipts include
total sales (net of returns and allowances) and all amounts received
for services. In addition, gross receipts include income from
investments, income from incidental or outside sources, interest
(including original issue discount and tax-exempt interest within the
meaning of section 103), dividends, rents, royalties, and annuities,
regardless of whether such amounts are derived in the ordinary course
of the taxpayer's trade or business. Gross receipts are not reduced by
cost of goods sold or by the cost of property sold if such property is
described in section 1221(1), (3), (4), or (5). With respect to sales
of capital assets as defined in section 1221, or sales of property
described in section 1221(2) (relating to property used in a trade or
business), gross receipts are reduced by the taxpayer's adjusted basis
in such property. Gross receipts do not include the repayment of a loan
or similar instrument (e.g., a repayment of the principal amount of a
loan held by a commercial lender). Finally, gross receipts do not
include amounts received by the taxpayer with respect to sales tax or
other similar State and local taxes if, under the applicable State or
local law, the tax is legally imposed on the purchaser of the good or
service, and the taxpayer merely collects and remits the tax to the
taxing authority. If, in contrast, the tax is imposed on the taxpayer
under the applicable law, then gross receipts include the amounts
received that are allocable to the payment of such tax. See section
448(c)(3)(C) and Treas. Reg. sec. 1.448-1T(f)(2)(iv).
\838\See sec. 448(c)(2).
\839\Secs. 448(a)(3) and (d)(3) and 461(i)(3) and (4). For this
purpose, a tax shelter includes: (1) any enterprise (other than a C
corporation) if at any time interests in such enterprise have been
offered for sale in any offering required to be registered with any
Federal or State agency having the authority to regulate the offering
of securities for sale; (2) any syndicate (within the meaning of
section 1256(e)(3)(B)); or (3) any tax shelter as defined in section
6662(d)(2)(C)(ii). In the case of a farming trade or business, a tax
shelter includes any tax shelter as defined in section
6662(d)(2)(C)(ii) or any partnership or any other enterprise other than
a corporation which is not an S corporation engaged in the trade or
business of farming, (1) if at any time interests in such partnership
or enterprise have been offered for sale in any offering required to be
registered with any Federal or State agency having authority to
regulate the offering of securities for sale, or (2) if more than 35
percent of the losses during any period are allocable to limited
partners or limited entrepreneurs. For this purpose, certain holdings
held directly by individuals that are attributable to active farm
management activities are not treated as being held by a limited
partner or a limited entrepreneur.
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A farming business is defined as a trade or business of
farming, including operating a nursery or sod farm, or the
raising or harvesting of trees bearing fruit, nuts, or other
crops, timber, or ornamental trees (other than evergreen trees
that are more than six years old at the time they are severed
from their roots).\840\ Such farming businesses are not
precluded from using the cash method regardless of whether they
meet the gross receipts test. However, section 447 generally
requires a farming C corporation (and any farming partnership
if a corporation is a partner in such partnership) to use an
accrual method of accounting. Section 447 does not apply to
nursery or sod farms, to the raising or harvesting of trees
(other than fruit and nut trees), nor to farming C corporations
that meet the $25 million gross receipts test.
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\840\Secs. 448(d)(1) and 263A(e)(4). See also Treas. Reg. sec.
1.263A-4(a)(5).
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A qualified personal service corporation is a corporation:
(1) substantially all of whose activities involve the
performance of services in the fields of health, law,
engineering, architecture, accounting, actuarial science,
performing arts, or consulting, and (2) substantially all of
the stock of which (by value) is owned by current or former
employees performing such services, their estates, or
heirs.\841\ Qualified personal service corporations are allowed
to use the cash method without regard to whether they meet the
$25 million gross receipts test.
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\841\Sec. 448(d)(2).
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Accounting for inventories

In general, for Federal income tax purposes, taxpayers must
account for inventories if the production, purchase, or sale of
merchandise is an income-producing factor to the taxpayer.\842\
Treasury regulations also provide that in any case in which the
use of inventories is necessary to clearly reflect income, the
accrual method must be used with regard to purchases and
sales.\843\ However, an exception is provided for taxpayers
that meet the $25 million gross receipts test.\844\
Specifically, taxpayers that meet the $25 million gross
receipts test are not required to account for inventories under
section 471, but rather may use a method of accounting for
inventories that either (1) treats inventories as non-
incidental materials and supplies, or (2) conforms to the
taxpayer's financial accounting treatment of inventories.\845\
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\842\Sec. 471(a) and Treas. Reg. sec. 1.471-1.
\843\Treas. Reg. sec. 1.446-1(c)(2).
\844\Sec. 471(c).
\845\See sec. 471(c) and Treas. Reg. sec. 1.471-1(b).
---------------------------------------------------------------------------
In those circumstances in which a taxpayer is required to
account for inventory, the taxpayer must maintain inventory
records to determine the cost of goods sold during the taxable
period. Cost of goods sold generally is determined by adding
the taxpayer's inventory at the beginning of the period to the
purchases made during the period and subtracting from that sum
the taxpayer's inventory at the end of the period.
Because of the difficulty of accounting for inventories on
an item-by-item basis, taxpayers often use conventions that
assume certain item or cost flows. Among these conventions are
the first-in, first-out (``FIFO'') method, which assumes that
the items in ending inventory are those most recently acquired
by the taxpayer,\846\ and the last-in, first-out (``LIFO'')
method, which assumes that the items in ending inventory are
those earliest acquired by the taxpayer.\847\
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\846\See Treas. Reg. sec. 1.471-2(d).
\847\See sec. 472.
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Uniform capitalization

The uniform capitalization rules require certain direct and
indirect costs allocable to real or tangible personal property
produced by the taxpayer to be included in either inventory or
capitalized into the basis of such property, as
applicable.\848\ For real or personal property acquired by the
taxpayer for resale, section 263A generally requires certain
direct and indirect costs allocable to such property to be
included in inventory.
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\848\Sec. 263A.
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Section 263A provides several exceptions to the general
uniform capitalization requirements. One such exception exists
for any producer or reseller that meets the $25 million gross
receipts test.\849\ Another exception exists for taxpayers who
raise, harvest, or grow trees.\850\ Under this exception,
section 263A does not apply to trees raised, harvested, or
grown by the taxpayer (other than trees bearing fruit, nuts, or
other crops, or ornamental trees) and any real property
underlying such trees. Similarly, the uniform capitalization
rules do not apply to any plant having a preproductive period
of two years or less or to any animal, which is produced by a
taxpayer in a farming business (unless the taxpayer is required
to use an accrual method of accounting under section 447 or
448(a)(3)).\851\ Freelance authors, photographers, and artists
also are exempt from section 263A for any qualified creative
expenses.\852\
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\849\Sec 263A(i).
\850\Sec. 263A(c)(5).
\851\Sec. 263A(d).
\852\Sec. 263A(h). Qualified creative expenses are defined as
amounts paid or incurred by an individual in the trade or business of
being a writer, photographer, or artist (other than as an employee).
However, such term does not include any expense related to printing,
photographic plates, motion picture films, video tapes, or similar
items.
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Interest limitation

In the case of any taxpayer for any taxable year, the
deduction for business interest is limited to the sum of (1)
business interest income of the taxpayer for the taxable year,
(2) 30 percent of the adjusted taxable income of the taxpayer
for the taxable year (not less than zero), and (3) the floor
plan financing interest of the taxpayer for the taxable year.
The limitation does not apply to any taxpayer (other than a tax
shelter prohibited from using the cash method under section
448(a)(3)) that meets the $25 million gross receipts test.

REASONS FOR CHANGE

The Committee is committed to lowering the tax burden on
manufacturers and increasing the industrial capacity of the
United States. The Committee believes that expanding the
availability of the cash method of accounting and other
simplified accounting methods for manufacturing taxpayers will
help accomplish these aims. In addition, the Committee believes
that expanding the number of manufacturing taxpayers that are
exempt from the section 163(j) limitation on business interest
deductibility will further promote these goals.

EXPLANATION OF PROVISION

The provision increases the $25 million threshold of the
gross receipts test\853\ to $80 million (indexed for
inflation)\854\ for a manufacturing taxpayer (other than a tax
shelter).
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\853\Sec. 448(c)(1).
\854\The gross receipts threshold for a manufacturing taxpayer is
adjusted for inflation for taxable years beginning after December 31,
2018.
---------------------------------------------------------------------------
A ``manufacturing taxpayer'' means a corporation or
partnership if, during the three taxable year period ending
with the taxable year preceding such taxable year,
substantially all of the gross receipts of the taxpayer are
derived from the lease, rental, sale, license, exchange, or
other disposition of ``qualified products.''
For purposes of the gross receipts test, a qualified
product means a product that is (1) any tangible personal
property, except any food or beverage prepared in the same
building as a retail establishment in which substantially
similar property is sold to the public, and (2) produced or
manufactured by the taxpayer in a manner that results in a
substantial transformation (within the meaning of proposed
section 168(n)(2)(D)) of the property comprising the product.
Solely for purposes of determining whether a taxpayer
qualifies as a manufacturing taxpayer, the aggregation
rules\855\ apply, except for purposes of applying rules related
to common control under section 52(b), the term trade or
business includes any activity involving research or
experimentation,\856\ any activity in connection with a trade
or business, or any activity with respect to which expenses are
allowable as a deduction under section 212.\857\
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\855\See secs. 448(c)(2) and 448(c)(3).
\856\See sec. 469(c)(5).
\857\See sec. 469(c)(6). The application of section 469(c)(6) is
determined without regard to the phrase ``To the extent provided in
regulations.''
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The provision allows a manufacturing taxpayer to qualify
for the cash method of accounting if it meets the $80 million
gross receipts test. Such a taxpayer may also benefit from the
exemptions from the limitation on business interest,\858\
uniform capitalization,\859\ and accounting for inventories
under section 471.\860\
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\858\See sec. 163(j)(3).
\859\See sec. 263A(i)(1).
\860\See sec. 471(c)(1).
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EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Global Intangible Low-Taxed Income Determined Without Regard to Certain
Income Derived From Services Performed in the Virgin Islands (sec.
111111 of the bill and sec. 951A of the Code)

PRESENT LAW

Global intangible low-taxed income (``GILTI'')

A U.S. shareholder of a controlled foreign corporation
(``CFC'')\861\ must include in gross income its GILTI. GILTI is
the excess of the shareholder's net CFC tested income over the
shareholder's net deemed tangible income return. The
shareholder's net deemed tangible income return equals the
excess of 10 percent of the aggregate of its pro rata share of
the qualified business asset investment (``QBAI'') of each CFC
over certain interest expense.
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\861\U.S. shareholders are U.S. persons that own at least 10
percent (measured by vote or value) of the stock of a foreign
corporation. A CFC generally is any foreign corporation in which U.S.
shareholders own (directly, indirectly, or constructively) more than 50
percent of the corporation's stock (measured by vote or value). See
secs. 951(b), 957, 958.
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The formula for GILTI is:

GILTI = Net CFC Tested Income - [(10% QBAI) -
Interest Expense]

Net CFC tested income means the excess of the aggregate of
a U.S. shareholder's pro rata share of the tested income of
each CFC over the aggregate of its pro rata share of the tested
loss of each CFC.\862\ In other words, GILTI is calculated on a
worldwide basis.
---------------------------------------------------------------------------
\862\Sec. 951A(c)(1). Pro rata shares are determined under subpart
F principles (i.e., the rules of section 951(a)(2) and the regulations
thereunder).
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The tested income of a CFC is the excess of the gross
income of the CFC determined without regard to certain amounts
that are exceptions to tested income (referred to in this
document as ``gross tested income'') over deductions (including
taxes) properly allocable to such gross tested income. The
exceptions to tested income are: (1) any effectively connected
income described in section 952(b); (2) any gross income taken
into account in determining the CFC's subpart F income;\863\
(3) any gross income excluded from foreign base company income
or insurance income by reason of the high-tax exception under
section 954(b)(4);\864\ (4) any dividend received from a
related person (as defined in section 954(d)(3)); and (5) any
foreign oil and gas extraction income (as defined in section
907(c)(1)).
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\863\Earnings of a CFC may constitute income to U.S. shareholders
under the traditional anti-deferral regime of subpart F of the Code,
which applies to certain passive income and certain other related-party
income. Subpart F income is taxed at full rates with related foreign
income taxes generally eligible for the foreign tax credit.
\864\In general, if a taxpayer so elects, subpart F income and
tested income for purposes of determining GILTI inclusions exclude any
item of income if the taxpayer establishes that the income was subject
to an effective foreign income tax rate greater than 90 percent of the
maximum U.S. corporate income tax rate (i.e., currently greater than 90
percent of 21 percent, or 18.9 percent). See sec. 954(b)(4) and Treas.
Reg. secs. 1.954-1(d) and 1.951A-2(c)(7).
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The tested loss of a CFC means the excess of deductions
(including taxes) properly allocable to the CFC's gross tested
income over the amount of such gross tested income.\865\
---------------------------------------------------------------------------
\865\For more information, see the description of Section 111004,
Extension of deduction for foreign-derived intangible income and global
intangible low-taxed income.
---------------------------------------------------------------------------

Investment incentives in U.S. territories

Federal tax rules apply to the territories in a manner that
is different from their application in relation to both the
States and foreign countries. The application of the Federal
tax rules to the territories varies from one possession to
another. Three territories, Guam, the Northern Mariana Islands,
and the U.S. Virgin Islands, are referred to as mirror Code
possessions because the Code serves as the internal tax law of
those territories (substituting the particular territory for
the United States wherever the Code refers to the United
States). A resident of one of those territories generally files
a single tax return only with the territory of which the
individual is a resident, and not with the United States.
American Samoa and Puerto Rico, by contrast, are non-mirror
Code possessions. These two territories have their own internal
tax laws, and a resident of either American Samoa or Puerto
Rico may be required to file income tax returns with both the
territory of residence and the United States.
Broadly, an individual resident of a territory is exempt
from U.S. tax on income that has a source in that territory but
is subject to U.S. tax on U.S.-source and non-possession-source
income. A corporation that is organized in a territory is
generally treated as a foreign corporation for U.S. tax
purposes. On the other hand, a number of Code provisions have
effect in one or all of the territories as if the territories
were States. For example, the tax credit for research and
experimentation has been available for research conducted in a
territory.
Historically, the Federal tax rules also have included
preferences for territory activities. Until its expiration in
2006, the section 936 possession tax credit permitted
qualifying U.S. corporations a credit against their U.S. tax
liability in respect of possession-source income.\866\ After
section 936 expired, a similar, temporary provision was enacted
for American Samoa activities,\867\ and the section 199
domestic production activities deduction was expanded
temporarily to include production activities conducted in
Puerto Rico. The latter has since expired.\868\ At present,
there is no economic development credit in the Code applicable
only to activities in the U.S. possessions.
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\866\For taxable years beginning before January 1, 2006, certain
domestic corporations with business operations in the U.S. possessions
were eligible for the possession tax credit. Secs. 27(b) and 936. This
credit offset the U.S. tax imposed on certain income related to
operations in the U.S. possessions. Subject to certain limitations, the
amount of the possession tax credit allowed to any domestic corporation
equaled the portion of that corporation's U.S. tax that was
attributable to the corporate taxable income from (1) the active
conduct of a trade or business within a U.S. possession, (2) the sale
or exchange of substantially all of the assets that were used in such
trade or business, or (3) certain possessions investment. No deduction
or foreign tax credit was allowed for any possessions or foreign tax
paid or accrued with respect to taxable income that was taken into
account in computing the credit under section 936. Under the economic
activity-based limit, the amount of the credit could not exceed an
amount equal to the sum of (1) 60 percent of the taxpayer's qualified
possession wages and allocable employee fringe benefit expenses, (2) 15
percent of depreciation allowances with respect to short-life qualified
tangible property, plus 40 percent of depreciation allowances with
respect to medium-life qualified tangible property, plus 65 percent of
depreciation allowances with respect to long-life qualified tangible
property, and (3) in certain cases, a portion of the taxpayer's
possession income taxes. A taxpayer could elect, instead of the
economic activity-based limit, a limit equal to the applicable
percentage of the credit that otherwise would have been allowable with
respect to possession business income. Beginning in 1998, the
applicable percentage was 40 percent.
To qualify for the possession tax credit for a taxable year, a
domestic corporation was required to satisfy two conditions. First, the
corporation was required to derive at least 80 percent of its gross
income for the three-year period immediately preceding the close of the
taxable year from sources within a possession. Second, the corporation
was required to derive at least 75 percent of its gross income for that
same period from the active conduct of a possession business. Sec.
936(a)(2). The section 936 credit was phased out during the 10-year
period starting in 1996. During this phase-out period, the Puerto Rico
economic activity credit of section 30A was available for trade or
business activity in Puerto Rico.
\867\Section 199 was repealed for taxable years beginning after
December 31, 2017, by An Act to provide for reconciliation pursuant to
titles II and V of the concurrent resolution on the budget for fiscal
year 2018, Pub. L. No. 115-97, section 13305, December 22, 2017.
\868\Sec. 199(d)(8).
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REASONS FOR CHANGE

Under Public Law 115-97, the new GILTI regime reduced the
effect of certain local incentives in the U.S. Virgin Islands
developed to attract new residents and businesses to the
territory and to further its economic development. For example,
prior to the enactment of the GILTI regime, corporations in the
U.S. Virgin Islands could benefit from the U.S. Virgin Islands
Economic Development Commission programs without their ten-
percent United States shareholders facing any additional U.S.
taxes beyond those imposed under the subpart F regime, which
protected the viability and complemented the effectiveness of
those programs. The Committee believes that the application of
the provision to income from certain personal services will
encourage the movement of talent and its attendant economic
benefits to the U.S. Virgin Islands, as well as increase local
employment, by restoring the effectiveness of those economic
development benefits, while maintaining what the Committee
believes to be an appropriate fiscal balance by limiting the
benefits of the provision to certain shareholders.

EXPLANATION OF PROVISION

The provision excludes from the definition of ``tested
income'' in the case of any ``specified United States
shareholder'' any ``qualified Virgin Island services income.''
The provision defines ``qualified Virgin Islands services
income'' as any gross income which is: (i) compensation for
labor or personal services performed in the Virgin Islands by a
corporation formed under the laws of the Virgin Islands; (ii)
attributable to services performed from within the Virgin
Islands by individuals for the benefit of such corporation; and
(iii) effectively connected with the conduct of a trade or
business within the Virgin Islands. A ``specified United States
shareholder'' is a United States shareholder which is: (i) an
individual, trust, or estate; or (ii) a closely held C
corporation,\869\ if such corporation acquired its direct or
indirect equity interest in the foreign corporation which
derived the qualified Virgin Islands services income before
December 31, 2023. The provision directs the Secretary to
provide regulations to carry out the provision, including
regulations to prevent its abuse.
---------------------------------------------------------------------------
\869\As defined in sec. 469(j)(1).
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EFFECTIVE DATE

The provision is effective for taxable years of foreign
corporations beginning after the date of enactment, and to
taxable years of United States shareholders in which or with
which such taxable years of foreign corporations end.

Extension and Modification of Clean Fuel Production Credit (sec. 111112
of the bill and sec. 45Z of the Code)

PRESENT LAW

Clean fuel production credit

Fuel must be produced at a qualified facility

A ``qualified facility'' is a facility used for the
production of transportation fuels and does not include any
facility for which one of the following credits is allowed
under section 38 for the taxable year: section 45V (the credit
for production of clean hydrogen), section 46 to the extent
that such credit is attributable to the energy credit
determined under section 48 with respect to any specified clean
hydrogen production facility for which an election has been
made under section 48(a)(15), or section 45Q (the credit for
carbon oxide sequestration).

Emissions factor calculation and establishment by the Secretary

The emissions factor of a transportation fuel is an amount
equal to the quotient of (1) 50 kilograms of CO2e
per mmBTU minus the emissions rate for such fuel, divided by
(2) 50 kilograms of CO2e per mmBTU.
The Secretary is required to publish a table that sets
forth the emission rate for similar types and categories of
transportation fuels based on the amount of lifecycle
greenhouse gas emissions (as described in section 211(o)(1)(H)
of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)) as in effect on
the date of enactment of this section) for such fuels,
expressed as kilograms of CO2e per mmBTU, which a
taxpayer shall use for the purposes of this provision.
In the case of transportation fuel that is not sustainable
aviation fuel, the lifecycle greenhouse gas emissions of such
fuel shall be based on the most recent determinations under the
Greenhouse Gases, Regulated Emissions, and Energy Use in
Transportation model (``GREET'') developed by Argonne National
Laboratory, or a successor model (as determined by the
Secretary).
In the case of transportation fuel that is sustainable
aviation fuel, the lifecycle greenhouse gas emissions of such
fuel shall be determined in accordance with (1) the most recent
Carbon Offsetting and Reduction Scheme for International
Aviation that has been adopted by the International Civil
Aviation Organization (``ICAO'') with the agreement of the
United States, or (2) any similar methodology which satisfies
the criteria under section 211(o)(1)(H) of the Clean Air Act
(42 U.S.C. 7545(o)(1)(H)) as in effect on the date of enactment
of this provision (August 22, 2022).
The Secretary may round the emissions rates for purposes of
the table to the nearest five kilograms of CO2e per
mmBTU. However, in the case of an emissions rate that is
between 2.5 kilograms of CO2e per mmBTU and -2.5
kilograms CO2e per mmBTU, the Secretary may round
such rate to zero.
On January 22, 2025, the IRS published Notice 2025-11,
providing initial guidance on emissions rates. The notice
contains the initial table of emissions rates for purposes of
the credit. The table covers several types of fuels (including
pathways and primary feedstock), such as ethanol, biodiesel,
renewable diesel, renewable natural gas, propane, naptha,
hydrogen, and sustainable aviation fuel. The Argonne National
Laboratory developed, and the Department of Energy published,
the ``45ZCF-GREET'' model to determine emissions rates for
purposes of the credit.
The determination of emissions rates is calculated using
either (1) determinations under the most recent version of the
45ZCF-GREET model or (2) determinations from fuel pathways
approved under the most recent CORSIA Default Life Cycle
Emissions Values for CORSIA Eligible Fuels lifecycle approach
(``CORSIA Default'') or the most recent CORSIA Methodology for
Calculating Actual Life Cycle Emissions Values lifecycle
approach (``CORSIA Actual'').
Notice 2025-11 notes that the pathways that use imported
used cooking oil will not be available in the 45ZCF-GREET model
until the Department of the Treasury and the IRS publish
further guidance, such as substantiation and recordkeeping
requirements. The Notice expresses concern about the improper
identification of a substance that is not used cooking oil as
used cooking oil, the uncertainty of market impacts caused by
incentivizing used cooking oil and, with imported used cooking
oil in particular, the lack of transparency regarding local
sources.

Petition for provisional emissions rate

In the case of any transportation fuel for which an
emissions rate has not been established by the Secretary, a
taxpayer producing such fuel may file a petition with the
Secretary for determination of the emissions rate with respect
to such fuel. Notice 2025-11 indicates that the Department of
the Treasury and IRS intend to provide guidance related to the
petition process at a later date. Until guidance is issued, the
IRS will not accept requests for provisional emissions rate
determinations and the Department of Energy will not issues
emissions values. However, the emissions rate for any new type
or category of fuel established on the applicable table or
determined through the provisional emissions rate process will
apply on January 1, 2025, regardless of when guidance is
published establishing such rate.

Inflation adjustment

In the case of calendar years beginning after 2024, the 20-
cent amount, $1.00 amount, 35 cent amount and $1.75 amount are
adjusted by multiplying such amount by the inflation adjustment
factor for the calendar year in which the sale or use of the
transportation fuel occurs. If any amount as increased is not a
multiple of one cent, such amount is to be rounded to the
nearest one cent. The inflation adjustment factor is the
inflation adjustment factor determined and published by the
Secretary under the clean electricity production credit
(section 45Y), determined by substituting ``calendar year
2022'' for ``calendar year 1992.''

Special rules

To be entitled to the clean fuel production credit, the
taxpayer must be registered with the IRS as a producer of clean
fuel at the time of production.\871\ Such fuel must be produced
in the United States. In addition, in the case of any
transportation that is sustainable aviation fuel, the taxpayer
must provide certification (in such form and such manner as the
Secretary prescribes) from an unrelated party demonstrating
compliance with any general requirements, supply chain
traceability requirements, and information transmission
requirements established under the Carbon Offsetting and
Reduction Scheme for International Aviation or similar
methodology which satisfies the criteria under section
211(o)(1)(H) of the Clean Air Act as in effect on the date of
enactment of this provision.
---------------------------------------------------------------------------
\871\Notice 2024-49 provides guidance on the clean fuel production
credit registration requirements.
---------------------------------------------------------------------------
In the case of a facility in which more than one person has
an ownership interest, except to the extent provided in
Treasury regulations, production from such facility shall be
allocated among such persons in proportion to their respective
ownership interests in the gross sales from such facility.
Persons shall be treated as related to each other if such
persons would be treated as a single employer under the
regulations prescribed under section 52(b). In the case of a
corporation which is a member of an affiliated group of
corporations filing a consolidated return, such corporation
shall be treated as selling fuel to an unrelated person if such
fuel is sold to such a person by another member of such group.
In the case of estates and trusts, under regulations
prescribed by the Secretary, rules similar to the rules of
section 52(d) shall apply. In the case of agricultural
cooperatives, an election may be made to apportion the credit
determined among the patrons of the cooperative on the basis of
business done by the patrons during the taxable year.

Prevailing wage and apprenticeship requirements for purposes of the
alternative amount

To obtain the alternative amount, the transportation fuel
must be produced at a qualified facility that satisfies the
prevailing wage and apprenticeship requirements. Rules similar
to the rules of section 45(b)(7) (prevailing wage requirements)
apply.
A special rule applies for facilities placed in service
before January 1, 2025. For those facilities, section
45(b)(7)(A)(i) (related to the construction of such facility)
does not apply. In addition, section 45(b)(7)(A)(ii) is to be
applied to alteration and repairs of a qualified facility with
respect to a taxable year beginning after December 31, 2024,
for which a clean fuel production credit is allowed.
Rules similar to section 45(b)(8) (relating to
apprenticeship requirements) apply for the purpose of the clean
fuel production credit.

Termination

The provision does not apply to transportation fuel sold
after December 31, 2027.

REASONS FOR CHANGE

The Committee believes the extension and modification of
the clean fuel production credit will support the expansion of
American energy. Rural economies will benefit from the further
development of the biofuels industry and sustainable aviation
fuel that the clean fuel production credit provides. Limiting
feedstocks to those produced or grown in the United States,
Mexico, and Canada will provide additional support for
America's farmers and two of its closest trading partners. The
Committee notes that the exact measurement of emissions
resulting from indirect land use is difficult to measure and
therefore, it is appropriate to exclude any emissions
attributed to indirect land use change.

EXPLANATION OF PROVISION

Prohibition on foreign feedstocks

The provision requires that the fuel be derived exclusively
from a feedstock produced or grown in the United States,
Mexico, or Canada.

Determination of emissions rate

The provision makes two changes with respect to the
determination of emissions rate. The provision requires that
the lifecycle greenhouse gas emissions are to be adjusted as
necessary to exclude any emissions attributed to indirect land
use change. Any such adjustment is to be based on regulations
or methodologies determined by the Secretary in consultation
with the Administrator of the Environmental Protection Agency
and the Secretary of Agriculture.
In addition, for transportation fuels that are derived from
animal manure, the emission rates table prescribed by the
Secretary is to provide a distinct emissions rate with respect
to each specific feedstock used to produce such fuel, including
dairy manure, swine manure, poultry manure and such other
sources as are determined appropriate by the Secretary.

Extension of the clean fuel production credit

The provision extends the clean fuel production credit
through December 31, 2031.

Restrictions relating to prohibited foreign entities

If the taxpayer is a specified foreign entity (as defined
in section 7701(a)(51)(B)), no clean fuel production credit is
allowed under section 38 for any taxable year beginning after
the date of enactment. If the taxpayer is a foreign-influenced
entity (as defined in section 7701(a)(51)(D)), no clean fuel
production credit is allowed under section 38 for any taxable
year beginning two years after the date of enactment.

EFFECTIVE DATE

The prohibition on foreign feedstocks applies to
transportation fuel sold after December 31, 2025. The changes
with respect to the determination of emission rates applies to
emission rates published for taxable years beginning after
December 31, 2025. The extension of the clean fuel production
credit is effective on the date of enactment. The restrictions
relating to prohibited foreign entities apply to taxable years
beginning after the date of enactment.

PART III--INVESTING IN THE HEALTH OF RURAL AMERICA AND MAIN STREET

Expanding the Definition of Rural Emergency Hospital Under the Medicare
Program (sec. 111201 of the bill)

PRESENT LAW

Medicare's rural emergency hospital (REH) designation,
created in 2020, allows rural hospitals on the brink of closure
to convert to the reh designation and preserve access to
emergency care and certain other outpatient services while
receiving more stable reimbursement. Under current law, only
certain hospitals that were enrolled in Medicare as of December
27, 2020, are eligible to convert to the reh designation.

REASONS FOR CHANGE

The committee has observed that the reh designation, while
helpful in its current form, still remains out of reach for
communities that have recently lost their full-service critical
access hospital (CAH) or other small hospital. Nearly 100
otherwise eligible rural hospitals closed between January 1,
2014, and December 27, 2020, and, while some of them are
permanently closed or have converted to a different provider
type, some could reopen and communities can retain access to
the most critical emergency care and other needed services.

EXPLANATION OF PROVISION

The provision extends eligibility for the Medicare reh
designation to rural facilities that closed between January 1,
2014, and December 26, 2020, with certain reimbursement
limitations.
Specifically, the provision creates a ``look-back'' under
which an otherwise qualifying small rural hospital or CAH that
closed between January 1, 2014, and December 26, 2020 (one day
before the current law threshold) would be eligible to convert
to reh status. Additionally, the provision contains guardrails
to protect existing hospitals and ensures rehs enrolling under
this look-back period engage primarily in emergency services.

EFFECTIVE DATE

This provision is effective January 1, 2027.

SUBTITLE C--MAKE AMERICA WIN AGAIN

PART I--WORKING FAMILIES OVER ELITES

Termination of Previously-Owned Clean Vehicle Credit (sec. 112001 of
the bill and sec. 25E of the Code)

PRESENT LAW

In general

A credit is available for previously-owned clean vehicles
(the ``previously-owned CV credit'') placed in service by a
qualified buyer.\872\ A ``previously-owned clean vehicle'' is a
motor vehicle with a model year at least two years earlier than
the calendar year in which the taxpayer acquires the vehicle,
the original use of which commences with a person other than
the taxpayer, which has a gross vehicle weight rating of less
than 14,000 pounds,\873\ which is acquired by the taxpayer in a
qualified sale, and that meets certain emissions
standards.\874\
---------------------------------------------------------------------------
\872\Treasury has released final regulations on the previously-
owned clean vehicle credit. T.D. 9995, 89 Fed. Reg. 37747, May 6, 2024.
\873\Sec. 25E(c)(1).
\874\Sec. 25E(e).
---------------------------------------------------------------------------
A qualified sale is a sale by a dealer\875\ that is the
first transfer since the date of enactment of this section to a
qualified buyer other than the person with whom the original
use of such vehicle commenced.\876\ A qualified sale does not
include transfers to qualified buyers made after the vehicle
has been used and owned by a person other than the person with
whom the original use of such vehicle commenced, even if such
use and ownership was not by a qualified buyer.\877\
---------------------------------------------------------------------------
\875\A dealer is a person licensed by a State, territory of the
United States, Indian tribal government, or Alaska Native Corporation
to engage in the sale of vehicles. Sec. 30D(g)(8).
\876\Sec. 25E(c)(2).
\877\Treas. Reg. sec. 1.25E-1(b)(14).
---------------------------------------------------------------------------
Additionally, a previously-owned clean vehicle must be an
electric vehicle or a fuel-cell vehicle that satisfies certain
criteria. Specifically, a previously-owned clean vehicle must
either (1) be propelled to a significant extent by an electric
motor drawing electricity from a battery (a) with at least
seven kilowatt-hours of capacity and (b) which is capable of
being recharged from an external source of electricity, made by
a qualified manufacturer, and with respect to which the person
who sells the vehicle provides a report to the taxpayer and
Secretary that includes the name and taxpayer identification
number of the taxpayer, the vehicle identification number of
the vehicle, the battery capacity of the vehicle, and the
maximum credit allowable to the taxpayer with respect to the
vehicle,\878\ or (2) be propelled by power derived from one or
more cells which convert chemical energy directly into
electricity by combining oxygen with hydrogen fuel stored on
board the vehicle and have received certain emissions-standard
certification.\879\
---------------------------------------------------------------------------
\878\Sec. 25E(c)(1)(D)(i).
\879\Sec. 25E(c)(1)(D)(ii). Fuel cell vehicles must satisfy the
requirements of section 30B(b)(3)(A) and (B).
---------------------------------------------------------------------------
A taxpayer must include the vehicle identification number
of the vehicle on a tax return to claim the credit.\880\
---------------------------------------------------------------------------
\880\Sec. 25E(d).
---------------------------------------------------------------------------
A qualified buyer is an individual who purchases a vehicle
for use and not resale, who cannot be claimed as a dependent,
and during the three-year period prior to such purchase, has
not made any purchases for which a previously-owned CV credit
was claimed.\881\
---------------------------------------------------------------------------
\881\Sec. 25E(c)(3).
---------------------------------------------------------------------------

Previously-owned CV credit amount

The amount of the credit is the lesser of (1) $4,000 or (2)
30 percent of the sale price of the vehicle.\882\
---------------------------------------------------------------------------
\882\Sec. 25E(a).
---------------------------------------------------------------------------
The sale price of a previously-owned clean vehicle
purchased by the taxpayer may not exceed $25,000.\883\ That is,
the credit amount is $0 if the sale price for the vehicle
exceeds this amount.
---------------------------------------------------------------------------
\883\Sec. 25E(c)(2)(B).
---------------------------------------------------------------------------
Additionally, no credit is allowed if the taxpayer's income
exceeds $150,000 in the case of a joint return or surviving
spouse, $112,500 in the case of a head of household, or $75,000
in the case of any other taxpayer.\884\ For purposes of this
limitation, the taxpayer's income is the lesser of modified AGI
of the current taxable year or modified AGI of the preceding
taxable year.\885\
---------------------------------------------------------------------------
\884\Sec. 25E(b).
\885\Modified AGI is AGI increased by any amount excluded from
gross income under section 911, 931, or 933. Sec. 25E(b)(3).
---------------------------------------------------------------------------

Other rules

In general, the credit is available to the vehicle owner,
including the lessor of a vehicle subject to lease. A vehicle
must be used predominantly in the United States to qualify for
the credit and the basis of any qualified vehicle is reduced by
the amount of the credit.\886\
---------------------------------------------------------------------------
\886\Secs. 25E(e) and 30D(f).
---------------------------------------------------------------------------

Transfer of credit

For vehicles acquired after December 31, 2023, a taxpayer
may elect to transfer the credit to an eligible entity under
rules similar to those for the transfer of the clean vehicle
credit.\887\ These rules are explained in the description of
present law for the provision ``Termination of Clean Vehicle
Credit'' below.
---------------------------------------------------------------------------
\887\Sec. 25E(f).
---------------------------------------------------------------------------

Expiration

No credit is allowed for any vehicle acquired after
December 31, 2032.\888\
---------------------------------------------------------------------------
\888\Sec. 25E(g).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the repeal of many existing tax
incentives, including the credit for previously-owned clean
vehicles, makes the tax system simpler and fairer for all
taxpayers, and allows for lower tax rates. The Committee
further believes that repeal of this provision is consistent
with streamlining the tax code, broadening the tax base,
lowering rates, and growing the economy.

EXPLANATION OF PROVISION

The provision repeals the previously-owned CV credit.

EFFECTIVE DATE

The provision is effective for vehicles acquired after
December 31, 2025.

Termination of Clean Vehicle Credit (sec. 112002 of the bill and sec.
30D of the Code)

PRESENT LAW

In general

Present law allows a credit for each new clean vehicle
placed in service (the ``CV credit'').\889\ A new clean vehicle
is a motor vehicle the original use of which commences with the
taxpayer, is acquired for use or lease and not for resale, is
made by a qualified manufacturer,\890\ has a gross vehicle
weight rating of less than 14,000 pounds, is treated as a motor
vehicle for purposes of title II of the Clean Air Act, and is
propelled to a significant extent by an electric motor drawing
electricity from a battery (1) with at least seven kilowatt-
hours of capacity and (2) which is capable of being recharged
from an external source of electricity.\891\ The person who
sells the vehicle must provide a report to the taxpayer and
Secretary that includes the name and taxpayer identification
number of the taxpayer, the vehicle identification number of
the vehicle, the battery capacity of the vehicle, verification
that original use of the vehicle commences with the taxpayer,
and the maximum credit allowable to the taxpayer with respect
to the vehicle.\892\ A new clean vehicle must have final
assembly occur within North America.\893\
---------------------------------------------------------------------------
\889\Treasury has released final regulations on the clean vehicle
credit. T.D. 9995, 89 Fed. Reg. 37754, May 6, 2024.
\890\A qualified manufacturer must be a manufacturer as defined in
regulations prescribed by the Administrator of the Environmental
Protection Agency for purposes of the administration of title II of the
Clean Air Act (42 U.S.C. sec. 7521 et seq.) and must provide periodic
written reports to the Secretary which include vehicle identification
numbers. Sec. 30D(d)(3).
\891\Sec. 30D(d)(1).
\892\Sec. 30D(d)(1)(H).
\893\Sec. 30D(d)(1)(G).
---------------------------------------------------------------------------
New qualified fuel cell motor vehicles\894\ which have
final assembly within North America and for which sellers
provide a report, as described above, are new clean vehicles
for purposes of the credit.\895\
---------------------------------------------------------------------------
\894\As defined in sec. 30B(b)(3).
\895\Sec. 30D(d)(6).
---------------------------------------------------------------------------
Vehicles with any applicable critical minerals in the
battery that are extracted, processed, or recycled by a foreign
entity of concern that are placed in service after December 31,
2024, or vehicles with any components contained in the battery
of the vehicle that are manufactured or assembled by a foreign
entity of concern that are placed in service after December 31,
2023 do not qualify for the credit.\896\
---------------------------------------------------------------------------
\896\Sec. 30D(d)(7). For a description of the meaning of foreign
entity of concern for purposes of section 30D see the present law
description for the provision ``Phase-out and Restrictions on Clean
Electricity Production Credit below.
---------------------------------------------------------------------------

CV credit amount

A new clean vehicle is eligible for a maximum credit of up
to $7,500 if certain requirements are met. One $3,750 amount is
allowed if a critical minerals requirement for the battery is
met.\897\ Another $3,750 amount is allowed if a battery
components requirement is met.\898\
---------------------------------------------------------------------------
\897\Sec. 30D(b)(2).
\898\Sec. 30D(b)(3).
---------------------------------------------------------------------------

Critical minerals requirement

To satisfy the critical minerals requirement, a new clean
vehicle's battery (from which the electric motor draws
electricity) must have a percentage of the value of applicable
critical minerals\899\ that were (1) extracted or processed in
the United States or a country that has a free trade agreement
with the United States or (2) recycled in North America equal
to or greater than an applicable percentage.\900\
---------------------------------------------------------------------------
\899\Critical minerals as defined in sec. 45X(c)(6).
\900\Sec. 30D(e)(1)(A).
---------------------------------------------------------------------------
For this purpose the applicable percentage is 40 percent
for a vehicle placed in service before January 1, 2024. The
applicable percentage is 50 percent for a vehicle placed in
service during calendar year 2024, 60 percent for 2025, 70
percent for 2026, and 80 percent after 2026.\901\
---------------------------------------------------------------------------
\901\Sec. 30D(e)(1)(B).
---------------------------------------------------------------------------

Battery components requirement

To satisfy the battery components requirement, a new clean
vehicle's battery (from which the electric motor draws
electricity) must have a percentage of the value of components
that were manufactured or assembled in North America equal to
or greater than an applicable percentage.\902\
---------------------------------------------------------------------------
\902\Sec. 30D(e)(2)(A).
---------------------------------------------------------------------------
For this purpose the applicable percentage is 50 percent
for a vehicle placed in service before January 1, 2024. The
applicable percentage is 60 percent for a vehicle placed in
service during calendar year 2024 or 2025, 70 percent for 2026,
80 percent for 2027, 90 percent for 2028, and 100 percent after
2028.\903\
---------------------------------------------------------------------------
\903\Sec. 30D(e)(2)(B).
---------------------------------------------------------------------------

Vehicle price and AGI limitations

The provision requires that the manufacturer's suggested
retail price (``MSRP'') of a new clean vehicle purchased by the
taxpayer not exceed certain limitations. That is, the credit
amount is $0 if the MSRP for the vehicle exceeds the applicable
limitation. This limitation is $80,000 in the case of a van,
sport utility vehicle, or pickup truck, and $55,000 in the case
of any other vehicle. The Secretary is directed to release
regulations or guidance to characterize vehicles into the
appropriate category by applying rules similar to those
employed by the Environmental Protection Agency (``EPA'') and
the Department of Energy to determine vehicle class and
size.\904\
---------------------------------------------------------------------------
\904\Sec. 30D(f)(11). Treas. Reg. sec. 1.30D-2(b)(56).
---------------------------------------------------------------------------
Additionally, no credit is allowed if the taxpayer's income
exceeds $300,000 in the case of a joint return or surviving
spouse, $225,000 in the case of a head of household, or
$150,000 in the case of any other taxpayer.\905\ For purposes
of this limitation, the taxpayer's income is the lesser of
modified AGI of the current taxable year or modified AGI of the
preceding taxable year.\906\
---------------------------------------------------------------------------
\905\Sec. 30D(f)(10).
\906\Modified AGI is AGI increased by any amount excluded from
gross income under section 911, 931, or 933. Sec. 30D(f)(10)(C).
---------------------------------------------------------------------------

Transfer of credit

A taxpayer who has purchased or leased a vehicle may elect
to transfer the credit to an eligible entity, subject to
regulations or guidance the Secretary deems necessary.\907\ The
eligible entity is then treated as the taxpayer with respect to
the credit.\908\ The Secretary is directed to establish a
program to provide advance payments of these credit amounts to
eligible entities.\909\ An election to transfer the credit must
be made on or before the date of vehicle purchase.\910\
---------------------------------------------------------------------------
\907\Treas. Reg. sec. 1.30D-5.
\908\Sec. 30D(g)(1).
\909\Sec. 30D(g)(7). Treas. Reg. sec. 1.30D-5(f).
\910\Sec. 30D(g)(3).
---------------------------------------------------------------------------
An eligible entity is a dealer\911\ which meets the
following requirements: First, the dealer must be registered
with the Secretary. Second, prior to the election of transfer,
the dealer must disclose information to the buyer on the MSRP
price of the vehicle, value of the credit or other incentives
available, and the amount provided by the dealer as a condition
of an election to transfer. Third, the dealer must pay the
taxpayer for the amount of the credit allowable. Finally, the
dealer must ensure that the availability or use of any other
available manufacturer or dealer incentive does not limit the
ability of the taxpayer to make an election and that the
election will not limit the value or use of any such
incentive.\912\ The Secretary may revoke the registration of
dealers that fail to comply with these requirements.\913\
---------------------------------------------------------------------------
\911\A dealer is a person licensed by a State, territory of the
United States, Indian tribal government, or Alaska Native Corporation
to engage in the sale of vehicles. Sec. 30D(g)(8).
\912\Sec 30D(g)(2).
\913\Sec. 30D(g)(4).
---------------------------------------------------------------------------
The payment made by dealers to buyers in connection with a
credit transfer election is not includable in the gross income
of the taxpayer and is not deductible to the dealer.\914\
---------------------------------------------------------------------------
\914\Sec. 30D(g)(5).
---------------------------------------------------------------------------
The tax liability of a taxpayer that does not meet the AGI
requirements for the credit, that elects to transfer a credit,
and that receives a payment in connection with such credit
transfer, is increased by the amount of such payment.\915\
---------------------------------------------------------------------------
\915\Sec. 30D(g)(10).
---------------------------------------------------------------------------

Other rules

A vehicle that is predominantly used outside the United
States does not qualify for the credit.\916\ A vehicle must
meet certain emissions and safety standards in order to qualify
for the credit.\917\
---------------------------------------------------------------------------
\916\Sec. 30D(f)(4).
\917\Sec. 30D(f)(7).
---------------------------------------------------------------------------
The basis of any qualified vehicle is reduced by the amount
of the credit.\918\ The portion of the credit attributable to
vehicles of a character subject to an allowance for
depreciation is treated as part of the general business credit;
the nonbusiness portion of the credit is allowable to the
extent of the excess of the regular tax and the alternative
minimum tax (reduced by certain other credits) for the taxable
year.\919\
---------------------------------------------------------------------------
\918\Sec. 30D(f)(1).
\919\Sec. 30D(c).
---------------------------------------------------------------------------
Only one credit is allowed for each vehicle and a taxpayer
must include the vehicle identification number of the vehicle
on a tax return to claim the credit.\920\
---------------------------------------------------------------------------
\920\Sec. 30D(f)(8) and (9).
---------------------------------------------------------------------------

Expiration

No credit is allowed for any vehicle placed in service
after December 31, 2032.\921\
---------------------------------------------------------------------------
\921\Sec. 30D(h).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the repeal of many existing tax
incentives, including the credit for new clean vehicles, makes
the tax system simpler and fairer for all taxpayers, and allows
for lower tax rates. The Committee further believes that repeal
of this provision is consistent with streamlining the tax code,
broadening the tax base, lowering rates, and growing the
economy.

EXPLANATION OF PROVISION

For vehicles sold after December 31, 2025, and before
January 1, 2027, the provision adds a manufacturer limitation
for covered vehicles. For each manufacturer, if a total of
200,000 covered vehicles have been manufactured by such
manufacturer and sold for use in the United States after
December 31, 2009, and before January 1, 2026, no credit is
available for any vehicle manufactured by such manufacturer.
Covered vehicles are new qualified plug-in electric drive motor
vehicles\922\ placed in service before January 1, 2023, and new
clean vehicles.
---------------------------------------------------------------------------
\922\New qualified plug-in electric drive motor vehicles are
defined in section 30D(d)(1) as in effect on December 31, 2022. For a
detailed description of prior law section 30D, see the description of
the clean vehicle credit in Joint Committee on Taxation, General
Explanation of Tax Legislation Enacted in the 117th Congress (JCS-1-
23), December 21, 2023. This document can be found on the Joint
Committee on Taxation website at www.jct.gov.
---------------------------------------------------------------------------
The provision modifies the termination date of the new
clean vehicle credit such that no credit is allowed for any
vehicle placed in service after December 31, 2026.

EFFECTIVE DATE

The provision is effective for vehicles placed in service
after December 31, 2025.

Termination of Qualified Commercial Clean Vehicles Credit (sec. 112003
of the bill and sec. 45W of the Code)

PRESENT LAW

Present law allows for a credit for qualified commercial
clean vehicles placed in service by a taxpayer.\923\ A
qualified commercial clean vehicle is a vehicle made by a
qualified manufacturer,\924\ acquired for use or lease by the
taxpayer and not for resale, that either (1) is manufactured
primarily for use on public streets, roads, and highways,\925\
or (2) is mobile machinery,\926\ and of a character subject to
the allowance of depreciation.\927\
---------------------------------------------------------------------------
\923\Treasury has released proposed regulations for section 45W.
See Notice of Proposed Rulemaking, 90 Fed. Reg. 3506, January 14, 2025.
No credit is allowed under section 45W with respect to any vehicle for
which a section 45W or section 30D was previously allowed.
\924\Qualified manufacturer has the same meaning as in section 30D.
For more detail see the present law description of the clean vehicle
credit above.
\925\Vehicles operated exclusively on a rail or rails are excluded.
\926\This is mobile machinery as defined in section 4053(8) and
includes vehicles not designed to perform a function of transporting a
load over public highways.
\927\Sec. 45W(c).
---------------------------------------------------------------------------
Additionally, a qualified commercial clean vehicle must be
an electric vehicle or a fuel- cell vehicle that satisfies
certain criteria. Specifically, a qualified commercial clean
vehicle must either (1) be propelled to a significant extent by
an electric motor drawing electricity from a battery (a) with
at least 15 kilowatt-hours of capacity (or seven kilowatt-hours
for a vehicle with a gross vehicle weight rating of less than
14,000 pounds) and (b) which is capable of being recharged from
an external source of electricity\928\ or (2) be propelled by
power derived from one or more cells which convert chemical
energy directly into electricity by combining oxygen with
hydrogen fuel stored on board the vehicle and have received
certain emissions-standard certification.\929\
---------------------------------------------------------------------------
\928\Sec. 45W(c)(3)(A).
\929\Sec. 45W(c)(3)(B). Fuel cell vehicles must satisfy the
requirements of section 30B(b)(3)(A) and (B).
---------------------------------------------------------------------------
A taxpayer must include the vehicle identification number
of the vehicle on a tax return to claim the credit.\930\ Only
one credit is allowed per vehicle, determined by such vehicle
identification number.\931\
---------------------------------------------------------------------------
\930\Sec. 45W(e).
\931\Secs. 45W(d)(1) and 30D(f)(8).
---------------------------------------------------------------------------
A qualified commercial clean vehicle must also meet certain
emissions standards to be eligible for a credit.\932\
---------------------------------------------------------------------------
\932\Sec. 45W(d)(1).
---------------------------------------------------------------------------

Qualified commercial clean vehicle credit amount

A qualified commercial clean vehicle qualifies for a credit
equal to the lesser of (1) 15 percent of the basis of such
vehicle (30 percent if the vehicle is not powered by a gasoline
or diesel internal combustion engine) or (2) the incremental
cost of the vehicle.\933\ The credit is limited to $40,000
($7,500 for a vehicle with a gross vehicle weight rating of
less than 14,000 pounds).\934\
---------------------------------------------------------------------------
\933\Sec. 45W(b)(1).
\934\Sec. 45W(b)(4).
---------------------------------------------------------------------------
The incremental cost of the vehicle is the amount by which
the purchase price of the vehicle exceeds the purchase price of
a comparable vehicle (one powered solely by gasoline or a
diesel internal combustion engine which is comparable in size
and use).\935\
---------------------------------------------------------------------------
\935\Sec. 45W(b)(2) and (3).
---------------------------------------------------------------------------

Other rules

The basis of any qualified vehicle is reduced by the amount
of the credit.\936\ No credit is allowed for any vehicle for
which a new clean vehicle credit is allowed.\937\
---------------------------------------------------------------------------
\936\Secs. 45W(d)(1) and 30D(f)(1).
\937\Sec. 45W(d)(3).
---------------------------------------------------------------------------
The requirement that a qualified clean commercial vehicle
is of a character subject to the allowance of depreciation does
not apply to vehicles that are not subject to a lease and which
are placed in service by certain tax-exempt entities.\938\
---------------------------------------------------------------------------
\938\Sec. 45W(d)(2).
---------------------------------------------------------------------------
A vehicle must be used predominantly in the United States
to qualify for the credit.\939\
---------------------------------------------------------------------------
\939\Secs. 45W(d)(1) and 30D(f)(4).
---------------------------------------------------------------------------

Regulations and guidance

The Secretary is directed to issue regulations or other
guidance relating to determining the incremental cost of any
qualified commercial clean vehicle in addition those necessary
to carry out this provision.\940\
---------------------------------------------------------------------------
\940\Sec. 45W(f). Treasury has released proposed regulations on
determining the incremental cost of a qualified commercial clean
vehicle. See Notice of Proposed Rulemaking, 90 Fed. Reg. 3506, January
14, 2025.
---------------------------------------------------------------------------

Expiration

No credit is allowed for any vehicle placed in service
after December 31, 2032.\941\
---------------------------------------------------------------------------
\941\Sec. 45W(g).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the repeal of many existing tax
incentives, including the credit for qualified commercial clean
vehicles, makes the tax system simpler and fairer for all
taxpayers, and allows for lower tax rates. The Committee
further believes that repeal of this provision is consistent
with streamlining the tax code, broadening the tax base,
lowering rates, and growing the economy.

EXPLANATION OF PROVISION

The provision repeals the commercial clean vehicle credit.
An exception is provided for vehicles placed in service before
January 1, 2033, which are acquired pursuant to a written
binding contract entered into before May 12, 2025.

EFFECTIVE DATE

The provision is effective for vehicles acquired after
December 31, 2025.
Notice 2025-9 provides a safe harbor for determining the
incremental cost of certain qualified commercial clean
vehicles. Notice 2025-9, 2025-6 I.R.B. 681, January 15, 2025.

Termination of Alternative Fuel Vehicle Refueling Property Credit (sec.
112004 of the bill and sec. 30C of the Code)

PRESENT LAW

In general

Present law allows a credit of 30 percent of the cost of
any qualified alternative fuel vehicle refueling property
placed in service that is not depreciable.\942\ The credit rate
is six percent for any qualified alternative fuel refueling
property that is depreciable.
---------------------------------------------------------------------------
\942\Sec. 30C(a).
---------------------------------------------------------------------------
Qualified alternative fuel refueling property is property
(not including a building and its structural components) of a
character subject to an allowance of depreciation (unless
installed on property used as the principal residence of the
taxpayer) the original use of which begins with the taxpayer.
Additionally, qualified alternative fuel refueling property is
property (1) for the storage or dispensing of a clean-burning
fuel into the fuel tank of a motor vehicle propelled by such
fuel but only if the storage or dispensing of fuel is at the
point where such fuel is delivered into the fuel tank of the
motor vehicle or (2) for the recharging of motor vehicles
propelled by electricity, but only if the property is located
at the point where the motor vehicles are recharged.\943\
---------------------------------------------------------------------------
\943\Secs. 30C(c)(1) and 179A(d), as in effect immediately before
repeal by Pub. L. No. 113-295, December 19, 2024.
---------------------------------------------------------------------------
For this purpose a clean-burning fuel is (1) any fuel which
is at least 85 percent by volume of one or more of ethanol,
natural gas, compressed natural gas, liquified natural gas,
liquified petroleum gas, or hydrogen, (2) any mixture
consisting of two or more of biodiesel, diesel fuel, or
kerosene and with at least 20 percent volume of biodiesel
determined without regard to any kerosene in such mixture, or
(3) electricity.\944\
---------------------------------------------------------------------------
\944\Sec. 30C(c)(1)(B).
---------------------------------------------------------------------------
Qualified alternative fuel vehicle refueling property
includes property that can charge the battery of a motor
vehicle propelled by electricity and allows discharging
electricity from such battery to an electric load external to
the motor vehicle.\945\
---------------------------------------------------------------------------
\945\Sec. 30C(c)(2).
---------------------------------------------------------------------------
Qualified alternative fuel vehicle refueling property
includes depreciable property designed to charge two- and
three-wheeled motor vehicles manufactured for primary use on
public streets, roads, or highways that are propelled by
electricity.\946\
---------------------------------------------------------------------------
\946\Sec. 30C(f).
---------------------------------------------------------------------------
The credit amount per item is limited to $100,000 in the
case of depreciable property and $1,000 in any other case.\947\
---------------------------------------------------------------------------
\947\Sec. 30C(b).
---------------------------------------------------------------------------

Location requirements

Qualified alternative fuel vehicle refueling property must
not be located in an urban area or must be located in a low-
income community.\948\ An urban area is a census tract which
has been designated as an urban area by the Secretary of
Commerce, according to the most recent decennial census.\949\ A
low-income community is a census tract with either (1) a
poverty rate of at least 20 percent or (2) median family income
which does not exceed 80 percent of the greater of metropolitan
area median family income or statewide median family income
(for a nonmetropolitan census tract, generally does not exceed
80 percent of statewide median family income).\950\
---------------------------------------------------------------------------
\948\Sec. 30C(c)(3).
\949\Sec. 30C(c)(3)(B)(ii). Treasury has released proposed
regulations on section 30C. Under these proposed rules, a ``non-urban
census tract'' means any population census tract in which at least 10
percent of the census blocks are not designated as urban areas by the
Census Bureau. See Notice of Proposed Rulemaking, 89 Fed. Reg. 76759,
September 19, 2024.
\950\Sec. 30C(c)(3)(B)(i). Low-income community has the same
meaning as in section 45D(e).
---------------------------------------------------------------------------

Enhanced credit rate where certain prevailing wage and apprenticeship
requirements are met

The credit rate is increased to 30 percent for any
depreciable qualified alternative fuel refueling property that
is part of a qualified alternative fuel vehicle refueling
project.\951\ A qualified alternative fuel vehicle refueling
project is a project (1) that meets certain prevailing wage and
apprenticeship requirements or (2) for which the construction
begins prior to the date that is 60 days after the Secretary
publishes guidance on such requirements.\952\ The Secretary is
directed to issue regulations or other guidance deemed
necessary to administer these requirements.\953\
---------------------------------------------------------------------------
\951\Sec. 30C(g)(1)(A). A project consists of one or more
properties.
\952\Sec. 30C(g)(1)(C).
\953\Sec. 30C(g)(4).
---------------------------------------------------------------------------
The prevailing wage requirements are that the taxpayer must
ensure that any laborers and mechanics employed by the taxpayer
or any contractors or subcontractors in the construction of any
qualified alternative fuel vehicle refueling property which is
part of a project are paid wages at a rate not less than the
prevailing wage rates for construction, alteration, or repair
of a similar character in the locality where the project is
located as determined by the Secretary of Labor, in accordance
with subchapter IV of chapter 31, of title 40, United States
Code.\954\ Additionally, correction and penalty procedures for
failure to satisfy wage requirements, similar to the rules in
section 45(b)(7)(B), apply.\955\
---------------------------------------------------------------------------
\954\Sec. 30C(g)(2)(A).
\955\Sec. 30C(g)(2)(B). For more detail explaining such correction
and penalties related to the failure to satisfy wage requirements, see
the present law description of the clean electricity production credit,
below.
---------------------------------------------------------------------------
The apprenticeship requirements are that generally not less
than a certain percentage of total labor hours of the
construction, alteration, or repair work (including work
performed by any contractor or subcontractor) on a project must
be performed by qualified apprentices, similar to the rules of
section 45(b)(8).\956\
---------------------------------------------------------------------------
\956\Sec. 30C(g)(3). For more detail on apprenticeship
requirements, see the present law description of the clean electricity
production credit, below.
---------------------------------------------------------------------------

Other rules

The basis of any qualified alternative fuel refueling
property is reduced by the amount of the credit.\957\ The
portion of the credit attributable to property of a character
subject to an allowance for depreciation is treated as part of
the general business credit; the nonbusiness portion of the
credit is allowable to the extent of the excess of the regular
tax and the alternative minimum tax (reduced by certain other
credits) for the taxable year.\958\
---------------------------------------------------------------------------
\957\Sec. 30C(e)(1).
\958\Sec. 30C(d).
---------------------------------------------------------------------------
For qualified property used by certain tax-exempt
organizations, governments, or foreign persons and that is not
subject to a lease, the seller of the property may claim the
credit so long as the seller clearly discloses to the user in a
document the amount that is allowable as a credit.\959\
Property that is predominantly used outside the United States
does not qualify for the credit.\960\
---------------------------------------------------------------------------
\959\Sec. 30C(e)(2).
\960\Sec. 30C(e)(3).
---------------------------------------------------------------------------

Termination

The credit does not apply to property placed in service
after December 31, 2032.

REASONS FOR CHANGE

The Committee believes that the repeal of many existing tax
incentives, including the credit for alternative fuel vehicle
refueling property, makes the tax system simpler and fairer for
all taxpayers, and allows for lower tax rates. The Committee
further believes that repeal of this provision is consistent
with streamlining the tax code, broadening the tax base,
lowering rates, and growing the economy.

EXPLANATION OF PROVISION

The provision repeals the alternative fuel vehicle
refueling property credit.

EFFECTIVE DATE

The provision is effective for property placed in service
after December 31, 2025.

Termination of Energy Efficient Home Improvement Credit (sec. 112005 of
the bill and sec. 25C of the Code)

PRESENT LAW

A 30-percent credit is available to individuals for amounts
paid or incurred for qualified energy efficiency improvements,
residential energy property expenditures, and home energy
audits.\961\
---------------------------------------------------------------------------
\961\Sec. 25C. Treasury has released proposed regulations on the
energy efficient home improvement credit as modified by Pub. L. No.
117-169, August 16, 2022. See Notice of Proposed Rulemaking, 89 Fed.
Reg. 85099, October 25, 2024.
---------------------------------------------------------------------------

Qualified energy efficiency improvements

A qualified energy efficiency improvement is any energy
efficient building envelope component (1) that is installed in
or on a dwelling located in the United States and owned and
used by the taxpayer as the taxpayer's principal residence; (2)
the original use of which commences with the taxpayer; and (3)
that reasonably can be expected to remain in use for at least
five years.\962\
---------------------------------------------------------------------------
\962\Sec. 25C(c)(1).
---------------------------------------------------------------------------
Energy efficient building envelope components are building
envelope components that meet (1) in the case of an exterior
window, a skylight, or an exterior door, the applicable Energy
Star program requirements, and (2) in the case of any other
component, the prescriptive criteria for such component
established by the International Energy Conservation Code
(``IECC'') standard in effect as of the beginning of the
calendar year which is two years prior to the calendar year in
which such component is placed in service.\963\
---------------------------------------------------------------------------
\963\Sec. 25C(c)(2).
---------------------------------------------------------------------------
Building envelope components are (1) insulation materials
or systems which are specifically and primarily designed to
reduce the heat loss or gain for a dwelling when installed in
or on such dwelling unit, (2) exterior windows (including
skylights); and (3) exterior doors.\964\
---------------------------------------------------------------------------
\964\Sec. 25C(c)(3).
---------------------------------------------------------------------------

Residential energy property expenditures

Residential energy property expenditures are expenditures
made by the taxpayer for qualified energy property (1) that is
installed on or in connection with a dwelling unit located in
the United States that is used as a residence by the taxpayer;
and (2) that is originally placed in service by the taxpayer.
Residential energy efficiency improvements include both
qualified energy property and expenditures for labor costs
properly allocable to the onsite preparation, assembly, or
original installation of the qualified energy property.\965\
---------------------------------------------------------------------------
\965\Sec. 25C(d)(1).
---------------------------------------------------------------------------
Qualified energy property includes any of the following
which meet or exceed the highest efficiency tier (not including
any advanced tier) established by the Consortium for Energy
Efficiency which is in effect as of the beginning of the
calendar year in which the property is placed in service:
An electric heat pump water heater;
An electric heat pump;
A central air conditioner;
A natural gas, propane, or oil water heater;
or
A natural gas, propane, or oil furnace or
hot water boiler.\966\
---------------------------------------------------------------------------
\966\Sec. 25C(d)(2)(A).
---------------------------------------------------------------------------
Qualified energy property also includes a biomass stove or
boiler which (i) uses the burning of biomass fuel to heat a
dwelling unit located in the United States and used as a
residence by the taxpayer, or to heat water for use in such a
dwelling unit, and (ii) has a thermal efficiency rating of at
least 75 percent (measured by the higher heating value of the
fuel).\967\
---------------------------------------------------------------------------
\967\Sec. 25C(d)(2)(B).
---------------------------------------------------------------------------
Additionally, qualified energy property includes oil
furnaces and hot water boilers to be qualified energy
property.\968\ For property placed in service after 2022 and
before 2027, an oil furnace or hot water boiler can qualify if
it meets or exceeds 2021 Energy Star efficiency criteria, and
is rated by the manufacturer for use with fuel blends at least
20 percent of the volume of which consists of an eligible fuel.
For such property placed in service after 2026, it can qualify
if it achieves an annual fuel utilization efficiency rate of
not less than 90, and is rated by the manufacturer for use with
fuel blends at least 50 percent of the volume of which consists
of an eligible fuel. For this purpose, an eligible fuel means
biodiesel and renewable diesel (within the meaning of section
40A) and second generation biofuel (within the meaning of
section 40).\969\
---------------------------------------------------------------------------
\968\Sec. 25C(d)(2)(C).
\969\Sec. 25C(d)(3).
---------------------------------------------------------------------------
Finally, qualified energy property includes any improvement
to, or replacement of, a panelboard, sub-panelboard, branch
circuits, or feeders that is installed in a manner consistent
with the National Electric Code, has a load capacity of at
least 200 amps, and is installed in conjunction with (and is
necessary for the installation and use of) any qualified energy
efficiency improvements or any qualified energy property.\970\
---------------------------------------------------------------------------
\970\Sec. 25C(d)(2)(D).
---------------------------------------------------------------------------

Home energy audits

A home energy audit means an inspection and written report
with respect to a dwelling unit located in the United States
owned or used by the taxpayer as the taxpayer's principal
residence that (1) identifies the most significant and cost-
effective energy efficiency improvements with respect to such
dwelling unit, including an estimate of the energy and cost
savings with respect to each such improvement, and (2) is
conducted and prepared by a home energy auditor that meets the
certification or other requirements specified by the
Secretary.\971\
---------------------------------------------------------------------------
\971\Sec. 25C(e). Treasury has released guidance on home energy
audits. See Notice 2023-59, 2023-34 I.R.B. 564, August 21, 2023.
---------------------------------------------------------------------------

Limitations

Generally, the credit is available for property placed in
service prior to January 1, 2033. The credit has an annual
limitation of $1,200.\972\ The credit limit with respect to any
item of energy property is generally limited to $600. For
windows, the limit is $600 for all exterior windows and
skylights combined. In the case of doors, the limit is $250 for
any exterior door and $500 for all exterior doors combined. In
the case of heat pumps, heat pump water heaters, biomass
stoves, and boilers, the annual limit is $2,000 for all such
property combined, applied separately from the $1,200 limit
described above.\973\ The effect of these limits is thus that
the maximum possible credit for a taxpayer in a given year is
$3,200.
---------------------------------------------------------------------------
\972\Sec. 25C(b).
\973\Sec. 25C(b)(5).
---------------------------------------------------------------------------

Other rules

The taxpayer's basis in the property is reduced by the
amount of the credit.\974\ Special proration rules apply in the
case of jointly owned property, condominiums, and tenant-
stockholders in cooperative housing corporations.\975\ If less
than 80 percent of the property is used for nonbusiness
purposes, only the portion of expenditures that is used for
nonbusiness purposes is taken into account.\976\
---------------------------------------------------------------------------
\974\Sec. 25C(g).
\975\Sec. 25C(f).
\976\Ibid.
---------------------------------------------------------------------------
For purposes of determining the amount of expenditures made
by any individual with respect to any dwelling unit,
expenditures which are made from subsidized energy financing
are not taken into account. The term ``subsidized energy
financing'' means financing provided under a Federal, State, or
local program a principal purpose of which is to provide
subsidized financing for projects designed to conserve or
produce energy.\977\
---------------------------------------------------------------------------
\977\Sec. 25C(f)(3).
---------------------------------------------------------------------------
A credit is not allowed with respect to any qualified
energy property or exterior window, skylight, or door, unless a
unique qualified product identification number, assigned by the
product's manufacturer, is included on the return.\978\
Omission of such a number is treated as a mathematical or
clerical error.\979\
---------------------------------------------------------------------------
\978\Sec. 25C(h).
\979\Sec. 6213(g)(2)(S).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the repeal of many existing tax
incentives, including the credit for energy efficient home
improvements, makes the tax system simpler and fairer for all
taxpayers, and allows for lower tax rates. The Committee
further believes that repeal of this provision is consistent
with streamlining the tax code, broadening the tax base,
lowering rates, and growing the economy.

EXPLANATION OF PROVISION

The provision repeals the energy efficient home improvement
credit.

EFFECTIVE DATE

Termination of Residential Clean Energy Credit (sec. 112006 of the bill
and sec. 25D of the Code)

PRESENT LAW

In general

An income tax credit is available to individuals for the
purchase of qualified solar electric property, qualified solar
water heating property, qualified fuel cell property, qualified
small wind energy property, qualified geothermal heat pump
property, and qualified battery storage technology.\980\
---------------------------------------------------------------------------
\980\Sec. 25D.
---------------------------------------------------------------------------
For property placed in service before January 1, 2033, the
credit rate is 30 percent of qualifying expenditures. For
property placed in service in calendar year 2033, the credit
rate is reduced to 26 percent, and for property placed in
service in calendar year 2034, the credit rate is reduced to 22
percent. The credit expires for property placed in service
after December 31, 2034.
Expenditures for labor costs allocable to onsite
preparation, assembly, or original installation of property
eligible for the credit, and for piping and wiring to
interconnect such property to the dwelling unit, are eligible
expenditures.\981\
---------------------------------------------------------------------------
\981\Sec. 25D(e)(1).
---------------------------------------------------------------------------
The credit is nonrefundable, but unused tax credits may be
carried forward to future tax years.\982\ The credit with
respect to all qualifying property may be claimed against the
alternative minimum tax.
---------------------------------------------------------------------------
\982\Sec. 25D(c).
---------------------------------------------------------------------------

Qualified property

Qualified solar electric property is property that uses
solar energy to generate electricity for use in a dwelling unit
located in the United States and used as a residence by the
taxpayer.\983\ Qualifying solar water heating property is
property used to heat water for use in a dwelling unit located
in the United States and used as a residence by the taxpayer if
at least half of the energy used by such property for such
purpose is derived from the sun.\984\
---------------------------------------------------------------------------
\983\Sec. 25D(d)(2).
\984\Sec. 25D(d)(1).
---------------------------------------------------------------------------
Qualified fuel cell property is a fuel cell power plant
which is an integrated system comprised of a fuel cell stack
assembly and associated balance of plant components that (1)
converts a fuel into electricity using electrochemical means,
(2) has an electricity-only generation efficiency of greater
than 30 percent, and (3) has a nameplate capacity of at least
0.5 kilowatt of electricity using an electrochemical
process.\985\ The qualified fuel cell property must be
installed on or in connection with a dwelling unit located in
the United States and used by the taxpayer as a principal
residence. In general, the credit for any fuel cell property
may not exceed $500 for each 0.5 kilowatt of capacity.\986\
---------------------------------------------------------------------------
\985\Secs. 25D(d)(3) and 48(c)(1).
\986\Sec. 25D(b)(1).
---------------------------------------------------------------------------
Qualified small wind energy property is property that uses
a wind turbine to generate electricity for use in connection
with a dwelling unit located in the United States and used as a
residence by the taxpayer.\987\
---------------------------------------------------------------------------
\987\Sec. 25D(d)(4).
---------------------------------------------------------------------------
Qualified geothermal heat pump property means any equipment
which (1) uses the ground or ground water as a thermal energy
source to heat the dwelling unit or as a thermal energy sink to
cool such dwelling unit, (2) meets the requirements of the
Energy Star program which are in effect at the time that the
expenditure for such equipment is made, and (3) is installed on
or in connection with a dwelling unit located in the United
States and used as a residence by the taxpayer.\988\
---------------------------------------------------------------------------
\988\Sec. 25D(d)(5).
---------------------------------------------------------------------------
Qualified battery storage technology is battery storage
technology having a capacity of at least three kilowatts that
is installed in connection with a dwelling unit located in the
United States and used as a residence by the taxpayer.\989\
---------------------------------------------------------------------------
\989\Sec. 25D(d)(6).
---------------------------------------------------------------------------

Additional rules

The depreciable basis of the property is reduced by the
amount of the credit.\990\ Special proration rules apply in the
case of jointly owned property, condominiums, and tenant-
stockholders in cooperative housing corporations. If less than
80 percent of the property is used for nonbusiness purposes,
only that portion of expenditures that is used for nonbusiness
purposes is taken into account.\991\
---------------------------------------------------------------------------
\990\Sec. 25D(f).
\991\Sec. 25D(e).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the repeal of many existing tax
incentives, including the credit for residential clean energy
property, makes the tax system simpler and fairer for all
taxpayers, and allows for lower tax rates. The Committee
further believes that repeal of this provision is consistent
with streamlining the tax code, broadening the tax base,
lowering rates, and growing the economy.

EXPLANATION OF PROVISION

The provision repeals the residential clean energy credit.

EFFECTIVE DATE

The provision is effective for property placed in service
after December 31, 2025.

Termination of New Energy Efficient Home Credit (sec. 112007 of the
bill and sec. 45L of the Code)

PRESENT LAW

The section 45L credit is available to an eligible
contractor for each qualified new energy efficient home that is
constructed by the eligible contractor and acquired by a person
from such eligible contractor for use as a residence during the
taxable year.\992\ To qualify as a new energy efficient home,
the home must be: (1) a dwelling located in the United States,
(2) substantially completed after August 8, 2005, and (3)
certified to meet certain energy saving requirements.\993\ As
described below, the provision provides for a $2,500 credit for
new homes that meet certain energy efficiency standards, but
which are not certified zero-energy ready, and a $5,000 credit
for new homes that are certified as zero-energy ready
homes.\994\ For multifamily dwelling units that are part of a
building eligible to participate in the Energy Star Multi-
family New Construction Program the credit is $500 for new
units that meet certain energy efficiency standards, but which
are not certified as zero-energy ready, and $1,000 for dwelling
units that are certified as zero-energy ready.\995\
---------------------------------------------------------------------------
\992\Sec. 45L(a).
\993\Sec. 45L(b)(2).
\994\Sec. 45L(a)(2)(A).
\995\Sec. 45L(a)(2)(B).
---------------------------------------------------------------------------
For single-family homes, to be eligible for the $2,500
credit, a dwelling unit must meet the following standards, as
applicable: (1) in the case of a dwelling unit acquired before
January 1, 2025, the Energy Star Single-Family New Homes
National Program Requirements 3.1, and (2) in the case of a
dwelling unit acquired after December 31, 2024, the Energy Star
Single-Family New Homes National Program Requirements 3.2.\996\
In addition, such dwelling unit must meet the most recent
Energy Star Single-Family New Homes Program Requirements
applicable to the location of such dwelling unit (as in effect
on the latter of January 1, 2023, or January 1 of two calendar
years prior to the date such dwelling unit is acquired). In the
case of a manufactured home, a dwelling unit is eligible for
the $2,500 credit if it meets the most recent Energy Star
Manufactured Home National program requirements as in effect on
the latter of January 1, 2023, or January 1 of two calendar
years prior to the date such dwelling unit is acquired.
---------------------------------------------------------------------------
\996\Sec. 45L(c)(2).
---------------------------------------------------------------------------
A multifamily dwelling unit is eligible for the $500 credit
if such unit (1) meets the most recent Energy Star Multifamily
New Construction National Program Requirements (as in effect on
the latter of January 1, 2023, or January 1 of three calendar
years prior to the date such dwelling unit was acquired), and
(2) meets the most recent Energy Star Multifamily New
Construction Regional Program Requirements applicable to the
location of such dwelling unit (as in effect on the latter of
January 1, 2023, or January 1 of three calendar years prior to
the date such dwelling unit is acquired).\997\
---------------------------------------------------------------------------
\997\Sec. 45L(c)(3).
---------------------------------------------------------------------------
For the $5,000 credit ($1,000 in the case of multifamily
housing), a dwelling unit must be certified as a zero-energy
ready home under the zero-energy ready home program of the
Department of Energy as in effect on January 1, 2023 (or any
successor program determined by the Secretary of the
Treasury).\998\
---------------------------------------------------------------------------
\998\Sec. 45L(c)(1)(B).
---------------------------------------------------------------------------
If certain prevailing wage requirements are met, the credit
for qualifying multifamily dwelling units is increased to
$2,500 per unit for those that are not zero-energy ready and to
$5,000 per unit for those that are zero-energy ready.\999\ In
general, to satisfy the prevailing wage requirements, the
taxpayer must ensure that any laborers and mechanics employed
by the taxpayer or any contractor or subcontractor in the
construction of such residence shall be paid wages at a rate
not less than the prevailing wage rates for construction,
alteration, or repair of a similar character in the locality as
determined by the Secretary of Labor, in accordance with
subchapter IV of chapter 31, of title 40, United States Code.
Rules similar to the rules set forth in section 45(b)(7)(B) of
the renewable electricity production credit apply regarding
penalties for failing to satisfy the prevailing wage
requirements.
---------------------------------------------------------------------------
\999\Sec. 45L(g).
---------------------------------------------------------------------------
The basis of any property associated with the new energy
efficient homes credit is reduced by the amount of any such
credit allowed under section 45L. The basis reduction is not
taken into account for purposes of determining the amount of
the section 42 low-income housing tax credit.
The credit is part of the general business credit. The
credit applies to homes that are purchased prior to January 1,
2033.

REASONS FOR CHANGE

The Committee believes that the repeal of many existing tax
incentives, including the credit for new energy efficient
homes, makes the tax system simpler and fairer for all
taxpayers, and allows for lower tax rates. The Committee
further believes that repeal of this provision is consistent
with streamlining the tax code, broadening the tax base,
lowering rates, and growing the economy.

EXPLANATION OF PROVISION

The provision generally repeals the new energy efficient
home credit for any qualified new energy efficient home
acquired after December 31, 2025. In the case of any home for
which construction began before May 12, 2025, the provision
repeals the credit for homes acquired after December 31, 2026.

EFFECTIVE DATE

The provision is effective for any qualified new energy
efficient home acquired after December 31, 2025.

Phase-Out and Restrictions on Clean Electricity Production Credit (sec.
112008 of the bill and secs. 45Y and 6418 of the Code)

PRESENT LAW

The clean electricity production credit is available with
respect to electricity produced by the taxpayer at a qualified
facility and sold to an unrelated person during the taxable
year.\1000\ The credit is also available where such electricity
is consumed or stored by the taxpayer during the taxable year
and there is no third-party sale, but only if the qualified
facility is equipped with a metering device owned and operated
by an unrelated person.\1001\ The credit is available for
electricity produced during the 10-year period beginning when
the qualified facility is originally placed in service.\1002\
Consumption, sales, or storage are only taken into account with
respect to electricity produced within the United States or a
possession of the United States.\1003\
---------------------------------------------------------------------------
\1000\Sec. 45Y(a)(1).
\1001\Ibid.
\1002\Sec. 45Y(b)(1)(B).
\1003\Sec. 45Y(g)(1).
---------------------------------------------------------------------------
The base credit rate is 0.3 cents per kilowatt-hour.\1004\
This amount is increased to 1.5 cents per kilowatt-hour for
facilities with a maximum output of less than one megawatt of
electricity (as measured in alternating current) and for
facilities that meet certain prevailing wage and apprenticeship
requirements (or for which construction began before January
29, 2023).\1005\ These amounts are adjusted for inflation using
1992 as the base year and increased in increments of one-
twentieth of a cent for the base credit and one-tenth of a cent
for the enhanced credit. The inflation adjustments must be
published annually be the Secretary no later than April 1 of
each calendar year.
---------------------------------------------------------------------------
\1004\Sec. 45Y(a)(2)(A).
\1005\Section 45Y(a)(2)(B)(ii) specifies that a qualified facility
that begins construction ``prior to the date that is 60 days after the
Secretary publishes guidance'' with respect to the prevailing wage and
apprenticeship requirements receives the increased credit rate.
Treasury published such guidance on November 30, 2022, therefore a
facility that began construction before January 29, 2023, is treated as
satisfying the prevailing wage and apprenticeship requirements. T.D.
9998, 89 Fed. Reg. 53184, June 25, 2024.
---------------------------------------------------------------------------
A qualified facility is an electricity generation facility
owned by the taxpayer that is placed in service after December
31, 2024, and for which the greenhouse gas emissions rate is
not greater than zero.\1006\ With respect to a facility placed
in service before January 1, 2025, a qualified facility
includes new units and additions to capacity placed in service
after December 31, 2024.\1007\ A qualified facility does not
include any facility for which a credit is allowed under
sections 45, 45J, 45Q, 45U, 48, 48A, or 48E for the taxable
year or any prior taxable year.\1008\
---------------------------------------------------------------------------
\1006\Sec. 45Y(b)(1)(A). This inflation adjustment is calculated
using the gross domestic product (``GDP'') implicit price deflator for
the preceding calendar year compared to the GDP implicit price deflator
for the base year.
\1007\Sec. 45Y(b)(1)(C).
\1008\Sec. 45Y(b)(1)(D).
---------------------------------------------------------------------------
The greenhouse gas emissions rate means the amount of
greenhouse gases emitted into the atmosphere by a facility in
the production of electricity, expressed as grams of carbon
dioxide equivalents per kilowatt-hour (``CO2e per
KWh''; see definitions below for how this is measured).\1009\
In the case of a facility which produces electricity through
combustion or gasification, the greenhouse gas emissions rate
for such facility shall be equal to the net rate of greenhouse
gases emitted into the atmosphere by such facility (taking into
account lifecycle greenhouse gas emissions, as described in
section 211(o)(1)(H) of the Clean Air Act) in the production of
electricity, expressed as grams of CO2e per
KWh.\1010\
---------------------------------------------------------------------------
\1009\Sec. 45Y(b)(2)(A).
\1010\Sec. 45Y(b)(2)(B).
---------------------------------------------------------------------------
The provision directs the Secretary to annually publish
greenhouse gas emissions rates for types or categories of
facilities, for use by taxpayers to determine whether a
facility qualifies.\1011\ In the case of any facility for which
an emissions rate has not been established by the Secretary, a
taxpayer which owns such a facility may file a petition with
the Secretary for a determination of the emissions rate with
respect to such facility.
---------------------------------------------------------------------------
\1011\Sec. 45Y(b)(2)(C).
---------------------------------------------------------------------------
The amount of greenhouse gases emitted into the atmosphere
by a facility in the production of electricity does not include
any qualified carbon dioxide that is captured by the taxpayer
and sequestered in secure geological storage under rules
similar to the rules applicable under section 45Q(f) or
utilized by the taxpayer in a manner described in section
45Q(f)(5).\1012\
---------------------------------------------------------------------------
\1012\Sec. 45Y(b)(2)(D).
---------------------------------------------------------------------------
The credit is part of the general business credit.
Phaseout of credit
The credit begins to phase out in the ``applicable year,''
which is defined as the later of 2032 or 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.\1013\ The credit is
reduced by 25 percent for a facility the construction of which
begins during the second calendar year following the applicable
year, by 50 percent for a facility the construction of which
begins during the third calendar year following the applicable
year, and by 100 percent for a facility the construction of
which begins during any subsequent calendar year.
---------------------------------------------------------------------------
\1013\Sec. 45Y(d).
---------------------------------------------------------------------------
Wage and apprenticeship requirements
The prevailing wage and apprenticeship requirements follow
a structure similar to that set forth in section 45(b)(7) and
45(b)(8).\1014\
---------------------------------------------------------------------------
\1014\Sec. 45Y(g)(8)-(9).
---------------------------------------------------------------------------
A taxpayer can meet the prevailing wage requirements if it
ensures that prevailing wages are paid to any laborers and
mechanics employed by the taxpayer or any contractor or
subcontractor in the construction of a qualified facility, and
for the alteration or repair of such facility during the 10-
year credit-eligible production period.\1015\ Prevailing wages
are wages paid at rates not less than the prevailing wage rates
for construction, alteration, or repair of a similar character
in the locality as determined by the Secretary of Labor, in
accordance with subchapter IV of chapter 31, of title 40,
United States Code.\1016\
---------------------------------------------------------------------------
\1015\Sec. 45(b)(7)(A).
\1016\Ibid.
---------------------------------------------------------------------------
A taxpayer that fails to pay prevailing wages may bring a
facility into compliance with the prevailing wage requirement,
and thus remain eligible for the increased credit rate, by
paying any affected workers the difference between the actual
compensation paid to such workers and the wages required to be
paid to those workers to meet prevailing wage requirements,
plus any applicable interest.\1017\ This amount is multiplied
by three in the case of intentional disregard of the
requirements. In addition, such taxpayer must pay a penalty to
the IRS equal to $5,000 per affected worker. The penalty is
increased to $10,000 per affected worker in the case of
intentional disregard of the requirements. The deficiency
procedures do not apply with respect to the assessment or
collection of these penalties, and payment must be made within
180 days of the penalty's determination.
---------------------------------------------------------------------------
\1017\Sec. 45(b)(7)(B).
---------------------------------------------------------------------------
To be eligible for the enhanced credit, a taxpayer must
also ensure that certain qualified apprenticeship requirements
are satisfied by ensuring that not less than 15 percent of the
total labor hours of construction, alteration, or repair work
on any qualified facility that begins construction after
December 31, 2023 are performed by qualified apprentices
(including such work performed by any contractor or
subcontractor).\1018\ Labor hours are the total number of hours
devoted to construction, alteration, or repair work by
employees of the contractor or subcontractor and excludes
certain hours worked by managers, owners, or certain other bona
fide executives, administrators, or professionals.\1019\ A
qualified apprentice is an employee of the contractor or
subcontractor who is participating in a registered
apprenticeship program.\1020\ In addition, the ratio of
apprentice-to-journeyworker must meet the standard set by the
Department of Labor or applicable State apprenticeship
agency.\1021\
---------------------------------------------------------------------------
\1018\Sec. 45(b)(8)(A).
\1019\Sec. 45(b)(8)(E)(i).
\1020\Sec. 45(b)(8)(E)(ii).
\1021\Sec. 45(b)(8)(B).
---------------------------------------------------------------------------
Each taxpayer, contractor, or subcontractor who employs
four or more individuals to perform construction, alteration,
or repair work with respect to the construction of a qualified
facility must employ one or more qualified apprentices to
perform such work.\1022\ Exceptions from these requirements are
provided for taxpayers that make a good faith effort to comply
with the requirements of the provision by requesting qualified
apprentices from a registered apprenticeship program but where
such request is denied or where the registered apprenticeship
program fails to respond to a request within five business
days.\1023\
---------------------------------------------------------------------------
\1022\Sec. 45(b)(8)(C).
\1023\Sec. 45(b)(8)(D)(ii).
---------------------------------------------------------------------------
A taxpayer that fails to satisfy the apprenticeship
requirements can come into compliance and thus remain eligible
for the increased rate by paying a penalty in the amount of $50
per missing apprenticeship labor hour.\1024\ In the case of
intentional disregard of the apprenticeship rules, this amount
is increased to $500 per labor hour.\1025\
---------------------------------------------------------------------------
\1024\Sec. 45(b)(8)(D)(i).
\1025\Sec. 45(b)(8)(D)(iii).
---------------------------------------------------------------------------
Definitions and guidance
CO2e per KWh means, with respect to any
greenhouse gas, the equivalent carbon dioxide (as determined
based on global warming potential) per kilowatt hour of
electricity produced.\1026\ The term greenhouse gas has the
same meaning given such term under section 211(o)(1)(G) of the
Clean Air Act, as in effect on the date of the provision's
enactment.\1027\ Qualified carbon dioxide means carbon dioxide
captured from an industrial source which (1) would otherwise be
released into the atmosphere as industrial emission of
greenhouse gas, (2) is measured at the source of capture and
verified at the point of disposal or utilization, and (3) is
captured and disposed or utilized within the United States or a
possession of the United States.\1028\
---------------------------------------------------------------------------
\1026\Sec. 45Y(e)(1).
\1027\Sec. 45Y(e)(2).
\1028\Sec. 45Y(e)(3).
---------------------------------------------------------------------------
The Secretary is required to issue guidance regarding
implementation of the provision no later than January 1, 2025,
including guidance on the calculation of greenhouse gas
emission rates for qualified facilities and the determination
of clean electricity production credits.\1029\
---------------------------------------------------------------------------
\1029\See T.D. 10024, 90 Fed. Reg. 4006, January 15, 2025.
---------------------------------------------------------------------------
Combined heat and power system property
For purposes of determining the clean electricity
production credit, the kilowatt hours of electricity produced
by a taxpayer at a qualified facility include any production in
the form of useful thermal energy by any combined heat and
power system property within such facility, and the amount of
greenhouse gases emitted into the atmosphere by such facility
in the production of such useful thermal energy is included for
purposes of determining the greenhouse gas emissions rate for
such facility.\1030\ For this purpose the term combined heat
and power system property has the same meaning given such term
for purposes of the section 48 energy credit, without regard to
the sunset date, capacity limitations, or special biomass
rule.\1031\ The amount of kilowatt-hours of electricity
produced in the form of useful thermal energy equals the total
useful thermal energy produced by the combined heat and power
system property within the qualified facility divided by the
heat rate for such facility.\1032\ For this purpose, the heat
rate means the amount of energy used by the qualified facility
to generate one kilowatt-hour of electricity, expressed as
British thermal units per net kilowatt-hour generated.\1033\
---------------------------------------------------------------------------
\1030\Sec. 45Y(g)(2)(A).
\1031\Sec. 45Y(g)(2)(B).
\1032\Sec. 45Y(e)(2)(C)(i).
\1033\Sec. 45Y(e)(2)(C)(ii).
---------------------------------------------------------------------------
Energy communities bonus
In the case of any qualified facility which is located in
an energy community (as defined in section 45(b)(11)(B)), the
credit amount is increased by 10 percent. An energy community
is defined as: (1) a brownfield site; (2) a metropolitan
statistical area or non-metropolitan area with an unemployment
rate at or above the national average for the previous year
which has (or had after 2009) 0.17 percent or greater direct
employment or 25 percent or greater local tax revenues related
to the extraction, processing, transport, or storage of coal,
oil, or natural gas; or (3) a census tract (or directly
adjoining tract) in which, in the period since 1999, a coal
mine has closed, or, in the period since 2009, a coal-fueled
power plant has been retired.\1034\
---------------------------------------------------------------------------
\1034\Sec. 45(b)(11)(B).
---------------------------------------------------------------------------
Credit reduced for tax-exempt bonds
The credit is reduced for tax-exempt bonds under rules
similar to the rules of section 45(b)(3).\1035\ With respect to
such bond-financed facilities, the credit is reduced by the
lesser of 15 percent or a percentage calculated using as the
numerator that amount of tax-exempt financing with respect to a
facility (for the taxable year and all prior years) and as the
denominator the aggregate amount of additions to the capitol
account for such facility (for the taxable year and all prior
years).\1036\ For purposes of this calculation, the numerator
includes bond proceeds that are used for capital expenditures
of qualified facilities but does not include proceeds that are
used for other purposes, such as reserve funds.
---------------------------------------------------------------------------
\1035\Sec. 45Y(g)(8).
\1036\Sec. 45(b)(3).
---------------------------------------------------------------------------
Domestic content bonus
The credit is increased by 10 percent (calculated without
regard to the energy communities bonus) if certain domestic
content requirements are met.\1037\ To meet these requirements,
a taxpayer must certify to the Secretary that any steel, iron,
or manufactured product which is a component of a qualified
facility (upon completion of construction) was produced in the
United States.\1038\
---------------------------------------------------------------------------
\1037\Sec. 45Y(g)(11)(A).
\1038\Sec. 45Y(g)(11)(B)(i); see Notice 2025-8, 2025-8 I.R.B. 800,
February 18, 2025.
---------------------------------------------------------------------------
For purposes of steel and iron, this requirement shall be
applied consistent with section 661.5 of title 49, Code of
Federal Regulations.\1039\
---------------------------------------------------------------------------
\1039\Sec. 45Y(g)(11)(B)(ii).
---------------------------------------------------------------------------
Manufactured products which are components of qualified
facilities are deemed to have been produced in the United
States if not less than the adjusted percentage of the total
costs of all manufactured products of such facility are
attributable to manufactured products (including components)
which are mined, produced, or manufactured in the United
States.\1040\ Except with respect to offshore wind facilities,
the percentage is 40 percent for a facility the construction of
which begins before January 1, 2025, 45 percent for a facility
the construction of which begins in calendar year 2025, 50
percent for a facility the construction of which begins in
calendar year 2026, and 55 percent for a facility the
construction of which begins after December 31, 2026.\1041\ For
offshore wind facilities, the percentage is 20 percent for a
facility the construction of which begins before January 1,
2025, 27.5 percent for a facility the construction of which
begins in calendar year 2025, 35 percent for a facility the
construction of which begins in calendar year 2026, 45 percent
for a facility the construction of which begins in calendar
year 2027, and 55 percent for a facility the construction of
which begins after December 31, 2027.\1042\
---------------------------------------------------------------------------
\1040\Sec. 45Y(g)(11)(B)(iii).
\1041\Sec. 45Y(g)(11)(C)(i).
\1042\Sec. 45Y(g)(11)(C)(ii).
---------------------------------------------------------------------------
Reduction of elective payment if domestic content rules are
not satisfied
Under section 6417, certain taxpayers may elect to have the
credit paid directly to the extent there is insufficient tax
liability to absorb the credit (see ``Elective payment for
applicable credits'' below). The amount of this direct payment
is reduced if the domestic content requirements described above
for the bonus credit are not satisfied.\1043\ This reduction
applies only to facilities having a maximum net output of at
least one megawatt (as measured in alternating current).\1044\
The payment is reduced by 10 percent if construction of the
facility begins in calendar year 2024, by 15 percent if
construction the facility begins in calendar year 2025, and by
100 percent if the construction of the facility begins after
December 31, 2025.\1045\
---------------------------------------------------------------------------
\1043\Sec. 45Y(g)(12)(B)(i).
\1044\Sec. 45Y(g)(12)(B)(ii).
\1045\Sec. 45Y(g)(12)(C).
---------------------------------------------------------------------------
An exception applies if the Secretary determines that the
inclusion of steel, iron, or manufactured products which are
produced in the United States increases the overall costs of
construction of qualified facilities by more than 25 percent,
or if the relevant steel, iron, or manufactured products are
not produced in the United States in sufficient and reasonably
available quantities or of a satisfactory quality.\1046\
---------------------------------------------------------------------------
\1046\Sec. 45Y(g)(12)(D).
---------------------------------------------------------------------------
Special rules
In the case of a qualified facility in which more than one
person has an ownership interest, except to the extent provided
in regulations prescribed by the Secretary, production from the
facility shall be allocated among such persons in proportion to
their respective ownership interests in the gross sales from
such facility.\1047\
---------------------------------------------------------------------------
\1047\Sec. 45Y(g)(3) and Treas. Reg. sec. 1.45Y-4(b).
---------------------------------------------------------------------------
Persons shall be treated as related to each other if such
persons would be treated as a single employer under the
regulations prescribed under section 52(b).\1048\ In the case
of a corporation which is a member of an affiliated group of
corporations filing a consolidated return, such corporation
shall be treated as selling electricity to an unrelated person
if such electricity is sold to such a person by another member
of such group.\1049\
---------------------------------------------------------------------------
\1048\Sec. 45Y(g)(2).
\1049\Sec. 45Y(g)(4).
---------------------------------------------------------------------------
Elective payment of applicable credits
In general In the case of an applicable entity making an
election (at such time and in such manner as the Secretary may
provide\1050\) with respect to any applicable credit determined
with respect to such entity, such entity is treated as making a
payment against the tax imposed by subtitle A of the Code (for
the taxable year with respect to which such credit was
determined) equal to the entire amount of such credit (a
``direct payment'').\1051\
---------------------------------------------------------------------------
\1050\Treas. Reg. 1.6417-2.
\1051\Sec. 6417(a). Because the payment is treated as a payment
against tax, it is not income for income tax purposes.
---------------------------------------------------------------------------
The applicable credits are: (1) the business credit portion
of the alternative fuel vehicle refueling property
credit,\1052\ (2) the renewable electricity production credit
(to the extent attributable to qualified facilities originally
placed in service after December 31, 2022),\1053\ (3) the
carbon oxide sequestration credit (to the extent attributable
to carbon capture equipment which is originally placed in
service after December 31, 2022),\1054\ (4) the zero-emission
nuclear power production credit,\1055\ (5) the clean hydrogen
production credit (to the extent attributable to qualified
clean hydrogen production facilities that are originally placed
in service after December 31, 2012),\1056\ (6) in the case of a
tax-exempt entity described in clause (i), (ii), or (iv) of
section 168(h)(2)(A), the credit for qualified commercial
vehicles determined under section 45W by reason of subsection
(d)(2) thereof, (7) the credit for advanced manufacturing
production,\1057\ (8) the clean electricity production
credit,\1058\ (9) the clean fuel production credit,\1059\ (10)
the energy credit,\1060\ (11) the qualifying advanced energy
project credit,\1061\ and (12) the clean electricity investment
credit.\1062\
---------------------------------------------------------------------------
\1052\Sec. 30C.
\1053\Sec. 45.
\1054\Sec. 45Q.
\1055\Sec. 45U.
\1056\Sec. 45V.
\1057\Sec. 45X.
\1058\Sec. 45Y.
\1059\Sec. 45Z.
\1060\Sec. 48.
\1061\Sec. 48C.
\1062\Sec. 48E.
---------------------------------------------------------------------------
In general, an applicable entity is (1) any tax-exempt
organization, (2) any State or political subdivision
thereof,\1063\ (3) the Tennessee Valley Authority, (4) any
Indian tribal government,\1064\ (5) any Alaska Native
Corporation, or (6) any corporation operating on a cooperative
basis which is engaged in furnishing electric energy to persons
in rural areas.\1065\ With certain limitations, entities not
included in this list (``nonlist entities'') may make an
election and be treated as an applicable entity with respect to
the section 45V qualified clean hydrogen production credit, the
section 45Q carbon oxide sequestration credit, and the section
45X advanced manufacturing production credit. No election by a
taxpayer that is a nonlist entity may be made with respect to
any taxable year beginning after December 31, 2032.
---------------------------------------------------------------------------
\1063\Eligible entities include State agencies and
instrumentalities. Treas. Reg. sec. 1.6417-1(c)(7).
\1064\As defined in sec. 30D(g)(9).
\1065\Sec. 6417(d)(1).
---------------------------------------------------------------------------
An election with respect to sections 45V, 45Q, and 45X by a
taxpayer that is a nonlist entity generally remains in effect
for the election year and for each of the four succeeding
taxable years ending before January 1, 2033.\1066\ A taxpayer
may prospectively revoke this election one time during that
period but may not subsequently re-elect.
---------------------------------------------------------------------------
\1066\Sec. 6417(d)(1)(B), (C), and (D) and Treas. Reg. sec. 1.6417-
2.
---------------------------------------------------------------------------
Special rules
In the case of an applicable credit determined with respect
to any facility or property held directly by a partnership or S
corporation, the election is made at the partnership level or
by the S corporation, in such manner as the Secretary may
provide.\1067\ In the event of such an election, any amount
received by a partnership or S corporation as an elective
payment is treated as tax-exempt income for purposes of
sections 705 and 1366, and a partner's distributive share of
such tax-exempt income is based on such partner's distributive
share of the otherwise applicable credit for each taxable year.
---------------------------------------------------------------------------
\1067\Sec. 6417(c) and Treas. Reg. sec. 1.6417-4.
---------------------------------------------------------------------------
Limitations in section 50(b)(3) and (4)(A)(i), relating to
property used by tax-exempt and government entities, do not
apply with respect to any applicable credit for which an
election for a direct payment has been made. In addition, any
such property is treated as used in a trade or business of the
applicable entity.\1068\
---------------------------------------------------------------------------
\1068\Sec. 6417(d)(2).
---------------------------------------------------------------------------
An election by a taxpayer must generally be made by the due
date (including extensions of time) for the tax return for the
taxable year for which the election is made, but in no event
earlier than 180 days after the date of enactment of the
provision.\1069\ In the case of any government or political
subdivision for which no return is required, the Secretary has
determined that the appropriate date is the 15th day of the
fifth month after the end of the taxable year.\1070\
---------------------------------------------------------------------------
\1069\Sec. 6417(d)(3)(A)(i)(II). The Joint Committee on Taxation's
refund review function only applies with respect to income taxes that
have been assessed. For this reason, direct payments with respect to
elections made on originally filed returns are not subject to review by
the Joint Committee under section 6405.
\1070\Sec. 6417(d)(3)(A)(i)(I) and Treas. Reg. sec. 1.6417-
2(b)(3)(i).
---------------------------------------------------------------------------
For the section 45 renewable electricity production credit,
the section 45Q credit for carbon oxide sequestration, the
section 45V credit for clean hydrogen production, and the
section 45Y clean electricity production credit, any election
for a direct payment is applied separately with respect to each
qualified facility.
As a condition of, and prior to, any amount being treated
as a payment which is made by an applicable entity under the
provision, the Secretary may require such information or
registration as the Secretary deems necessary for purposes of
preventing duplication, fraud, improper payments, or excessive
payments under this section.\1071\
---------------------------------------------------------------------------
\1071\For such requirements see Treas. Reg. sec. 1.6417-5.
---------------------------------------------------------------------------
Excessive payments are subject to recapture and penalty, in
the absence of reasonable cause. An excessive payment is,
generally, the excess of the amount of the direct payment over
the amount of the credit which would otherwise be allowable for
the taxable year.\1072\ In the case of an excessive payment,
the tax is increased in the year in which the Secretary makes a
determination that an excessive payment exists.\1073\
---------------------------------------------------------------------------
\1072\Sec. 6417(d)(6).
\1073\Treas. Reg. sec. 1.6417-6(a).
---------------------------------------------------------------------------
In general, if a nonlist entity makes an election for a
direct payment no election may be made to transfer the credits
under the rules described below.
If an election is made for a direct payment, the underlying
applicable credit for which an election is made is reduced to
zero and, for any other Code purposes, is deemed allowed to
such entity for the taxable year.\1074\ In other words, the
credit determined with respect to the applicable entity is
treated as a credit for all purposes, but after it is applied
against income tax liability, it is reduced to zero to prevent
any double benefit (such as claiming the credit twice).
---------------------------------------------------------------------------
\1074\Sec. 6417(e).
---------------------------------------------------------------------------
The direct payment rules do not apply to any possession of
the United States with a mirror code tax system unless the
possession elects to have them apply.\1075\
---------------------------------------------------------------------------
\1075\Sec. 6417(f).
---------------------------------------------------------------------------
Rules similar to the rules of section 50 apply, without
regard to certain limitations applicable to government and tax-
exempt entities.\1076\
---------------------------------------------------------------------------
\1076\Sec. 6417(g).
---------------------------------------------------------------------------
Beginning in fiscal year 2023 and each fiscal year
thereafter, the portion of any payment for which a direct
payment election has been made, or any amount treated as a such
a payment and that is direct spending is increased by 6.0445
percent.\1077\ This is intended to offset any reduction due to
Federal budget sequestration.
---------------------------------------------------------------------------
\1077\Pub. L. No. 117-169, sec. 13801(f), August 16, 2022.
---------------------------------------------------------------------------

Transfer of certain credits

In general
An eligible taxpayer may elect to transfer all or a portion
of an eligible credit determined with respect to such taxpayer
for any taxable year to an unrelated taxpayer (the ``transferee
taxpayer'').\1078\ Payments to the taxpayer by the transferee
taxpayer must be made in cash. Such payments are not includible
in the gross income of the taxpayer nor are they deductible by
the transferee taxpayer.\1079\ The transferee taxpayer has no
basis in any transferred credit, and the fact that the credit
amount may exceed the transfer payment does not give rise to
any income to the transferee. Such payments are similarly
ignored when determining the existence or character of income
for other tax purposes. Taxpayers may only transfer credits to
which they are entitled, after the application of any
limitations (such as the limitation on projects financed by
tax-exempt bonds).
---------------------------------------------------------------------------
\1078\Sec. 6418(a).
\1079\Sec. 6418(b).
---------------------------------------------------------------------------
The list of eligible credits is the same as the list of
applicable credits under the direct payment rules described
above, except for the credit for qualified commercial vehicles
determined under section 45W by reason of subsection (d)(2)
thereof.\1080\ An eligible credit does not include any business
credit carryforward or business credit carryback.\1081\ In the
case of an eligible credit under sections 45, 45Q, 45V, and
45Y, an election may be made separately with respect to each
facility for which such credit is determined and for each
taxable year during the 10-year period beginning on the date
such facility was originally placed in service (or in the case
of a credit under section 45Q, the 12-year period beginning on
the date the carbon capture equipment was originally placed in
service at such facility).\1082\
---------------------------------------------------------------------------
\1080\Sec. 6418(f)(1)(A).
\1081\Sec. 6418(f)(1)(C).
\1082\Sec. 6418(f)(1)(B).
---------------------------------------------------------------------------
An eligible taxpayer is any taxpayer other than a tax-
exempt organization, a State or political subdivision thereof,
the Tennessee Valley Authority, an Indian tribal government, an
Alaska Native Corporation, or a corporation operating on a
cooperative basis which is engaged in furnishing electric
energy to persons in rural areas.\1083\
---------------------------------------------------------------------------
\1083\Sec. 6418(f)(2); see also sec. 6417(d)(1)(A).
---------------------------------------------------------------------------
In the case of any facility or property held directly by a
partnership or S corporation, a credit transfer election must
be made at the partnership or S corporation level. If a
partnership or S corporation makes an election to transfer
credits under the provision, any amount received as
consideration for a transfer described is treated as tax-exempt
income for purposes of sections 705 and 1366, and a partner's
distributive share of such tax-exempt income is based on such
partner's distributive share of the otherwise eligible credit
for each taxable year.\1084\
---------------------------------------------------------------------------
\1084\Sec. 6418(c).
---------------------------------------------------------------------------
Transferred credits must be taken into account in the first
taxable year of the transferee taxpayer ending with, or after,
the taxable year of the eligible taxpayer with respect to which
the credit was determined.\1085\
---------------------------------------------------------------------------
\1085\Sec. 6418(d).
---------------------------------------------------------------------------
An election to transfer any portion of an eligible credit
must be made not later than the due date (including extensions
of time) for the tax return for the taxable year for which the
credit is determined, but in no event earlier than 180 days
after the date of the enactment of the provision. Any such
election, once made, is irrevocable and no additional election
may be made by a transferee taxpayer with respect to any
credits received under the provision.\1086\
---------------------------------------------------------------------------
\1086\Sec. 6418(e).
---------------------------------------------------------------------------
Special rules
As a condition of, and prior to, any transfer of any
portion of an eligible credit, the Secretary may require such
information (including, in such form or manner as is determined
appropriate by the Secretary, such information returns) or
registration as the Secretary deems necessary for purposes of
preventing duplication, fraud, improper payments, or excessive
payments under this section.\1087\
---------------------------------------------------------------------------
\1087\Sec. 6418(g)(1) and Treas. Reg. sec. 1.6418-4.
---------------------------------------------------------------------------
Absent reasonable cause, in the event of an excessive
credit transfer, the transferee taxpayer is liable for tax in
the amount of the excessive credit transfer plus 20-percent
penalty. For this purpose, an excessive credit transfer is,
generally, the excess of the amount of the credit claimed by
the transferee taxpayer over the amount of the credit which
would otherwise be allowable for the taxable year without the
application of section 6418 (in other words, the amount of the
credit properly determined with respect to such facility or
property for such taxable year in the hands of the eligible
taxpayer).\1088\
---------------------------------------------------------------------------
\1088\Sec. 6418(g)(2) and Treas. Reg. sec. 16418-5.
---------------------------------------------------------------------------
In the case of transferred credits associated with
investment credit property, the basis of such property must be
reduced under the rules of section 50. In addition, if, during
any taxable year, the underlying property that gave rise to a
transferred credit is disposed of or otherwise ceases to be
investment credit property with respect to the eligible
taxpayer before the close of the section 50 recapture period,
such eligible taxpayer must notify the transferee taxpayer of
the recapture event and the transferee taxpayer must notify the
eligible taxpayer of the recapture amount. The transferee,
filling in as the taxpayer once the transfer is complete, is
responsible for any amounts subject to recapture.\1089\
---------------------------------------------------------------------------
\1089\Sec. 6418(g)(3).
---------------------------------------------------------------------------
No transfer election may be made with respect to progress
expenditures.\1090\
---------------------------------------------------------------------------
\1090\Sec. 6418(g)(4).
---------------------------------------------------------------------------

Foreign Entity of Concern

In general
There are two credits in the Code that have restrictions
related to foreign entities of concern, the clean vehicle
credit (section 30D) and the advanced manufacturing investment
credit (section 48D).
Under section 30D, vehicles with any applicable critical
minerals in the battery that are extracted, processed, or
recycled by a foreign entity of concern\1091\ that are placed
in service after December 31, 2024, or vehicles with any
components contained in the battery of the vehicle that are
manufactured or assembled by a foreign entity of concern that
are placed in service after December 31, 2023, do not qualify
for the clean vehicle credit.\1092\
---------------------------------------------------------------------------
\1091\Foreign entity of concern as defined in 42 U.S.C. sec.
18741(a)(5).
\1092\Sec. 30D(d)(7). For a description of 30D see the description
of the clean vehicle credit above.
---------------------------------------------------------------------------
Under section 48D a taxpayer that is a foreign entity of
concern\1093\ is not allowed to claim the advanced
manufacturing investment credit.\1094\
---------------------------------------------------------------------------
\1093\Foreign entity of concern as defined in section 9901(8) of
the William M. (Mac) Thornberry National Defense Authorization Act for
Fiscal Year 2021.
\1094\Sec. 48D(c)(1). For a detailed description of section 48D see
the description of the advanced manufacturing investment credit in
Joint Committee on Taxation, General Explanation of Tax Legislation
Enacted in the 117th Congress (JCS-1-23), December 21, 2023.
---------------------------------------------------------------------------
For both purposes a foreign entity of concern is defined as
a foreign entity that is (1) designated as a foreign terrorist
organization by the Secretary of State, (2) included on the
list of specially designated nationals and blocked persons
maintained by the Office of Foreign Assets Control of the
Department of the Treasury (``SDN list''), (3) owned by,
controlled by, or subject to the jurisdiction or direction of
the government of a foreign country that is a covered
nation,\1095\ (4) alleged by the Attorney General to have been
involved in activities for which a conviction was obtained
under certain laws, or (5) determined by the Secretary,\1096\
in consultation with the Secretary of Defense and the Director
of National Intelligence, to be engaged in unauthorized conduct
that is detrimental to the national security or foreign policy
of the United States.
---------------------------------------------------------------------------
\1095\10 U.S.C. sec. 4872(f)(2). Covered nation means the
Democratic People's Republic of North Korea, the People's Republic of
China, the Russian Federation, and the Islamic Republic of Iran.
\1096\For the purposes of the foreign entity of concern definition
used in section 48D, ``the Secretary'' refers to the ``Secretary of
Commerce.'' William M. (Mac) Thornberry National Defense Authorization
Act for Fiscal Year 2021, Pub. L. No. 116-283, sec. 9901(12), January
1, 2021. For the purposes of the foreign entity of concern definition
used in section 30D, ``the Secretary'' refers to the ``Secretary of
Energy.'' 42 U.S.C. sec. 18701(3).
---------------------------------------------------------------------------
Clean Vehicle Credit
Treasury regulations provide that guidance promulgated by
the Department of Energy on foreign entity of concern applies
for purposes of the clean vehicle credit.\1097\ This guidance
includes interpretations of the terms ``foreign entity,''
``government of a foreign country,'' ``subject to the
jurisdiction,'' and ``owned by, controlled by, or subject to
the direction,'' used in the definition of foreign entity of
concern described above.
---------------------------------------------------------------------------
\1097\Treas. Reg. sec. 1.30D-2(b)(24) and 89 Fed. Reg. 37079, May
6, 2024.
---------------------------------------------------------------------------
A foreign entity is: (1) a government of a foreign country;
(2) a natural person who is not a lawful permanent resident or
citizen of the U.S. or any other protected individual; (3) a
partnership, association, corporation, organization, or other
combination of persons organized under the laws of or having
its principal place of business in a foreign country; or (4) an
entity organized under the laws of the U.S. that is owned by,
controlled by, or subject to the direction of an entity
described in (1)-(3).
A government of a foreign country is: (1) a national of
subnational government of a foreign country; (2) an agency or
instrumentality of a national or subnational government of a
foreign country; (3) a dominant or ruling political party of a
foreign country; or (4) a current or former senior foreign
political figure.
A foreign entity is subject to the jurisdiction of a
covered nation government if (1) the foreign entity is
incorporated or domiciled in, or has its principal place of
business in a covered nation or (2) the foreign entity engages
in the extraction, processing, or recycling of critical
minerals, the manufacturing or assembly of components, or the
processing of materials for batteries used to power the
electric motor of new clean vehicles.
An entity is considered to be owned by, controlled by, or
subject to the direction of another entity if (1) 25% or more
of the entity's board seats, voting rights, or equity interests
are cumulatively held by that other entity, whether directly or
indirectly or (2) the entity has entered into a licensing
agreement or other contract with another entity that entitles
the entity to exercise effective control over the extraction,
processing, recycling, manufacturing, or assembly of the
critical minerals, battery components, or battery materials
attributed to the entity.\1098\
---------------------------------------------------------------------------
\1098\89 Fed. Reg. 37079, May 6, 2024.
---------------------------------------------------------------------------
For the definition of foreign entity of concern, the
Secretary of Energy makes the determination of engagement in
unauthorized conduct detrimental to the national security or
foreign policy of the United States for the clean vehicle
credit.
Advanced manufacturing investment credit
Treasury regulations provide that foreign entity of concern
has the same meaning as under regulations issued for Title 15
of the U.S. Code for purposes of the advanced manufacturing
investment credit.\1099\
---------------------------------------------------------------------------
\1099\Treas. Reg. sec. 1.48D-2(f)(2) and 15 C.F.R. sec. 231.104.
---------------------------------------------------------------------------
A person is considered to be owned by, controlled by, or
subject to the jurisdiction or direction of a government of a
covered nation if (1) the person is a citizen, national, or
resident of a covered nation and located in a covered nation,
(2) the person is organized under the laws or has its principal
place of business in a covered nation, (3) 25 percent of more
of the person's outstanding voting interest, board seats, or
equity interests is directly or indirectly held by a covered
nation, or (4) 25 percent or more of the person's outstanding
voting interest, board seats, or equity interests is held
directly or indirectly by any combinations of persons described
in (1)-(3).\1100\
---------------------------------------------------------------------------
\1100\15 C.F.R. sec. 231.104(c)(1).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the Internal Revenue Code
should not provide tax benefits to certain types of energy
projects over others. The Committee believes that phasing out
the credit earlier will promote horizontal equity in the tax
treatment of energy projects.
The Committee believes that prohibited foreign entities
should not directly or indirectly benefit from U.S. energy tax
incentives. Therefore, the Committee believes it is appropriate
to disallow the credit if the taxpayer is a specified foreign
entity or foreign-influenced entity, uses material assistance
from a prohibited foreign entity in the construction of their
facility, or makes certain payments in excess of specified
thresholds to prohibited foreign entities.
The Committee notes that unlike other business credits, the
energy tax credits are given preferential treatment in the Code
through the ability to transfer credits to unrelated taxpayers.
The Committee believes that tax credits generally should be
limited to the taxpayer that engaged in the activity giving
rise to the credit. Therefore, the Committee believes it is
appropriate to repeal the ability to transfer tax credits to
unrelated taxpayers. As some taxpayers may have factored the
use of transferability into their near-term investment
decisions, the Committee believes it is appropriate to
terminate transferability for facilities that begin
construction more than two years after the date of enactment.

EXPLANATION OF PROVISION

Clean Electricity Production Credit

Phase-out percentage
The provision modifies the phaseout of the clean
electricity production credit. The credit is reduced by 20
percent for facilities placed in service during calendar year
2029, by 40 percent for facilities placed in service during
calendar year 2030, by 60 percent for facilities placed in
service during calendar year 2031, and by 100 percent for a
facility placed in service after December 31, 2031.
Restrictions related to prohibited foreign entities
Under the provision, a ``qualified facility'' does not
include any facility that begins construction after the date
that is one year after the date of enactment if the
construction of the facility includes any material assistance
from a prohibited foreign entity (as defined in section
7701(a)(52).
The provision disallows any credit for any taxable year
beginning after the date of enactment if the taxpayer is a
specified foreign entity (as defined in section
7701(a)(51)(B)).
The provision disallows any credit for any taxable year
beginning after the date that is two years after the date of
enactment if the taxpayer is a foreign-influenced entity (as
defined in section 7701(a)(51)(D)).
No credit is allowed for any taxable year beginning after
the date that is two years after the date of enactment if the
taxpayer makes a payment of dividends, interest, compensation
for services, rentals or royalties, guarantees or any other
fixed, determinable, annual, or periodic amount (1) to a
prohibited foreign entity in an amount equal to or greater than
five percent of such total payments made by the taxpayer
related to the production of electricity during the taxable
year or (2) to more than one prohibited foreign entity in an
amount that, in aggregate, is equal to or greater than 15
percent of such payments related to the production of
electricity made by the taxpayer during the taxable year.
Repeal of transferability
The provision terminates transferability of the credit for
facilities that begin construction after the date that is two
years after the date of enactment.

Prohibited Foreign Entity

In general
The provision expands upon the concept of foreign entity of
concern and defines several new categories of entities, which
are used for new requirements for certain energy-related tax
benefits.\1101\
---------------------------------------------------------------------------
\1101\See the descriptions of restrictions on sections 45X, 45Y,
and 48E for details on how the restrictions on prohibited foreign
entities are applied.
---------------------------------------------------------------------------
A prohibited foreign entity\1102\ is an entity that is a
specified foreign entity\1103\ or a foreign-influenced
entity.\1104\
---------------------------------------------------------------------------
\1102\New sec. 7701(a)(51)(A).
\1103\New sec. 7701(a)(51)(B).
\1104\New sec. 7701(a)(51)(D).
---------------------------------------------------------------------------
Specified foreign entity
A specified foreign entity is: (1) a foreign entity that is
designated as a foreign terrorist organization by the Secretary
of State;\1105\ (2) a foreign entity that is included on the
list of specially designated nationals and blocked persons
maintained by the Office of Foreign Assets Control of the
Department of the Treasury (``SDN list'');\1106\ (3) a foreign
entity that is alleged by the Attorney General to have been
involved in activities for which a conviction was obtained
under certain laws;\1107\ (4) a foreign entity that is
determined by the Secretary of Commerce, in consultation with
the Secretary of Defense and the Director of National
Intelligence, to be engaged in unauthorized conduct that is
detrimental to the national security or foreign policy of the
United States;\1108\ (5) an entity identified as a Chinese
military company operating in the United States;\1109\ (6) a
certain entity associated with the Xinjian Uyghur Autonomous
Region;\1110\ (7) a certain battery producing entity;\1111\ or
(8) a foreign-controlled entity.
---------------------------------------------------------------------------
\1105\See 15 U.S.C. sec. 4651; William M. (Mac) Thornberry National
Defense Authorization Act for Fiscal Year 2021 (``NDAA''), Pub. L. No.
116-283, sec. 9901(8)(A), January 1, 2021. Note that the CHIPS and
Science Act modified the NDAA. See Pub. L. No. 117-167, sec. 103,
August 9, 2022.
\1106\See 15 U.S.C. sec. 4651; NDAA, Pub. L. No. 116-283, sec.
9901(8)(B), January 1, 2021.
\1107\See 15 U.S.C. sec. 4651; NDAA, Pub. L. No. 116-283, sec.
9901(8)(D), January 1, 2021.
\1108\See 15 U.S.C. sec. 4651; NDAA, Pub. L. No. 116-283, sec.
9901(8)(E), January 1, 2021.
\1109\In accordance with section 1260H of Public Law 116-283.
\1110\An entity included on a list required by sec. 2(d)(2)(B)(i),
(ii), (iv), or (v) of Pub. L. No. 117-78.
\1111\An entity specified under section 154(b) of Public Law 118-
31.
---------------------------------------------------------------------------
For this purpose a foreign-controlled entity means: (1) the
government of a covered nation (as defined in 10 U.S.C. section
4872(f)(2)); (2) a person who is a citizen, national, or
resident of a covered nation and not a citizen or lawful
permanent resident of the United States; (3) an entity or
qualified business unit (as defined in section 989(a))
incorporated or organized under the laws of, or has its
principal place of business in, a covered nation; or (4) an
entity (including subsidiaries) controlled by an entity
described in (1) through (3).\1112\
---------------------------------------------------------------------------
\1112\New sec. 7701(a)(51)(C).
---------------------------------------------------------------------------
Control in the case of an entity, in (4) above, means
ownership (by vote or value) of more than 50 percent of the
stock in the case of a corporation, ownership of more than 50
percent of the profits interests or capital interests in the
case of a partnership, and ownership of more than 50 percent of
the beneficial interest in the case of any other entity.
Foreign-influenced entity
A foreign-influenced entity means an entity with respect to
which, during the taxable year: (1) a specified foreign entity
has the direct or indirect authority to appoint a covered
officer; (2) a single specified foreign entity owns at least 10
percent; (3) one or more specified foreign entities own in
aggregate at least 25 percent; (4) one or more specified
foreign entities holds in aggregate at least 25 percent of the
debt; or (5) payments of dividends, interest, compensation for
services, rentals or royalties, guarantees or any other fixed,
determinable, annual, or periodic amount (a) to a specified
foreign entity equal to or exceed 10 percent of such total
payments for the previous taxable year, or (b) to one or more
specified foreign entities equal to or exceed 25 percent of
such total payments for the previous taxable year, are
knowingly made.
A covered officer with respect to an entity is: (1) a
member of the board of directors, board of supervisors, or
equivalent governing body; (2) an executive-level officer,
including the president, chief executive officer, chief
operating officer, chief financial officer, general counsel, or
senior vice president; or (3) an individual having powers or
responsibilities similar to those described in (1) and (2).
Material assistance
Material assistance from a prohibited foreign entity means
(1) property with any included component, subcomponent, or
applicable critical mineral (as defined in section 45X(c)(6))
that is extracted, processed, recycled, manufactured, or
assembled by a prohibited foreign entity or (2) property the
design of which is based on any copyright or patent held by a
prohibited foreign entity or any know-how or trade secret
provided by a prohibited foreign entity.\1113\
---------------------------------------------------------------------------
\1113\New sec. 7701(a)(52).
---------------------------------------------------------------------------
Material assistance from a prohibited foreign entity does
not include any assembly part or constituent material if such
part or material is not directly acquired from a prohibited
foreign entity. For this purpose, assembly parts are
subcomponents or collections of subcomponents that (1) are not
uniquely designed for use in the construction of a qualified
facility described in section 45Y or 48E or an eligible
component described in 45X and (2) are not exclusively or
predominately produced by prohibited foreign entities. For this
purpose, constituent materials are materials which (1) are not
uniquely formulated for use in a qualified facility described
in section 45Y or 48E or an eligible component described in 45X
and (2) are not exclusively or predominately produced,
processed, or extracted by prohibited foreign entities.

EFFECTIVE DATE

In general, the provision is effective for taxable years
beginning after the date of enactment. The repeal of
transferability is effective for facilities that begin
construction after the date that is two years after the date of
enactment.

Phase-Out and Restrictions on Clean Electricity Investment Credit (sec.
112009 of the bill and secs. 48E and 6418 of the Code)

PRESENT LAW

In general

A business energy credit is allowed equal to the applicable
percentage of qualified investment for any taxable year with
respect to any qualified facility and any energy storage
technology.\1114\ The base rate is 6 percent.\1115\ This base
rate is increased to 30 percent (the ``alternative rate'') for
facilities with a maximum output of less than one megawatt of
electricity (as measured in alternating current) and for
facilities that meet certain prevailing wage and apprenticeship
requirements (or for which construction began more than 60 days
before the Secretary publishes guidance with respect to such
prevailing wage and apprenticeship requirements).\1116\
---------------------------------------------------------------------------
\1114\Sec. 48E.
\1115\Sec. 48E(a)(2)(A)(i).
\1116\Sec. 48E(a)(2)(A)(ii). Section 48E(a)(2)(A)(ii)(II) and
(a)(2)(B)(ii)(II) specify that a qualified facility or energy storage
technology, respectively, that begins construction ``prior to the date
that is 60 days after the Secretary publishes guidance'' with respect
to the prevailing wage and apprenticeship requirements receives the
increased credit rate. Treasury published such guidance on November 30,
2022, therefore a facility that began construction before January 29,
2023, is treated as satisfying the prevailing wage and apprenticeship
requirements. T.D. 9998, 89 Fed. Reg. 53184, June 25, 2024.
---------------------------------------------------------------------------

Qualified investment with respect to a qualified facility

For purposes of determining the amount of the credit, a
qualified investment with respect to any qualified facility for
the taxable year is the sum of the basis of any qualified
property placed in service by the taxpayer during such taxable
year which is part of a qualified facility, plus the amount of
any expenditures that are paid or incurred by the taxpayer for
qualified interconnection property.\1117\ The qualified
interconnection property must be properly chargeable to a
capital account of the taxpayer and placed in service during
the taxpayer's taxable year in connection with a qualified
facility that has a maximum net output of no more than five
megawatts (as measured in alternating current).\1118\
---------------------------------------------------------------------------
\1117\Sec. 48E(b)(1).
\1118\Sec. 48E(b)(1)(B).
---------------------------------------------------------------------------
Qualified property is tangible personal property or other
tangible property (not including a building or its structural
components), but only if such property is used as an integral
part of a qualified facility.\1119\ In addition, such property
must consist of depreciable or amortizable property that is
either built by the taxpayer or the original use of which
begins with the taxpayer.
---------------------------------------------------------------------------
\1119\Sec. 48E(b)(2).
---------------------------------------------------------------------------
A qualified facility is an electricity generation facility
owned by the taxpayer that is placed in service after December
31, 2024, and for which the greenhouse gas emissions rate is
not greater than zero.\1120\ With respect to a facility placed
in service before January 1, 2025, a qualified facility
includes new units and additions to capacity placed in service
after December 31, 2024.\1121\ The greenhouse gas emissions
rate is determined using rules similar to the rules set forth
in section 45Y(b)(2) and the terms ``greenhouse gas,''
``greenhouse gas emissions rate,'' and ``CO2e per
KWh'' have the same meaning given such terms under section
45Y.\1122\
---------------------------------------------------------------------------
\1120\Sec. 48E(b)(3)(A).
\1121\Sec. 48E(b)(3)(B)(i).
\1122\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above.
---------------------------------------------------------------------------
A qualified facility does not include any facility for
which a credit is allowed under sections 45, 45J, 45Q, 45U,
45Y, 48, or 48A for the taxable year or any prior taxable
year.\1123\ The qualified investment with respect to any
qualified facility for any taxable year does not include that
portion of the basis of any property which is attributable to
qualified rehabilitation expenditures (as defined in section
47(c)(2)).
---------------------------------------------------------------------------
\1123\Sec. 48E(b)(3)(C).
---------------------------------------------------------------------------
Qualified interconnection property has the meaning given
such term in section 48(a)(8)(B).\1124\ Qualified
interconnection property is tangible property that is part of
an addition, modification, or upgrade to a transmission or
distribution system, and which is required at or beyond the
point where the energy project interconnects to such
transmission or distribution system in order to accommodate
such interconnection.\1125\ Qualified interconnection property
must be built or funded by the taxpayer and the original use of
such property, pursuant to an interconnection agreement, must
commence with a utility.
---------------------------------------------------------------------------
\1124\Sec. 48E(b)(4).
\1125\Sec. 48(a)(8)(B).
---------------------------------------------------------------------------

Qualified investment with respect to energy storage technology

The qualified investment with respect to energy storage
technology for any taxable year is the basis of any energy
storage technology placed in service by the taxpayer during
such taxable year.\1126\ The term ``energy storage technology''
has the meaning given such term in section 48(c)(6) (except
that subparagraph (D) of such section shall not apply).\1127\
---------------------------------------------------------------------------
\1126\Sec. 48E(c)(1).
\1127\Sec. 48E(c)(2).
---------------------------------------------------------------------------
Energy storage technology consists of either (1) property
(other than property primarily used in the transportation of
goods or individuals and not for the production of electricity)
which receives, stores, and delivers energy for conversion to
electricity (or, in the case of hydrogen, which stores energy),
and has a nameplate capacity of not less than five kilowatt-
hours, and (2) thermal energy storage property.\1128\ Property
placed in service before the date of enactment of section 48
that is modified to increase its capacity to at least five
kilowatts (or if already having a capacity of at least five
kilowatts, increases its capacity by at least an additional
five kilowatts), is treated as qualifying property except that
the basis of any existing property prior to such modification
is not taken into account.\1129\
---------------------------------------------------------------------------
\1128\Sec. 48(c)(6)(A).
\1129\Sec. 48(c)(6)(B).
---------------------------------------------------------------------------
Thermal energy storage property is property comprising a
system which (1) is directly connected to a heating,
ventilation, or air conditioning system, (2) removes heat from,
or adds heat to, a storage medium for subsequent use, and (3)
provides energy for the heating or cooling of the interior of a
residential or commercial building. Thermal energy property
does not include a swimming pool, combined heat and power
system property, or a building or its structural
components.\1130\
---------------------------------------------------------------------------
\1130\Sec. 48(c)(6)(C).
---------------------------------------------------------------------------

Wage and apprenticeship requirements

The prevailing wage and apprenticeship requirements follow
a structure similar to that set forth in section 48(a)(10) and
section 45(b)(8), respectively.\1131\ A taxpayer can meet the
prevailing wage requirements if it ensures that prevailing
wages are paid to any laborers and mechanics employed by the
taxpayer or any contractor or subcontractor in the construction
of an energy project, and for the alteration or repair of such
project during the 5-year period beginning on the date the
energy project is originally placed in service.\1132\
Prevailing wages are wages paid at rates not less than the
prevailing wage rates for construction, alteration, or repair
of a similar character in the locality as determined by the
Secretary of Labor, in accordance with subchapter IV of chapter
31, of title 40, United States Code. Rules for correction and
penalties related to failure to satisfy wage requirements
similar to those in section 45(b)(7)(B) apply.\1133\
---------------------------------------------------------------------------
\1131\Sec. 48E(d)(2)-(3).
\1132\Sec. 48(a)(10)(A).
\1133\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------
The apprenticeship requirements in section 45(b)(8) require
that, generally, not less than a certain percentage of total
labor hours of the construction, alteration, or repair work
(including work performed by any contractor or subcontractor)
on a project must be performed by qualified apprentices.\1134\
---------------------------------------------------------------------------
\1134\Ibid.
---------------------------------------------------------------------------

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) apply.

Credit reduced for tax-exempt bonds

The credit is reduced for tax-exempt bonds under rules
similar to the rules of section 45(b)(3).\1135\
---------------------------------------------------------------------------
\1135\Ibid.
---------------------------------------------------------------------------

Phaseout of credit

The credit phases out under rules similar to the rules set
forth in section 45Y(d)(3).\1136\
---------------------------------------------------------------------------
\1136\See sec. 48E(e).
---------------------------------------------------------------------------

Recapture of the credit

If the Secretary determines that the greenhouse gas
emissions rate for a qualified facility is greater than 10
grams of CO2e per KWh, any property for which a
credit was allowed under this section with respect to such
facility ceases to be investment credit property in the taxable
year in which the determination is made and such credit is
subject to recapture under the rules of section 50.\1137\
---------------------------------------------------------------------------
\1137\Sec. 48E(g).
---------------------------------------------------------------------------

Energy communities bonus

If energy property is placed in service in an ``energy
community,'' the provision increases the base rate by two
percentage points and the alternative rate by ten percentage
points.\1138\ The definition of energy community is that same
that set forth in section 45(b)(11)(B).\1139\
---------------------------------------------------------------------------
\1138\Sec. 48E(a)(3)(A).
\1139\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

Domestic content bonus

An additional credit amount is available for property that
meets certain domestic content requirements similar to those
used in section 48.\1140\ To meet these requirements, a
taxpayer must certify to the Secretary that any steel, iron, or
manufactured product which is a component of a qualified
facility or energy storage technology (upon completion of
construction) was produced in the United States.\1141\ For
purposes of steel and iron, this requirement shall be applied
consistent with section 661.5 of title 49, Code of Federal
Regulations. Manufactured products which are components of a
qualified facility or energy storage technology are deemed to
have been produced in the United States if not less than 40
percent (20 percent in the case of offshore wind facilities) of
the total costs of all manufactured products of such facility
are attributable to manufactured products (including
components) which are mined, produced, or manufactured in the
United States.
---------------------------------------------------------------------------
\1140\Sec. 48E(a)(3)(B).
\1141\See Notice 2025-8, 2025-8 I.R.B. 800, February 18, 2025.
---------------------------------------------------------------------------

Special rules for certain facilities placed in service in connection
with low-income communities

A bonus credit amount is allowed for applicable facilities
placed in service in connection with low-income
communities.\1142\ Applicable facilities are qualified
facilities that do not produce electricity through combustion
or gasification, have a maximum net output of less than five
megawatts (as measured in alternating current), and are either
(1) located in a low-income community (as defined in section
45D(e)) or on Indian land (as defined in section 2601(2) of the
Energy Policy Act of 1992 (25 U.S.C. sec. 3501(2))) or (2) part
of a qualified low-income residential building project or a
qualified low-income economic benefit project.\1143\ In the
case of facilities located in a low-income community or on
Indian land, the bonus credit rate is 10 percentage
points.\1144\ In the case of facilities that are part of a
qualified low-income residential building project or a
qualified low-income economic benefit project, the bonus credit
rate is 20 percentage points.\1145\
---------------------------------------------------------------------------
\1142\Sec. 48E(h).
\1143\Sec. 48E(h)(2).
\1144\Sec. 48E(h)(1)(A)(i).
\1145\Sec. 48E(h)(1)(A)(ii).
---------------------------------------------------------------------------
A facility is treated as part of a qualified low-income
residential building project if the facility is installed on a
residential rental building\1146\ which participates in a
covered housing program (as defined in section 41411(a) of the
Violence Against Women Act of 1994 (34 U.S.C. 12491(a)(3)), a
housing assistance program administered by the Department of
Agriculture under title V of the Housing Act of 1949, a housing
program administered by a tribally designated housing entity
(as defined in section 4(22) of the Native American Housing
Assistance and Self-Determination Act of 1996 (25 U.S.C.
4103(22)) or such other affordable housing programs as the
Secretary may provide, and the financial benefits of the
electricity produced by such facility are allocated equitably
among the occupants of the dwelling units of such
building.\1147\
---------------------------------------------------------------------------
\1146\For this purpose, a facility installed next to a building or
in a building complex's common area may be treated as installed on a
residential building.
\1147\Sec. 48E(h)(2)(B).
---------------------------------------------------------------------------
A facility is treated as part of a qualified low-income
economic benefit project if at least 50 percent of the
financial benefits of the electricity produced by such facility
are provided to households with income of (1) less than 200
percent of the poverty line (as defined in section
36B(d)(3)(A)) applicable to a family of the size involved or
(2) less than 80 percent of area median gross income (as
determined under section 142(d)(2)(B)).\1148\ For purposes of
determining whether a facility is part of a qualified low-
income residential building project or a qualified low-income
economic benefit project, electricity acquired at a below-
market rate shall be taken into account as a financial
benefit.\1149\
---------------------------------------------------------------------------
\1148\Sec. 48E(h)(2)(C).
\1149\Sec. 48E(h)(2)(D).
---------------------------------------------------------------------------
The bonus is subject to an annual capacity limitation is
1.8 gigawatts of direct current capacity for each calendar year
beginning on January 1, 2025, and ending on December 31 of the
applicable year (as defined by section 45Y(d)(3)),\1150\ and
zero thereafter.\1151\ The Secretary is required to establish
(within 180 days after the date of the provision's enactment) a
program to allocate the capacity limitation to qualified solar
and wind facilities.\1152\ In establishing such program, the
Secretary must provide procedures to allow for an efficient
allocation process, including, when appropriate, consideration
of multiple projects in a single application if such projects
will be placed in service by a single taxpayer.
---------------------------------------------------------------------------
\1150\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above.
\1151\Sec. 48E(h)(4)(C).
\1152\Sec. 48E(h)(4)(A) and Treas. Reg. sec 1.48E(h)-1.
---------------------------------------------------------------------------
Facilities that have been awarded credits must be placed in
service within four years of the date such facilities have been
allocated electricity generation capacity by the
Secretary.\1153\ If a facility is not placed in service within
this four-year period, the electric generation capacity
allocated to such facility may be reallocated by the
Secretary.\1154\ In addition, if the annual capacity limitation
for 2023 is not fully allocated, the unallocated portion is
added to the amount available in calendar year 2024.\1155\
---------------------------------------------------------------------------
\1153\Sec. 48E(h)(4)(E).
\1154\Sec. 48E(h)(4)(E)(ii).
\1155\Sec. 48E(h)(4)(D).
---------------------------------------------------------------------------
The bonus credit is subject to recapture if the property to
which it relates ceases to meet the applicable requirements,
notwithstanding the fact such property still qualifies for the
energy credit under section 50(a).

Reduction of elective payment if domestic content rules are not
satisfied

Under section 6417, applicable entities may elect to have
the credit paid directly to the extent there is insufficient
tax liability to absorb the credit.\1156\ The amount of this
direct payment is reduced if the domestic content requirements
described above for the bonus credit are not satisfied under
rules similar to the rules in section 45Y(g)(12).\1157\
---------------------------------------------------------------------------
\1156\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
\1157\Sec. 48E(d)(5); ibid.
---------------------------------------------------------------------------

Transferability

Under section 6418, an eligible taxpayer may elect to
transfer all or a portion of a clean electricity investment
credit determined with respect to such taxpayer for any taxable
year to an unrelated taxpayer.\1158\
---------------------------------------------------------------------------
\1158\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the Internal Revenue Code
should not provide tax benefits to certain types of energy
projects over others. The Committee believes that phasing out
the credit earlier will promote horizontal equity in the tax
treatment of energy projects.
The Committee believes that prohibited foreign entities
should not directly or indirectly benefit from U.S. energy tax
incentives. Therefore, the Committee believes it is appropriate
to disallow the credit if the taxpayer is a specified foreign
entity or foreign-influenced entity, uses material assistance
from a prohibited foreign entity in the construction of their
facility or energy storage technology, or makes certain
payments in excess of specified thresholds to prohibited
foreign entities.
The Committee notes that unlike other business credits, the
energy tax credits are given preferential treatment in the Code
through the ability to transfer credits to unrelated taxpayers.
The Committee believes that tax credits generally should be
limited to the taxpayer that engaged in the activity giving
rise to the credit. Therefore, the Committee believes it is
appropriate to repeal the ability to transfer tax credits to
unrelated taxpayers. As some taxpayers may have factored the
use of transferability into their near-term investment
decisions, the Committee believes it is appropriate to
terminate transferability for facilities and energy storage
technology that begin construction more than two years after
the date of enactment.

EXPLANATION OF PROVISION

Modification of phase-out

The provision modifies the phaseout of the clean
electricity investment credit. The credit is reduced by 20
percent for any qualified investment with respect to any
qualified facility or energy storage technology placed in
service during calendar year 2029, by 40 percent for any
qualified investment with respect to any qualified facility or
energy storage technology placed in service during calendar
year 2030, by 60 percent for any qualified investment with
respect to any qualified facility or energy storage technology
placed in service during calendar year 2031, and by 100 percent
for any qualified investment with respect to any qualified
facility or energy storage technology placed in service after
December 31, 2031.

Restrictions related to prohibited foreign entities

Under the provision, a ``qualified facility'' does not
include any facility that begins construction after the date
that is one year after the date of enactment if the
construction of the facility includes any material assistance
from a prohibited foreign entity (as defined in section
7701(a)(52)). ``Energy storage technology'' does not include
any property that begins construction after the date that is
one year after the date of enactment if the construction of the
property includes any material assistance from a prohibited
foreign entity (as defined in section 7701(a)(52)).
The provision disallows any credit for any taxable year
beginning after the date of enactment if the taxpayer is a
specified foreign entity (as defined in section
7701(a)(51)(B)).
The provision disallows any credit for any taxable year
beginning after the date that is two years after the date of
enactment if the taxpayer is a foreign-influenced entity (as
defined in section 7701(a)(51)(D)).
No credit is allowed for any taxable year beginning after
the date that is two years after the date of enactment if the
taxpayer makes a payment of dividends, interest, compensation
for services, rentals or royalties, guarantees or any other
fixed, determinable, annual, or periodic amount related to the
production of electricity or storage of energy (1) to a
prohibited foreign entity in an amount equal to or greater than
five percent of such total payments made by the taxpayer during
the taxable year or (2) to more than one prohibited foreign
entity in an amount that, in aggregate, is equal to or greater
than 15 percent of such payments made by the taxpayer during
the taxable year.
The provision modifies section 50 to provide that if a
specified taxpayer makes an applicable payment during the 10-
year period beginning on the date that the taxpayer placed in
service investment credit property eligible for the section 48E
credit, 100 percent of the section 48E credit for that property
is recaptured during the taxable year in which the applicable
payment occurs. A specified taxpayer is a taxpayer who has been
allowed a credit under section 48E(a) for any taxable year
beginning after the date which is two years after the date of
enactment.
Under the provision, an applicable payment is (1) a payment
of dividends, interest, compensation for services, rentals or
royalties, guarantees or any other fixed, determinable, annual,
or periodic amount related to the production of electricity or
storage of energy to a prohibited foreign entity in an amount
equal to or greater than five percent of such total payments
made by the taxpayer during the taxable year or (2) payments of
dividends, interest, compensation for services, rentals or
royalties, guarantees or any other fixed, determinable, annual,
or periodic amount related to the production of electricity or
storage of energy to more than one prohibited foreign entity in
an amount that, in aggregate, is equal to or greater than 15
percent of such total payments made by the taxpayer during the
taxable year.

Repeal of transferability

The provision terminates transferability of the credit for
facilities and energy storage technology that begin
construction after the date that is two years after the date of
enactment.

Modification of Low-Income Communities Bonus Credit

Under the provision, the term ``annual capacity
limitation'' means 1.8 gigawatts of direct current capacity for
each calendar year during the period beginning on January 1,
2025, and ending on December 31, 2031, and zero thereafter. The
provision bars any excess capacity limitation from carrying
over to any calendar year after December 31, 2031. The
provision requires facilities that have been awarded bonus
credits to be placed in service by the earlier of the date that
is four years after the date such facilities have been
allocated electricity generation capacity by the Secretary and
December 31, 2031.

EFFECTIVE DATE

In general, the provision is effective for taxable years
beginning after the date of enactment. The repeal of
transferability is effective facilities and energy storage
technology that begin construction after the date that is two
years after the date of enactment.

Repeal of Transferability of Clean Fuel Production Credit (sec. 112010
of the bill and sec. 6418(f)(1)(A)(viii) of the Code)

PRESENT LAW

Clean fuel production credit

For transportation fuel, the Code provides a business
credit, the ``Clean Fuel Production Credit.'' ``Transportation
fuel'' is a fuel suitable for use as a fuel in a highway
vehicle or aircraft, that has a lifecycle greenhouse gas
emissions rate which is not greater than 50 kilograms of
CO2e per 1 million British Thermal Units
(``mmBTU''), and that is not derived from coprocessing an
applicable material (or material derived from an applicable
material) with a feedstock which is not biomass.\1159\
---------------------------------------------------------------------------
\1159\``Applicable material'' means monoglycerides, diglycerides,
and triglycerides, free fatty acids, and fatty acid esters. The term
``biomass'' has the same meaning given such term in section 45K(c)(3).
---------------------------------------------------------------------------
The credit per gallon is the product of (1) the applicable
amount per gallon (or gallon equivalent) of transportation fuel
produced and sold by the taxpayer under specified circumstances
and (2) the emissions factor for such fuel. To qualify for the
credit, the transportation fuel must be produced at a qualified
facility and sold by the taxpayer to an unrelated person (1)
for use by such person in the production of a fuel mixture, (2)
for use by such person in a trade or business, or (3) who sells
such fuel at retail into the fuel tank of another person.
The ``applicable amount'' is either a ``base amount'' or an
``alternative amount'' depending on whether certain
requirements are met. The base amount is 20 cents per gallon
for transportation fuel produced at a qualified facility that
does not satisfy certain prevailing wage and apprenticeship
requirements. For transportation fuel produced at a qualified
facility that does satisfy those requirements, the alternative
amount is $1.00 per gallon. For transportation fuel that is
sustainable aviation fuel, the base amount is 35 cents, and the
alternative amount is $1.75. ``Sustainable aviation fuel''
means liquid fuel, the portion of which is not kerosene, which
is sold for use in an aircraft, and which meets the
requirements of either ASTM International Standard D7566, or
the Fischer Tropsch provisions of ASTM International Standard
D1655, Annex A1; and is not derived from palm fatty acid
distillates or petroleum.
Fuel must be produced at a qualified facility
A ``qualified facility'' is a facility used for the
production of transportation fuels and does not include any
facility for which one of the following credits is allowed
under section 38 for the taxable year: section 45V (the credit
for production of clean hydrogen), section 46 to the extent
that such credit is attributable to the energy credit
determined under section 48 with respect to any specified clean
hydrogen production facility for which an election has been
made under section 48(a)(15), or section 45Q (the credit for
carbon oxide sequestration).
Emissions factor calculation and establishment by the
Secretary
The emissions factor of a transportation fuel is an amount
equal to the quotient of (1) 50 kilograms of CO2e
per mmBTU minus the emissions rate for such fuel, divided by
(2) 50 kilograms of CO2e per mmBTU.
The Secretary is required to publish a table that sets
forth the emission rate for similar types and categories of
transportation fuels based on the amount of lifecycle
greenhouse gas emissions (as described in section 211(o)(1)(H)
of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)) as in effect on
the date of enactment of this section) for such fuels,
expressed as kilograms of CO2e per mmBTU, which a
taxpayer shall use for the purposes of this provision.
In the case of transportation fuel that is not sustainable
aviation fuel, the lifecycle greenhouse gas emissions of such
fuel shall be based on the most recent determinations under the
Greenhouse Gases, Regulated Emissions, and Energy Use in
Transportation model (``GREET'') developed by Argonne National
Laboratory, or a successor model (as determined by the
Secretary).
In the case of transportation fuel that is sustainable
aviation fuel, the lifecycle greenhouse gas emissions of such
fuel shall be determined in accordance with (1) the most recent
Carbon Offsetting and Reduction Scheme for International
Aviation that has been adopted by the International Civil
Aviation Organization (``ICAO'') with the agreement of the
United States, or (2) any similar methodology which satisfies
the criteria under section 211(o)(1)(H) of the Clean Air Act
(42 U.S.C. 7545(o)(1)(H)) as in effect on the date of enactment
of this provision (August 22, 2022).
The Secretary may round the emissions rates for purposes of
the table to the nearest five kilograms of CO2e per
mmBTU. However, in the case of an emissions rate that is
between 2.5 kilograms of CO2e per mmBTU and -2.5
kilograms CO2e per mmBTU, the Secretary may round
such rate to zero.
On January 22, 2025, the IRS published Notice 2025-11,
providing initial guidance on emissions rates. The notice
contains the initial table of emissions rates for purposes of
the credit. The table covers several types of fuels (including
pathways and primary feedstock), such as ethanol, biodiesel,
renewable diesel, renewable natural gas, propane, naptha,
hydrogen, and sustainable aviation fuel. The Argonne National
Laboratory developed, and the Department of Energy published,
the ``45ZCF-GREET'' model to determine emissions rates for
purposes of the credit.
The determination of emissions rates is calculated using
either (1) determinations under the most recent version of the
45ZCF-GREET model or (2) determinations from fuel pathways
approved under the most recent CORSIA Default Life Cycle
Emissions Values for CORSIA Eligible Fuels lifecycle approach
(``CORSIA Default'') or the most recent CORSIA Methodology for
Calculating Actual Life Cycle Emissions Values lifecycle
approach (``CORSIA Actual'').
Notice 2025-11 notes that the pathways that use imported
used cooking oil will not be available in the 45ZCF-GREET model
until the Department of the Treasury and the IRS publish
further guidance, such as substantiation and recordkeeping
requirements. The Notice expresses concern about the improper
identification of a substance that is not used cooking oil as
used cooking oil, the uncertainty of market impacts caused by
incentivizing used cooking oil and, with imported used cooking
oil in particular, the lack of transparency regarding local
sources.
Petition for provisional emissions rate
In the case of any transportation fuel for which an
emissions rate has not been established by the Secretary, a
taxpayer producing such fuel may file a petition with the
Secretary for determination of the emissions rate with respect
to such fuel. Notice 2025-11 indicates that the Department of
the Treasury and IRS intend to provide guidance related to the
petition process at a later date. Until guidance is issued, the
IRS will not accept requests for provisional emissions rate
determinations and the Department of Energy will not issues
emissions values. However, the emissions rate for any new type
or category of fuel established on the applicable table or
determined through the provisional emissions rate process will
apply on January 1, 2025, regardless of when guidance is
published establishing such rate.
Inflation adjustment
In the case of calendar years beginning after 2024, the 20-
cent amount, $1.00 amount, 35 cent amount and $1.75 amount are
adjusted by multiplying such amount by the inflation adjustment
factor for the calendar year in which the sale or use of the
transportation fuel occurs. If any amount as increased is not a
multiple of one cent, such amount is to be rounded to the
nearest one cent. The inflation adjustment factor is the
inflation adjustment factor determined and published by the
Secretary under the clean electricity production credit
(section 45Y), determined by substituting ``calendar year
2022'' for ``calendar year 1992.''
Special rules
To be entitled to the clean fuel production credit, the
taxpayer must be registered with the IRS as a producer of clean
fuel at the time of production.\1160\ Such fuel must be
produced in the United States. In addition, in the case of any
transportation that is sustainable aviation fuel, the taxpayer
must provide certification (in such form and such manner as the
Secretary prescribes) from an unrelated party demonstrating
compliance with any general requirements, supply chain
traceability requirements, and information transmission
requirements established under the Carbon Offsetting and
Reduction Scheme for International Aviation or similar
methodology which satisfies the criteria under section
211(o)(1)(H) of the Clean Air Act as in effect on the date of
enactment of this provision.
---------------------------------------------------------------------------
\1160\Notice 2024-49 provides guidance on the clean fuel production
credit registration requirements.
---------------------------------------------------------------------------
In the case of a facility in which more than one person has
an ownership interest, except to the extent provided in
Treasury regulations, production from such facility shall be
allocated among such persons in proportion to their respective
ownership interests in the gross sales from such facility.
Persons shall be treated as related to each other if such
persons would be treated as a single employer under the
regulations prescribed under section 52(b). In the case of a
corporation which is a member of an affiliated group of
corporations filing a consolidated return, such corporation
shall be treated as selling fuel to an unrelated person if such
fuel is sold to such a person by another member of such group.
In the case of estates and trusts, under regulations
prescribed by the Secretary, rules similar to the rules of
section 52(d) shall apply. In the case of agricultural
cooperatives, an election may be made to apportion the credit
determined among the patrons of the cooperative on the basis of
business done by the patrons during the taxable year.

Prevailing wage and apprenticeship requirements for purposes of the
alternative amount

Termination

The provision does not apply to transportation fuel sold
after December 31, 2027.

Transferability

Under section 6418, an eligible taxpay may elect to
transfer all or a portion of the clean fuel production credit
determined with respect to such taxpayer for any taxable year
to an unrelated taxpayer.

REASONS FOR CHANGE

The Committee notes that unlike other business credits, the
energy tax credits are given preferential treatment in the Code
through the ability to transfer credits to unrelated taxpayers.
The Committee believes that tax credits generally should be
limited to the taxpayer that engaged in the activity giving
rise to the credit. Therefore, the Committee believes it is
appropriate to repeal the ability to transfer tax credits to
unrelated taxpayers. As some clean fuel projects may have
factored the use of transferability into their near-term
investment decisions, the Committee believes it is appropriate
terminate transferability after December 31, 2027.

EXPLANATION OF PROVISION

Repeal of transferability

The provision terminates transferability of the clean fuel
production credit\1161\ attributable to fuel produced after
December 31, 2027.
---------------------------------------------------------------------------
\1161\The provision extends and modifies the credit in section
111112, ``Extension and Modification of Clean Fuel Production Credit,''
described above.
---------------------------------------------------------------------------

EFFECTIVE DATE

The repeal of transferability applies to fuel produced
after December 31, 2027.

Restrictions on Carbon Oxide Sequestration Credit (sec. 112011 of the
bill and secs. 45Q and 6418 of the Code)

PRESENT LAW

In general

A general business credit is available for the capture and
sequestration of carbon oxide. Taxpayers may claim the credit
during the 12-year period beginning on the date the carbon
capture equipment is originally placed in service.
Credits are generally attributable to the person that
captures and physically or contractually ensures the disposal,
utilization, or use as a tertiary injectant, of the qualified
carbon oxide.\1162\ Such persons may elect to transfer the
credit to the taxpayer that disposes of, utilizes, or uses (as
a tertiary injectant) the qualified carbon oxide.
---------------------------------------------------------------------------
\1162\Sec. 45Q(f)(3).
---------------------------------------------------------------------------
Credits are subject to recapture with respect to any
qualified carbon oxide that ceases to be captured, disposed of,
or used as a tertiary injectant in a manner consistent with the
credit rules.\1163\
---------------------------------------------------------------------------
\1163\Sec. 45Q(f)(4).
---------------------------------------------------------------------------
Significant changes to the credit rate and structure were
made in 2018 by the Bipartisan Budget Act of 2018 (``BBA'') and
in 2022 by the Inflation Reduction Act (``IRA'').\1164\ BBA was
enacted on February 9, 2018. The BBA changes were effective for
taxable years beginning after December 31, 2017.\1165\ The IRA
changes were generally effective for facilities or equipment
placed in service after December 31, 2022, with exceptions
noted below.
---------------------------------------------------------------------------
\1164\Pub. L. No. 115-123, sec. 41119.
\1165\Pub. L. No. 117-169, sec. 13104.
---------------------------------------------------------------------------

Credit amount

Equipment placed in service at a qualified facility on or
after February 9, 2018, and before January 1, 2023
For carbon oxide captured using equipment placed in service
on or after February 9, 2018, and before January 1, 2023, a
credit rate of $12.83 per metric ton in 2017, increasing
linearly each calendar year to $35 per metric ton by December
31, 2026, is available for qualified carbon oxide that is
captured by the taxpayer at a qualified facility and used by
such taxpayer either as a tertiary injectant in a qualified
enhanced oil or natural gas recovery project (``EOR uses'') and
disposed of by such taxpayer in secure geological storage or
for qualified carbon oxide utilization by the taxpayer.\1166\
The credit rate is adjusted for inflation after December 31,
2026. For 2025, the credit rate is $32.54.\1167\
---------------------------------------------------------------------------
\1166\Sec. 45Q(b)(1)(A)(i)(II) in effect prior to the date of
enactment of the IRA, August 16, 2022.
\1167\Treas. Reg. sec. 1.45Q-1(d).
---------------------------------------------------------------------------
For qualified carbon oxide captured using equipment placed
in service on or after February 9, 2018, and before January 1,
2023, and disposed of in secure geological storage, the credit
rate is $22.66 per metric ton in 2017, increasing linearly each
calendar year to $50 per metric ton by December 31, 2026, and
adjusted for inflation thereafter.\1168\ For 2025, the credit
rate is $46.96.\1169\
---------------------------------------------------------------------------
\1168\Sec. 45Q(b)(1)(A)(i)(I) in effect prior to the date of
enactment of the IRA, August 16, 2022.
\1169\Treas. Reg. sec. 1.45Q-1(d).
---------------------------------------------------------------------------
Equipment placed in service at a qualified facility after
December 31, 2022
In the case of facilities and equipment originally placed
in service after December 31, 2022, or with respect to
additional carbon capture equipment installed after such date
at a facility placed in service before such date, the base
credit rate is $17 (adjusted for inflation after 2026) per
metric ton for qualified carbon oxide captured by the taxpayer
using carbon capture equipment which is disposed of by the
taxpayer in secure geological storage without being first used
for EOR uses.\1170\ The base credit is $12 (adjusted for
inflation after 2026) per metric ton where the captured carbon
oxide is first used for EOR uses or utilized in a manner
prescribed by section 45Q.\1171\
---------------------------------------------------------------------------
\1170\45Q(b)(1)(A).
\1171\Ibid.
---------------------------------------------------------------------------
In the case of carbon oxide captured at direct air capture
facilities placed in service after December 31, 2022, or with
respect to additional carbon capture equipment installed after
such date at such facilities placed in service before such
date, the credit amounts described above are $36 and $26 per
ton, respectively.
The total amount of credit is multiplied by five for
qualified facilities or carbon capture equipment that meet
certain prevailing wage and apprenticeship requirements.\1172\
---------------------------------------------------------------------------
\1172\Sec. 45Q(h).
---------------------------------------------------------------------------
Election for equipment placed in service at a qualified
facility on or after February 9, 2018
The credit for carbon captured by facilities placed in
service before February 9, 2018, ended on January 1,
2023.\1173\ However, taxpayers may elect to apply the credit
rate for these facilities to facilities that are placed in
service on or after February 9, 2018.\1174\ A taxpayer that
makes this election would receive a credit of $10 per metric
ton ($13.88 per metric ton, adjusted for inflation\1175\) for
qualified carbon oxide that is captured by the taxpayer at a
qualified facility and used by such taxpayer for EOR uses and
disposed of by such taxpayer in secure geological storage or
for qualified carbon oxide utilization.\1176\ Such taxpayer
would receive a credit of $20 per metric ton ($27.75 per metric
ton, adjusted for inflation\1177\) for carbon oxide that is
captured by the taxpayer at a qualified facility and disposed
of in secure geological storage.\1178\
---------------------------------------------------------------------------
\1173\Sec. 45Q(g); Notice 2022-38, 2022-39 IRB 239, September 26,
2022.
\1174\Sec. 45Q(b)(3).
\1175\Notice 2024-39, 2024-24 I.R.B. 1611, June 10, 2024.
\1176\Sec. 45Q(a)(2).
\1177\Notice 2024-39, 2024-24 I.R.B. 1611, June 10, 2024.
\1178\Sec. 45Q(a)(1).
---------------------------------------------------------------------------

Definitions

Qualified carbon oxide is defined as any carbon dioxide or
other carbon oxide captured from an industrial source by carbon
capture equipment placed in service after February 9, 2018,
that (1) would otherwise be released into the atmosphere as an
industrial emission of greenhouse gas, and (2) is measured at
the source of capture and verified at the point or points of
injection.\1179\ Qualified carbon oxide includes the initial
deposit of captured carbon oxide used as a tertiary injectant
but does not include carbon oxide that is recaptured, recycled,
and re-injected as part of an enhanced oil or natural gas
recovery project process.\1180\ Only qualified carbon oxide
captured and disposed of, used, or utilized within the United
States or a possession of the United States is taken into
account.\1181\
---------------------------------------------------------------------------
\1179\Sec. 45Q(c)(1)(B).
\1180\Sec. 45Q(c)(2).
\1181\Sec. 45Q(f)(1).
---------------------------------------------------------------------------
A qualified enhanced oil or natural gas recovery project is
a project that would otherwise meet the definition of an
enhanced oil recovery project under section 43, if natural gas
projects were included within that definition.\1182\
---------------------------------------------------------------------------
\1182\Sec. 45Q(e)(4).
---------------------------------------------------------------------------
Utilization of qualified carbon oxide means: (1) the
fixation of such carbon oxide through photosynthesis or
chemosynthesis, such as through the growing of algae or
bacteria, (2) the chemical conversion of such qualified carbon
oxide to a material or compound which results in secure
storage, or (3) the use of such carbon oxide for any other
purpose for which a commercial market exists (except for EOR
uses), as determined by the Secretary.\1183\
---------------------------------------------------------------------------
\1183\Sec. 45Q(f)(5).
---------------------------------------------------------------------------
Secure geological storage includes storage at deep saline
formations, oil and gas reservoirs, and unminable coal
seams.\1184\ The Secretary, in consultation with the
Administrator of the Environmental Protection Agency, the
Secretary of Energy, and the Secretary of the Interior, is
required to establish regulations for determining adequate
security measures for the secure geological storage of carbon
oxide such that the carbon oxide does not escape into the
atmosphere.\1185\
---------------------------------------------------------------------------
\1184\Sec. 45Q(f)(2).
\1185\Final Treasury regulations for section 45Q were published in
the Federal Register on January 15, 2021. T.D. 9944, 86 Fed. Reg. 4728,
January 15, 2021.
---------------------------------------------------------------------------
For facilities or equipment the construction of which
begins before August 16, 2022 (pre-IRA), a qualified facility
is any industrial facility or direct air capture facility
located in the United States or a possession of the United
States the construction of which begins before January 1, 2026,
and the construction of carbon capture equipment begins before
such date or is integrated into the original planning and
design of the facility.\1186\ Qualified facilities also must
capture a minimum amount of carbon oxide.\1187\ For electricity
generation facilities that emit 500,000 metric tons or more of
carbon oxide in a taxable year, the facility must capture at
least 500,000 metric tons of carbon oxide. For facilities that
emit less than 500,000 metric tons of carbon oxide or non-power
facilities that emit at least 500,000 metric tons of carbon
oxide, the facility must generally capture at least 100,000
metric tons of carbon oxide per taxable year. However, where
the carbon oxide is captured at a facility that emits less than
500,000 metric tons of carbon oxide and is being utilized for
commercial purposes, this minimum amount is reduced to 25,000
metric tons of carbon oxide. Direct air capture facilities
(described below) must also capture at least 100,000 metric
tons of carbon oxide per taxable year to be qualified
facilities.
---------------------------------------------------------------------------
\1186\Sec. 45Q(d)(1) in effect prior to the date of enactment of
the IRA, August 16, 2022.
\1187\Sec. 45Q(d)(2) in effect prior to the date of enactment of
the IRA, August 16, 2022.
---------------------------------------------------------------------------
The IRA modified the definition of qualified facility for
facilities or equipment the construction of which begins after
the date of enactment of the IRA.\1188\ A qualified facility
must begin construction before January 1, 2033. In the case of
a direct air capture facility, the minimum amount of carbon
oxide that must be captured for a facility to qualify is 1,000
metric tons per taxable year. In the case of an electricity
generating facility, the minimum amount is 18,750 metric tons
per taxable year; any carbon capture equipment associated with
the applicable electric generating unit at such facility must
have a capture design capacity of not less than 75 percent of
the baseline carbon oxide production of such unit. For this
purpose, an applicable electric generating unit means the
principal electric generating unit for which the carbon capture
equipment is originally planned and designed.\1189\
---------------------------------------------------------------------------
\1188\See sec. 45Q(d).
\1189\Sec. 45Q(e)(1).
---------------------------------------------------------------------------
In the case of an applicable electric generating unit
originally placed in service more than one year prior to the
date on which construction of the carbon capture equipment
begins, the baseline carbon oxide production is generally the
average annual carbon oxide production, by mass, from such unit
during the three years with the highest annual carbon oxide
production during the 12-year period preceding the date on
which construction of such carbon capture equipment began. In
the case of an applicable generating unit that was originally
placed in service more than one year but not more than three
years prior to the date on which construction of the carbon
capture equipment begins, the baseline is measured using the
period beginning on the date such unit was placed in service
and ending on the date on which construction of such carbon
capture equipment began. Where construction of the carbon
capture equipment begins either before or not more than one
year after the applicable electric generating unit is placed in
service, the baseline carbon oxide production is the designed
annual carbon oxide production, by mass, as determined based on
an assumed capacity factor of 60 percent.\1190\
---------------------------------------------------------------------------
\1190\Sec. 45Q(e)(2).
---------------------------------------------------------------------------

Prevailing wage and apprenticeship

The prevailing wage and apprenticeship requirements
generally follow the structure established in section 45(b)(7)
and (b)(8). Generally, the prevailing wage rules require that
the taxpayer ensure that any laborers and mechanics employed by
the taxpayer or any contractor or subcontractor in the
construction, alteration, or repair of a project are paid wages
at a rate not less than the prevailing wage rates for
construction, alteration, or repair of a similar character in
the locality where the project is located as determined by the
Secretary of Labor, in accordance with subchapter IV of chapter
31, of title 40, United States Code. The apprenticeship
requirements require that, generally, not less than a certain
percentage of total labor hours of the construction,
alteration, or repair work (including work performed by any
contractor or subcontractor) on a project must be performed by
qualified apprentices, similar to the rules of section
45(b)(8).\1191\
---------------------------------------------------------------------------
\1191\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

Election for certain facilities located in an area affected by a
Federally declared disaster

In the case of qualified carbon oxide captured using carbon
capture equipment which is originally placed in service at a
qualified facility on or after the date of enactment of the
Bipartisan Budget Act of 2018 (February 9, 2018), the taxpayer
may elect, at such time and in such manner as the Secretary may
prescribe, to have the 12-year period begin on the first day of
the first taxable year in which a credit is claimed so long as
(1) no taxpayer claimed a credit with respect to such carbon
capture equipment for any prior taxable year, (2) the qualified
facility at which such carbon capture equipment is placed in
service is located in an area affected by a Federally declared
disaster (as defined by section 165(i)(5)(A)) after the carbon
capture equipment is originally placed in service, and (3) such
Federally declared disaster results in a cessation of the
operation of the qualified facility or the carbon capture
equipment after such equipment is originally placed in service.

Tax-exempt bonds

The credit is reduced for tax-exempt bonds for facilities
or equipment that begin construction after December 31, 2022,
under rules similar to the rules of section 45(b)(3).\1192\
---------------------------------------------------------------------------
\1192\Sec. 45Q(f)(8).
---------------------------------------------------------------------------

Elective pay

Under section 6417, applicable entities may elect to have
the credit paid directly to the extent there is insufficient
tax liability to absorb the credit.\1193\ In general, an
applicable entity is (1) any tax-exempt organization, (2) any
State or political subdivision thereof,\1194\ (3) the Tennessee
Valley Authority, (4) any Indian tribal government,\1195\ (5)
any Alaska Native Corporation, or (6) any corporation operating
on a cooperative basis which is engaged in furnishing electric
energy to persons in rural areas.\1196\ With certain
limitations, entities not included in this list (``nonlist
entities'') may make an election and be treated as an
applicable entity with respect to the section 45Q carbon oxide
sequestration credit.\1197\ The election generally remains in
effect for the election year and for each of the four
succeeding taxable years ending before January 1, 2033.\1198\
---------------------------------------------------------------------------
\1193\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
\1194\Eligible entities include State agencies and
instrumentalities. Treas. Reg. sec. 1.6417-1(c)(7).
\1195\As defined in sec. 30D(g)(9).
\1196\Sec. 6417(d)(1)(A).
\1197\Sec. 6417(d)(1)(C).
\1198\Sec. 6417(d)(3)(C).
---------------------------------------------------------------------------

Transferability

Under section 6418, an eligible taxpayer may elect to
transfer all or a portion of a carbon oxide sequestration
credit determined with respect to such taxpayer for any taxable
year to an unrelated taxpayer.\1199\
---------------------------------------------------------------------------
\1199\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that prohibited foreign entities
should not directly or indirectly benefit from U.S. energy tax
incentives. Therefore, the Committee believes it is appropriate
to disallow the credit if the taxpayer is a specified foreign
entity or foreign-influenced entity.
The Committee notes that unlike other business credits, the
energy tax credits are given preferential treatment in the Code
through the ability to transfer credits to unrelated taxpayers.
The Committee believes that tax credits generally should be
limited to the taxpayer that engaged in the activity giving
rise to the credit. Therefore, the Committee believes it is
appropriate to repeal the ability to transfer tax credits to
unrelated taxpayers. As some taxpayers may have factored the
use of transferability into their near-term investment
decisions, the Committee believes it is appropriate to
terminate transferability for carbon capture equipment that
begins construction more than two years after the date of
enactment.

EXPLANATION OF PROVISION

The provision disallows any credit for any taxable year
beginning after the date of enactment if the taxpayer is a
specified foreign entity (as defined in section
7701(a)(51)(B)).
The provision disallows any credit for any taxable year
beginning after the date that is two years after the date of
enactment if the taxpayer is a foreign-influenced entity (as
defined in section 7701(a)(51)(D)).
The provision terminates transferability of the credit for
carbon capture equipment that begins construction after the
date that is two years after the date of enactment.

EFFECTIVE DATE

In general, the provision is effective for taxable years
beginning after the date of enactment. The repeal of
transferability is effective for carbon capture equipment that
begins construction after the date that is two years after the
date of enactment.

Phase-Out and Restrictions on Zero-Emission Nuclear Power Production
Credit (sec. 112012 of the bill and sec. 45U of the Code)

PRESENT LAW

In general

A section 45U credit is available for the production of
nuclear power produced in the United States by the taxpayer at
a qualified nuclear power facility and sold by the taxpayer to
an unrelated person. A qualified nuclear power facility is any
nuclear facility which (1) is owned by the taxpayer (including
successor owner-taxpayers) and uses nuclear energy to produce
electricity, (2) is not an advanced nuclear power facility
under section 45J, and (3) is placed in service before August
16, 2022.
The credit rate is 0.3 cents per kilowatt-hour of nuclear
power production.\1200\ The total credit for the taxable year
is reduced (but not below zero) by a ``reduction amount'' equal
to the lesser of: (1) the product of 0.3 cents multiplied by
the kilowatt hours of electricity produced by the taxpayer at a
qualified nuclear power facility and sold by the taxpayer to an
unrelated person during the taxable year, or (2) 16 percent of
the excess of the gross receipts from any electricity produced
by such facility (including any electricity services or
products provided in conjunction with the electricity produced
by such facility) and sold to an unrelated person during the
taxable year, over the number of kilowatts sold to unrelated
persons times 2.5 cents.\1201\ In calculating the reduction
amount, gross receipts generally include payments with respect
to a qualified nuclear power facility as a result of any
Federal, State or local government program for, in whole or in
part, the zero-emission, zero-carbon, or air quality attributes
of any portion of the electricity produced by such
facility.\1202\ However, such payments are excluded from gross
receipts for purposes of the reduction amount calculation if
the full amount of the credit is used to reduce such
payments.\1203\ The 0.3 cent and 2.5 cent amounts are adjusted
for inflation using calendar year 2023 as the base year.\1204\
---------------------------------------------------------------------------
\1200\Sec. 45U(a).
\1201\Sec. 45U(b)(2)(A).
\1202\Sec. 45U(b)(2)(B)(i).
\1203\Section 45U(b)(2)(B)(iii).
\1204\Secs. 45U(c)(1) and 45(e)(2). This inflation adjustment is
calculated using the gross domestic product (``GDP'') implicit price
deflator for the preceding calendar year compared to the GDP implicit
price deflator for the base year.
---------------------------------------------------------------------------
The credit is part of the general business credit. The
credit expires for taxable years beginning after December 31,
2032.

Elective payment

Under section 6417, applicable entities may elect to have
the credit paid directly to the extent there is insufficient
tax liability to absorb the credit.\1205\
---------------------------------------------------------------------------
\1205\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

Transferability

Under section 6418, an eligible taxpayer may elect to
transfer all or a portion of a zero-emission nuclear power
production credit determined with respect to such taxpayer for
any taxable year to an unrelated taxpayer.\1206\
---------------------------------------------------------------------------
\1206\Ibid.
---------------------------------------------------------------------------

Increased credit amount for qualified nuclear power facilities

If certain prevailing wage requirements are met, the total
amount of the credit is multiplied by five for qualified
nuclear power facilities. Generally, the prevailing wage rules
require that the taxpayer ensure that any laborers and
mechanics employed by the taxpayer or any contractor or
subcontractor in the alteration or repair of a facility are
paid wages at a rate not less than the prevailing wage rates
for alteration or repair of a similar character in the locality
where the project is located as determined by the Secretary of
Labor, in accordance with subchapter IV of chapter 31, of title
40, United States Code. Rules similar to the rules set forth in
section 45(b)(7)(B) of the renewable electricity production
credit apply regarding penalties for failing to satisfy the
prevailing wage requirements.\1207\
---------------------------------------------------------------------------
\1207\Ibid.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the Code should not provide tax
benefits to certain types of energy projects over others. The
Committee believes that phasing out the credit earlier will
promote horizontal equity in the tax treatment of energy
projects. The Committee believes that prohibited foreign
entities should not directly or indirectly benefit from U.S.
energy tax incentives. Therefore, the Committee believes it is
appropriate to disallow the credit if the taxpayer is a
specified foreign entity or foreign-influenced entity.
The Committee notes that unlike other business credits, the
energy tax credits are given preferential treatment in the Code
through the ability to transfer credits to unrelated taxpayers.
The Committee believes that tax credits generally should be
limited to the taxpayer that engaged in the activity giving
rise to the credit. Therefore, the Committee believes it is
appropriate to repeal the ability to transfer tax credits to
unrelated taxpayers. As some taxpayers may have factored the
use of transferability into their near-term investment
decisions, the Committee believes it is appropriate to
terminate transferability after December 31, 2027.

EXPLANATION OF PROVISION

For taxable years beginning after December 31, 2028, the
provision phases down the amount of the zero-emission nuclear
power production credit applicable for electricity produced and
sold by the taxpayer. The otherwise allowable amount of the
credit is multiplied by the applicable phase out percentage
provided as follows.

------------------------------------------------------------------------
Phase out
Taxable year beginning in calendar year percentage
------------------------------------------------------------------------
2029................................................. 80 percent
2030................................................. 60 percent
2031................................................. 40 percent
2032................................................. None
------------------------------------------------------------------------

No section 45U credit is allowed under section 38 for any
taxable year beginning after the date of enactment if the
taxpayer is a specified foreign entity as defined in section
7701(a)(51)(B). No foreign-influenced entity (as defined in
section 7701(a)(51)(D)) is allowed a section 45U credit under
section 38 for any taxable year beginning two years after the
date of enactment.

Repeal of transferability

The provision terminates transferability of the credit for
electricity produced and sold after December 31, 2027.

EFFECTIVE DATE

The provision is generally effective for taxable years
beginning after the date of enactment. The repeal of
transferability is effective for electricity produced and sold
after December 31, 2027.

Termination of Clean Hydrogen Production Credit (sec. 112013 of the
bill and sec. 45V of the Code)

PRESENT LAW

In general

The Code provides an income tax credit for the production
of qualified clean hydrogen, the clean hydrogen production
credit. The clean hydrogen production credit is part of the
general business credit under section 38. For any taxable year,
the clean hydrogen production credit is an amount equal to the
product of (1) the kilograms of qualified clean hydrogen
produced in that year by the taxpayer at a qualified clean
hydrogen production facility during the ten-year period
beginning on the date such facility was originally placed in
service by (2) the applicable amount.
The ``applicable amount'' is equal to the applicable
percentage of $0.60 (or of $3.00 if certain prevailing wage and
apprenticeship requirements are met), rounded to the nearest
0.1 cent.\1208\ The ``applicable percentage'' consists of four
tiers, with the applicable percentage increasing as the
lifecycle greenhouse gas emissions rate of the hydrogen
decreases:
---------------------------------------------------------------------------
\1208\The $0.60 amount (or the $3.00 in the case of the enhanced
credit) is indexed for inflation by multiplying such amount by the
inflation adjustment factor (as determined under section 45(e)(2) by
substituting 2022 for 1992 in subparagraph (B) thereof) for the
calendar year in which the qualified hydrogen is produced. If any
amount as adjusted is not a multiple of 0.1 cent, such amount is
rounded to the nearest multiple of 0.1 cent.
---------------------------------------------------------------------------
20 percent in the case of qualified clean
hydrogen which is produced through a process that
results in a lifecycle greenhouse gas emissions rate of
not greater than four kilograms of
CO2e\1209\ per kilogram of hydrogen and not
less than 2.5 kilograms of CO2e per kilogram
of hydrogen
---------------------------------------------------------------------------
\1209\``CO2e'' or ``CO2 equivalent'' is the
measure of greenhouse gas emissions ``where the mass values of for all
greenhouse gases are adjusted to account for their relative global
warming potential.'' 42 U.S.C. sec. 7545(o)(1)(H).
---------------------------------------------------------------------------
25 percent in the case of qualified clean
hydrogen which is produced through a process that
results in a lifecycle greenhouse gas emissions rate of
less than 2.5 kilograms of CO2e per kilogram
of hydrogen and not less than 1.5 kilograms of
CO2e per kilogram of hydrogen
33.4 percent in the case of qualified clean
hydrogen which is produced through a process that
results in a lifecycle greenhouse gas emissions rate of
less than 1.5 kilograms of CO2e per kilogram
of hydrogen and not less than 0.45 kilograms of
CO2e per kilogram of hydrogen
100 percent in the case of qualified clean
hydrogen which is produced through a process that
results in a lifecycle greenhouse gas emissions rate of
less than 0.45 kilograms of CO2e per
kilogram of hydrogen

Definitions

``Qualified clean hydrogen'' means hydrogen that is
produced through a process that results in a lifecycle
greenhouse gas emissions rate of not greater than four
kilograms of CO2e per kilogram of hydrogen. The
hydrogen must be produced in the United States or a possession
of the United States in the ordinary course of a trade or
business of the taxpayer for sale or use. The production and
sale or use of such hydrogen must be verified by an unrelated
party. In the case of any hydrogen for which a lifecycle
greenhouse gas emissions rate has not been determined, a
taxpayer producing such hydrogen may file a petition with the
Secretary for determination of the lifecycle greenhouse gas
emissions rate with respect to such hydrogen.
A ``qualified clean hydrogen production facility'' is a
facility (1) owned by the taxpayer (2) that produces qualified
clean hydrogen and (3) the construction of which begins before
January 1, 2033.
The term ``lifecycle greenhouse gas emissions'' has the
same meaning given such term under subparagraph (H) of section
211(o)(1) of the Clean Air Act as in effect on the date of
enactment of the Act. However, such term only includes
emissions through the point of production (well-to-gate) as
determined under the most recent Greenhouse Gases, Regulated
Emissions, and Energy Use in Transportation model (``GREET'')
developed by the Argonne National Laboratory or a successor
model (as determined by the Secretary). The Secretary has
identified a successor model for this purpose, ``45VH2-GREET.''

Increased credit amount for qualified clean hydrogen production
facilities meeting certain prevailing wage and apprenticeship
requirements

In the case of a qualified clean hydrogen production
facility that satisfies certain prevailing wage and
apprenticeship requirements, the amount of credit determined
with respect to qualified clean hydrogen is multiplied by
five.\1210\
---------------------------------------------------------------------------
\1210\Sec. 45V(e)(1). Under the Treasury regulations, a qualified
clean hydrogen production facility satisfies the requirements it is one
of the following: (1) a facility the construction of which began prior
to January 29, 2023, and that meets the prevailing wage requirements of
section 45(b)(7) and Treasury regulation section 1.45-7 with respect to
alterations or repairs of a qualified facility that occur after January
29, 2023 (to the extent applicable), and that meets the recordkeeping
and reporting requirements of Treasury regulation section 1.45-12; or
(2) a facility that meets the prevailing wage requirements of section
45(b)(7) and Treasury regulation section 1.45-7, the apprenticeship
requirements of section 45(b)(8) and Treasury regulation section 1.45-
8, and the recordkeeping and reporting requirements of Treasury
regulation section 1.45-7 with respect to the construction, alteration,
or repair of a qualified facility. Treas. Reg. sec. 1.45V-3(b).
---------------------------------------------------------------------------

Special rules

For facilities owned by more than one taxpayer, rules
similar to the rules of section 45(e)(3) apply for purposes of
the provision. Rules similar to the rule under section 45(b)(3)
(credit reduced for tax-exempt bonds) apply for purposes of the
provision. No credit is allowed with respect to qualified clean
hydrogen produced at a facility which includes carbon capture
equipment for which a credit is allowed to any taxpayer under
section 45Q for the taxable year or any prior taxable year.
Thus, a facility is disqualified for purposes of section 45V,
if a section 45Q credit is claimed for the taxable year or any
prior taxable year with respect to such facility containing
carbon capture equipment.

Modification of existing facilities

A special placed-in-service rule applies for existing
facilities modified to produce qualified clean hydrogen. In the
case of any facility that was originally placed in service
before January 1, 2023, and prior to the modification, did not
produce qualified clean hydrogen, and after the date such
facility was originally placed in service is (1) modified to
produce clean hydrogen, and (2) the amounts paid or incurred
with respect to such modification are properly chargeable to
the capital account of the taxpayer, such facility is deemed to
have been originally placed in service as of the date that the
property required to complete the modification is placed in
service.

Election to treat clean hydrogen production facilities as energy
property

In lieu of the clean hydrogen production credit, the
provision permits a taxpayer to elect to treat specified clean
hydrogen facilities (or any portion of such facility) as energy
property. The energy percentage with respect to such property
ranges from 1.2 percent to six percent depending on the type of
qualified clean hydrogen that the facility is designed and
reasonably expected to produce. No credit is allowed under
section 45V or section 45Q for any taxable year with respect to
any specified clean hydrogen production facility or any carbon
capture equipment included at such facility. A ``specified
clean hydrogen production facility'' is a qualified clean
hydrogen production facility (as defined in 45V(c)(3) described
above) (1) that is placed in service after December 31, 2022,
(2) with respect to which no credit has been allowed under
sections 45V or 45Q, and the taxpayer makes an irrevocable
election to have this provision apply, and (3) for which an
unrelated third party has verified (in such form or manner as
the Secretary may prescribe) that such facility produces
hydrogen through a process which results in lifecycle
greenhouse gas emissions that are consistent with the hydrogen
that such facility was designed and expected to produce.

Credit monetization

In lieu of the clean hydrogen production credit, certain
taxpayers may elect a direct payment or transfer credits.

Regulations and guidance

On January 10, 2025, the Department of Treasury and the IRS
published final regulations regarding the clean hydrogen
production credit and the election under section 48(a)(15)
relating to the investment tax credit for specified clean
hydrogen production facilities.\1211\ The regulations provide
rules for: (1) determining lifecycle greenhouse gas emissions
rates resulting from hydrogen production processes; (2)
petitioning for provisional emissions rates; (3) verifying
production and sale or use of clean hydrogen; (4) modifying or
retrofitting existing qualified clean hydrogen production
facilities; (5) using electricity from certain renewable or
zero-emissions sources to produce qualified clean hydrogen; and
(6) electing to treat part of a specified clean hydrogen
production facility as property eligible for the energy credit
in lieu of the clean hydrogen production credit.
---------------------------------------------------------------------------
\1211\T.D. 10023, 90 Fed. Reg. 2224, January 10, 2025.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes it is appropriate to terminate the
clean hydrogen production credit after the end of this year for
new projects. While the use of hydrogen as fuel (i.e., burning
hydrogen fuel) does not result in the emission of greenhouse
gases, the production process may have associated emissions.
Accounting for these upstream emissions is complex and
administratively difficult. Therefore, the overall cost
effectiveness of the clean hydrogen production credit on
reducing greenhouse gas emissions is not entirely clear.
Further, the regulations promulgated to account for emissions
associated with the lifecycle of the hydrogen production
process have been viewed by some as overly complex, potentially
discouraging investment. The Committee also notes that projects
in development to make hydrogen from fossil fuels with a carbon
capture and storage process could alternatively utilize section
45Q.

EXPLANATION OF PROVISION

The provision terminates the clean hydrogen production
credit for facilities that begin construction after December
31, 2025. The provision similarly terminates the election to
treat clean hydrogen production facilities as energy property
for purposes of section 48.

EFFECTIVE DATE

The provision is effective for facilities that begin
construction after December 31, 2025.

Phase-out and Restrictions on Advanced Manufacturing Production Credit
(sec. 112014 of the bill and sec. 45X of the Code)

PRESENT LAW

In general

A credit is provided for eligible components that are
produced by the taxpayer and sold to an unrelated person during
the taxable year.\1212\ Eligible components include any solar
energy component (solar modules, photovoltaic cells,
photovoltaic wafers, solar grade polysilicon, torque tubes or
structural fasteners, and polymeric backsheets), any wind
energy component (blades, nacelles, towers, offshore wind
foundations, and related offshore wind vessels), certain
inverters (central, commercial, distributed wind,
microinverter, residential, and utility), any qualifying
battery component (electrode active materials, battery cells,
and battery modules), and any applicable critical
mineral.\1213\ The production and sale of eligible components
must be in the trade of business of the taxpayer.\1214\
---------------------------------------------------------------------------
\1212\Sec. 45X(a)(1).
\1213\Sec. 45X(c)(1)(A).
Any property produced by a facility that has received a credit
under section 48C after the date of enactment (August 16, 2022) is not
an eligible component. Sec. 45X(c)(1)(B).
Any property produced by a facility that is co-located with a
facility that has received a credit under section 48C may be an
eligible component if such facilities are separable. Treas. Reg. 1.45X-
1(g).
\1214\Sec. 45X(a)(2).
---------------------------------------------------------------------------
An eligible component that is integrated, incorporated, or
assembled into another eligible component which is then sold to
an unrelated person is treated having been sold to an unrelated
person for purposes of this credit.\1215\
---------------------------------------------------------------------------
\1215\Sec. 45X(d)(4).
---------------------------------------------------------------------------
A taxpayer can sell components to a related person and
still qualify for the credit if the related person sells such
components to an unrelated person or the taxpayer makes an
election and meets certain requirements the Secretary deems
necessary to prevent duplication, fraud, or any improper or
excessive amount of credit.\1216\ Likewise, a vertically
integrated manufacturer that produces eligible components and
integrates, incorporates, or assembles them as part of a
product that is sold to an unrelated person may qualify for the
credit.\1217\
---------------------------------------------------------------------------
\1216\Sec. 45X(a)(3) and Treas. Reg. 1.45X-2(d).
\1217\Treas. Reg. 1.45X-2(e).
---------------------------------------------------------------------------

Credit amounts

Table 1 shows the credit amount for certain eligible
components.

TABLE 1.--CREDIT AMOUNT FOR CERTAIN ELIGIBLE COMPONENTS
------------------------------------------------------------------------
Eligible Component Credit Amount
------------------------------------------------------------------------
Thin film photovoltaic cell or crystalline 4 cents times the capacity
photovoltaic cell. of the cell (per direct
current watt basis)
Photovoltaic wafer........................ $12 per square meter
Solar grade polysilicon................... $3 per kilogram
Polymeric backsheet....................... 40 cents per square meter
Solar module.............................. 7 cents times the capacity
of the module (per direct
current watt basis)
Torque tube............................... 87 cents per kilogram
Structural fastener....................... $2.28 per kilogram
Central inverter.......................... 25 cents times the capacity
of the inverter (per
alternating current watt
basis)
Utility inverter.......................... 1.5 cents times the capacity
of the inverter (per
alternating current watt
basis)
Commercial inverter....................... 2 cents times the capacity
of the inverter (per
alternating current watt
basis)
Residential inverter...................... 6.5 cents times the capacity
of the inverter (per
alternating current watt
basis)
Microinverter or distributed wind inverter 11 cents times the capacity
of the inverter (per
alternating current watt
basis)
------------------------------------------------------------------------

The\1218\ credit for a related offshore wind vessel is 10
percent of the sales price of the vessel.\1219\ Table 2
presents the rates for other wind energy components. For this
purpose, total rated capacity relates to the completed wind
turbine for which the component is designed.\1220\
---------------------------------------------------------------------------
\1218\Sec. 45X(b)(1).
\1219\Sec. 45X(b)(1)(F)(i).
\1220\Sec. 45X(b)(1)(F)(ii)(II).

TABLE 2.--CREDIT AMOUNT FOR CERTAIN WIND ENERGY COMPONENTS1221
----------------------------------------------------------------------------------------------------------------
Wind Energy Component Credit Amount
----------------------------------------------------------------------------------------------------------------
Blade................................................. 2 cents times the total rated capacity (per watt basis)
Nacelle............................................... 5 cents times the total rated capacity (per watt basis)
Tower................................................. 3 cents times the total rated capacity (per watt basis)
Offshore wind foundation using a fixed platform....... 2 cents times the total rated capacity (per watt basis)
Offshore wind foundation using a floating platform.... 4 cents times the total rated capacity (per watt basis)
----------------------------------------------------------------------------------------------------------------

The credit for electrode active minerals and applicable
critical minerals is 10 percent of the costs incurred by the
taxpayer with respect to production of the minerals.\1222\
---------------------------------------------------------------------------
\1221\Sec. 45X(b)(1)(F)(ii) and (b)(2)(A).
\1222\Sec. 45X(b)(1)(J) and (M).
---------------------------------------------------------------------------
The credit for a battery cell is $35 times the capacity of
the cell (kilowatt-hour basis). The credit for a battery module
is $10 ($45 if the battery module does not use battery cells)
times the capacity of the battery module (kilowatt-hour
basis).\1223\ For both battery cells and modules, the capacity
taken into account for the credit cannot exceed a ratio of such
capacity to maximum discharge of 100 to 1.\1224\
---------------------------------------------------------------------------
\1223\Sec. 45X(b)(1)(K) and (L).
\1224\Sec. 45X(b)(4).
---------------------------------------------------------------------------
Applicable critical minerals Generally, applicable critical
minerals are certain minerals converted to other forms or
purified to a certain minimum purity by mass.\1225\ These
minerals are listed in table 3.
---------------------------------------------------------------------------
\1225\Sec. 45X(c)(6).

TABLE 3.--CERTAIN MINERALS\1226\
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Aluminum............................................... Antimony Barite Beryllium Cerium
Cesium................................................. Chromium Cobalt Dysprosium Europium
Fluorspar.............................................. Gadolinium Germanium Graphite Indium
Lithium................................................ Manganese Neodymium Nickel Niobium
Tellurium.............................................. Tin Tungsten Vanadium Yttrium
Arsenic................................................ Bismuth Erbium Gallium Hafnium
Holmium................................................ Iridium Lanthanum Lutetium Magnesium
Palladium.............................................. Platinum Praseodymium Rhodium Rubidium
Ruthenium.............................................. Samarium Scandium Tantalum Terbium
Thulium................................................ Titanium Ytterbium Zinc Zirconium
----------------------------------------------------------------------------------------------------------------

Credit phaseout

The credit begins to phase out in 2030.\1227\ Specifically,
for eligible components sold during calendar years 2030, 2031,
and 2032, the otherwise allowable amount of credit is reduced
by 25 percent, 50 percent, and 75 percent, respectively. This
phasedown does not apply to applicable critical minerals.\1228\
The credit is fully phased out for eligible components except
for applicable critical minerals after 2032.\1229\
---------------------------------------------------------------------------
\1226\Ibid.
\1227\Sec. 45X(b)(3).
\1228\Sec. 45X(b)(3)(C).
\1229\Treas. Reg. sec. 1.45X-3(f).
---------------------------------------------------------------------------

Special rules

The credit only applies to sales where the eligible
components are produced within the United States or U.S.
territories.\1230\ This requirement does not to apply to
subcomponents or materials used to produce eligible
components.\1231\
---------------------------------------------------------------------------
\1230\Sec. 45X(d)(2).
\1231\Treas. Reg. sec. 1.45X-1(d)(2).
---------------------------------------------------------------------------
Rules for common control and estates and trusts similar to
those of section 52(b) and (d) apply.\1232\
---------------------------------------------------------------------------
\1232\Sec. 45X(d)(1) and (3).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the Code should not provide tax
benefits to certain types of energy projects over others. The
Committee believes that phasing out the credit earlier will
promote horizontal equity in the tax treatment of energy
projects. In particular, the Committee believes that wind
energy is a sufficiently mature industry and that the phase-out
for wind energy components should occur even earlier.
The Committee believes that prohibited foreign entities
should not directly or indirectly benefit from U.S. energy tax
incentives. Therefore, the Committee believes it is appropriate
to disallow the credit if the taxpayer is a specified foreign
entity or foreign-influenced entity, uses material assistance
from a prohibited foreign entity in the production of eligible
components, or makes certain payments in excess of specified
thresholds to prohibited foreign entities.
The Committee notes that unlike other business credits, the
energy tax credits are given preferential treatment in the Code
through the ability to transfer credits to unrelated taxpayers.
The Committee believes that tax credits generally should be
limited to the taxpayer that engaged in the activity giving
rise to the credit. Therefore, the Committee believes it is
appropriate to repeal the ability to transfer tax credits to
unrelated taxpayers. As some taxpayers may have factored the
use of transferability into their near-term investment
decisions, the Committee believes it is appropriate to
terminate transferability after December 31, 2027.

EXPLANATION OF PROVISION

The provision adds several restrictions to and accelerates
the termination of the advanced manufacturing production
credit.
No credit is allowed for taxpayers that are specified
foreign entities (as defined in section 7701(a)(51)(B)) for
taxable years beginning after the date of enactment. No credit
is allowed for taxpayers that are foreign-influenced entities
(as defined in section 7701(a)(51)(D)) for taxable years
beginning two years after the date of enactment.
For taxable years beginning two years after the date of
enactment, an eligible component for purposes of the credit
does not include any property that includes material assistance
from a prohibited foreign entity (as defined in section
7701(a)(52)) or is produced subject to a licensing agreement,
valued in excess of $1,000,000, with a prohibited foreign
entity (as defined in section 7701(a)(51)).
No credit is allowed for any taxable year beginning after
the date that is two years after the date of enactment of the
Act if the taxpayer makes a payment of dividends, interest,
compensation for services, rentals or royalties, guarantees or
any other fixed, determinable, annual, or periodic amount (1)
to a prohibited foreign entity in an amount equal to or greater
than 5 percent of such total payments made by the taxpayer,
related to the production of eligible components within such
eligible component category, during the taxable year or (2) to
more than one prohibited foreign entity in an amount that, in
aggregate, is equal to or greater than 15 percent of such total
payments made by the taxpayer, related to the production of
eligible components within such eligible component category,
during the taxable year. For this purpose, the eligible
component categories are solar energy components, wind energy
components, certain inverters, qualifying battery components,
and applicable critical minerals.\1233\
---------------------------------------------------------------------------
\1233\Eligible components are categorized according to section
45X(c)(1)(A).
---------------------------------------------------------------------------
The provision modifies the phaseout of the credit. Wind
energy components sold after December 31, 2027, do not qualify
for the credit. All other eligible components, including
applicable critical minerals, sold after December 31, 2031, do
not qualify for the credit.
The provision terminates transferability of the credit
attributable to components sold after December 31, 2027.

EFFECTIVE DATE

In general, the provision is effective for taxable years
beginning after the date of enactment. The repeal of
transferability is effective for components sold after December
31, 2027.

Phase-out of Credit for Certain Energy Property (sec. 112015 of the
bill and secs. 48 and 6418 of the Code)

PRESENT LAW

In general

An investment credit is available for qualified energy
property originally placed in service by the taxpayer.\1234\
The base credit rate is 6 percent. This rate is increased to 30
percent if certain wage and apprenticeship requirements are
met. The credit is generally available for property placed in
service before January 1, 2025, except for geothermal heat pump
property, which must be placed in service before January 1,
2035.
---------------------------------------------------------------------------
\1234\Sec. 48.
---------------------------------------------------------------------------

Qualified property

The following types of property qualify for the energy
credit.
Solar energy property
Fuel cell property
Geothermal power property
Fiber optic solar and electrochromic glass
property
Small wind property
Waste energy recovery property
Energy storage technology property
Biogas property
Microgrid controller property
Combined heat and power system property, and
Geothermal heat pump property
A taxpayer may also make an irrevocable election to have
certain property which is part of a qualified renewable
electricity production facility treated as energy property
eligible for an investment credit under section 48. For
purposes of the investment credit, qualified facilities are
facilities otherwise eligible for the renewable electricity
production credit with respect to which no credit under section
45 has been allowed. A taxpayer electing to treat a facility as
energy property may not claim the renewable electricity
production credit.

Wage and apprenticeship

A taxpayer can meet the prevailing wage requirements if it
ensures that prevailing wages are paid to any laborers and
mechanics employed by the taxpayer or any contractor or
subcontractor in the construction of an energy project, and for
the alteration or repair of such project during the 5-year
period beginning on the date the energy project is originally
placed in service.\1235\ Prevailing wages are wages paid at
rates not less than the prevailing wage rates for construction,
alteration, or repair of a similar character in the locality as
determined by the Secretary of Labor, in accordance with
subchapter IV of chapter 31, of title 40, United States Code.
Rules for correction and penalties related to failure to
satisfy wage requirements similar to those in section
45(b)(7)(B) apply.\1236\
---------------------------------------------------------------------------
\1235\Sec. 48(a)(10)(A).
\1236\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------
The apprenticeship requirements in section 45(b)(8) require
that, generally, not less than a certain percentage of total
labor hours of the construction, alteration, or repair work
(including work performed by any contractor or subcontractor)
on a project must be performed by qualified apprentices.\1237\
---------------------------------------------------------------------------
\1237\Ibid.
---------------------------------------------------------------------------

Domestic content bonus

Where certain domestic content requirements are satisfied,
the energy credit rate is increased by two percentage points
(ten percentage points where the wage and apprenticeship
requirements are met).\1238\ The domestic content requirements
are similar to those provided for in section 45(b)(9).\1239\
---------------------------------------------------------------------------
\1238\Sec. 48(a)(12).
\1239\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

Reduction of elective payment if domestic content rules are not
satisfied

Certain taxpayers may elect to have the credit paid
directly to the extent there is insufficient income tax
liability to absorb the credit.\1240\ The amount of this direct
payment is reduced by 10 percent for energy property that
begins construction in 2024 if the domestic content
requirements described above for the domestic content bonus are
not satisfied.\1241\ This rule is similar to those provided in
section 45(b)(10).\1242\
---------------------------------------------------------------------------
\1240\Sec. 6417.
\1241\Sec. 48(a)(13).
\1242\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

Credit reduced for tax-exempt bonds

The energy credit is reduced when the qualified property is
financed using tax-exempt bonds.\1243\ The rules governing this
reduction are similar to those provided in section
45(b)(3).\1244\
---------------------------------------------------------------------------
\1243\Sec. 48(a)(4).
\1244\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

Energy communities bonus

If energy property is placed in service in an ``energy
community,'' the energy credit rate increases by two percentage
points (10 percentage points where the wage and apprenticeship
requirements are met).\1245\ The definition of energy community
is the same as that set forth in section 45(b)(11).\1246\
---------------------------------------------------------------------------
\1245\Sec. 48(a)(14).
\1246\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

Phase-out of investment credit for geothermal heat pump property

The investment credit for geothermal heat pump property
phases out beginning in 2033.\1247\ The base credit for
geothermal heat pump property that begins construction before
January 1, 2033, and is placed in service after December 31,
2021, is six percent. The base credit for geothermal heat pump
property that begins construction after December 31, 2032, and
before January 1, 2034, is 5.2 percent. The base credit for
geothermal heat pump property that begins construction after
December 31, 2033, and before January 1, 2035, is 4.4 percent.
No investment credit is available for geothermal heat pump
property that begins construction on or after January 1, 2035.
---------------------------------------------------------------------------
\1247\Sec. 48(a)(7).
---------------------------------------------------------------------------

Reduction of elective payment if domestic content rules are not
satisfied

Under section 6417, applicable entities may elect to have
the credit paid directly to the extent there is insufficient
tax liability to absorb the credit.\1248\ The amount of this
direct payment is reduced by 10% for energy property with a
maximum net output of 1 megawatt or more (as measured in
alternating current) that begins construction in calendar year
2024 if the domestic content requirements described above for
the bonus credit are not satisfied under rules similar to the
rules in section 45(b)(10).\1249\
---------------------------------------------------------------------------
\1248\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
\1249\Sec. 48(a)(13). See the present law description for the
provision ``Phase-out and Restrictions on Clean Electricity Production
Credit'' above for more detail.
---------------------------------------------------------------------------

Transferability

Under section 6418, an eligible taxpayer may elect to
transfer all or a portion of a clean electricity investment
credit determined with respect to such taxpayer for any taxable
year to an unrelated taxpayer.\1250\
---------------------------------------------------------------------------
\1250\See the present law description for the provision ``Phase-out
and Restrictions on Clean Electricity Production Credit'' above for
more detail.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the Internal Revenue Code
should not provide tax benefits to certain types of energy
projects over others. The Committee believes that phasing out
the credit earlier will promote horizontal equity in the tax
treatment of energy projects.
The Committee believes that prohibited foreign entities
should not directly or indirectly benefit from U.S. energy tax
incentives. Therefore, the Committee believes it is appropriate
to disallow the credit if the taxpayer is a specified foreign
entity or foreign-influenced entity.
The Committee notes that unlike other business credits, the
energy tax credits are given preferential treatment in the Code
through the ability to transfer credits to unrelated taxpayers.
The Committee believes that tax credits generally should be
limited to the taxpayer that engaged in the activity giving
rise to the credit. Therefore, the Committee believes it is
appropriate to repeal the ability to transfer tax credits to
unrelated taxpayers. As some taxpayers may have factored the
use of transferability into their near-term investment
decisions, the Committee believes it is appropriate to
terminate transferability for property that begins construction
more than two years after the date of enactment.

EXPLANATION OF PROVISION

The provision modifies the phase-out of the investment
credit for geothermal heat pump property. The base credit for
geothermal heat pump property that begins construction before
January 1, 2030, and is placed in service after December 31,
2021, is six percent. The base credit for geothermal heat pump
property that begins construction after December 31, 2029, and
before January 1, 2031, is 5.2 percent. The base credit for
geothermal heat pump property that begins construction after
December 31, 2030, and before January 1, 2032, is 4.4 percent.
No investment credit is available for geothermal heat pump
property that begins construction on or after January 1, 2032.
The provision disallows any credit for any taxable year
beginning after the date of enactment if the taxpayer is a
specified foreign entity (as defined in section
7701(a)(51)(B)).
The provision disallows any credit for any taxable year
beginning after the date that is two years after the date of
enactment if the taxpayer is a foreign-influenced entity (as
defined in section 7701(a)(51)(D)).
The provision terminates transferability of the credit for
property that begins construction after the date that is two
years after the date of enactment.

EFFECTIVE DATE

In general, the provision is effective for taxable years
beginning after the date of enactment. The repeal of
transferability is effective for property that begins
construction after the date that is two years after the date of
enactment.

Income From Hydrogen Storage, Carbon Capture Added to Qualifying Income
of Certain Publicly Traded Partnerships Treated as Corporations (sec.
112016 of the bill and sec. 7704 of the Code)

PRESENT LAW

Partnerships in general

A partnership generally is not treated as a taxable entity
(except for certain publicly traded partnerships), but rather,
is treated as a pass-through entity. Income earned by a
partnership, whether distributed or not, is taxed to the
partners.\1251\ The character of partnership items passes
through to the partners, as if the items were realized directly
by the partners.\1252\ For example, a partner's share of the
partnership's dividend income is generally treated as dividend
income in the hands of the partner.
---------------------------------------------------------------------------
\1251\Sec. 701.
\1252\Sec. 702.
---------------------------------------------------------------------------

Publicly traded partnerships

Under present law, a publicly traded partnership generally
is treated as a corporation for Federal tax purposes.\1253\ For
this purpose, a publicly traded partnership means any
partnership if interests in the partnership are traded on an
established securities market, or interests in the partnership
are readily tradable on a secondary market (or the substantial
equivalent thereof).
---------------------------------------------------------------------------
\1253\Sec. 7704(a).
---------------------------------------------------------------------------
An exception from corporate treatment is provided for
certain publicly traded partnerships, 90 percent or more of
whose gross income is qualifying income.\1254\ However, this
exception does not apply to any partnership that would be
described in section 851(a) if it were a domestic corporation,
which includes a corporation registered under the Investment
Company Act of 1940 as a management company or unit investment
trust.\1255\
---------------------------------------------------------------------------
\1254\Sec. 7704(c)(2).
\1255\Sec. 7704(c)(3).
---------------------------------------------------------------------------
Qualifying income includes interest, dividends, and gains
from the disposition of a capital asset (or of property
described in section 1231(b)) that is held to produce
qualifying income. Qualifying income also includes rents from
real property, gains from the sale or other disposition of real
property, and income and gains from the exploration,
development, mining or production, processing, refining,
transportation (including pipelines transporting gas, oil, or
products thereof), or the marketing of any mineral or natural
resource (including fertilizer, geothermal energy, and timber),
industrial source carbon dioxide, or the transportation or
storage of any alcohol fuel mixture, biodiesel fuel mixture or
alternative fuel described in subsection (b), (c), (d), or (e)
of section 6426, or any alcohol fuel defined in section
6426(b)(4)(A) or any biodiesel fuel as defined in section
40A(d)(1). It also includes income and gains from commodities
(not described in section 1221(a)(1)) or futures, options, or
forward contracts with respect to such commodities (including
foreign currency transactions of a commodity pool) in the case
of partnership, a principal activity of which is the buying and
selling of such commodities, futures, options or forward
contracts.\1256\
---------------------------------------------------------------------------
\1256\Sec. 7704(d).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee is aware of businesses that have made
significant investment in technologies and facilities related
to the transportation and storage of hydrogen and sustainable
aviation fuel, as well as carbon capture technologies. The
Committee believes that allowing such businesses the
opportunity to operate as publicly traded partnerships will
encourage additional investment from the capital markets,
thereby providing for further innovation and development of
these technologies and workforce job protection within such
industries.

EXPLANATION OF PROVISION

The provision expands the definition of qualifying income
of a publicly traded partnership to include income and gains
with respect to the transportation or storage of sustainable
aviation fuel as described in section 6426(k) or section
40B(d)(1), liquified hydrogen, or compressed hydrogen.
The provision also expands qualifying income of a publicly
traded partnership to include income and gains with respect to
the generation, availability for such generation, or storage of
electric power, as well as the capture of carbon dioxide by a
qualified facility.\1257\ A qualified facility means any
industrial facility or direct air capture facility in which not
less than 50 percent of the total carbon oxide production is
qualified carbon oxide.\1258\
---------------------------------------------------------------------------
\1257\As defined in Sec. 45Q(d), determined without regard to any
date by which construction of the facility is required to begin.
\1258\Sec. 45Q(c).
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2025.

Limitation on Amortization of Certain Sports Franchises (sec. 112017 of
the bill and sec. 197 of the Code)

PRESENT LAW

Under section 197, the adjusted basis of an ``amortizable
section 197 intangible'' held in connection with a trade or
business is amortizable on a straight-line basis over 15
years.\1259\ Section 197 intangibles include goodwill; going
concern value; workforce in place including its composition and
terms and conditions (contractual or otherwise) of its
employment; business books and records, operating systems, or
other information base; any patent, copyright, formula,
process, design, pattern, knowhow, format, or similar item;
customer based intangibles; supplier based intangibles; and any
other similar item.\1260\ The definition of a section 197
intangible also includes any license, permit, or other rights
granted by governmental units (even if the right is granted for
an indefinite period or is reasonably expected to be renewed
indefinitely); any covenant not to compete; and any franchise,
trademark, or trade name.\1261\
---------------------------------------------------------------------------
\1259\Sec. 197(a) and 197(c).
\1260\Sec. 197(d).
\1261\Ibid.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the owners of sports teams
unfairly benefit from the amortization of intangibles acquired
in connection with a sports team. The current amortization
deductions available may allow sports team owners to offset
losses attributable to a sports team against other income.

EXPLANATION OF PROVISION

The provision excludes 50 percent of the adjusted basis of
an amortizable section 197 asset from amortization in the case
of a franchise engaged in professional football, basketball,
baseball, hockey, soccer, or other professional sport, or any
item acquired in connection with such a franchise.

EFFECTIVE DATE

The provision applies to section 197 intangibles acquired
after the date of enactment.

Limitation on Individual Deductions for Certain State and Local Taxes,
etc. (sec. 112018 of the bill and secs. 56, 164, 275, 702, 703, 704,
6031, and 6037 and new sec. 6659 of the Code)

PRESENT LAW

Limitation on individual deductions for certain State and local and
foreign tax payments for taxable years 2018 through 2025

Public Law 115-97 provided that in the case of an
individual\1262\ and a taxable year beginning after December
31, 2017, and before January 1, 2026, as a general matter,
State and local\1263\ income, war profits, and excess profits
taxes are not allowable as a deduction, and State and local and
foreign property taxes and State and local sales taxes are
allowed as a deduction only when paid or accrued in carrying on
a trade or business or an activity described in section 212
(relating to expenses for the production of income).\1264\
However, an individual may claim an itemized deduction of up to
$10,000 ($5,000 for a married taxpayer filing a separate
return) for the aggregate of (i) State and local property taxes
not paid or accrued in carrying on a trade or business or an
activity described in section 212, and (ii) State and local
income, war profits, and excess profits taxes (or sales taxes
in lieu of income, etc. taxes) paid or accrued in the taxable
year.\1265\ Foreign real property taxes may not be deducted
under this exception.
---------------------------------------------------------------------------
\1262\See sec. 641(b) regarding the computation of taxable income
of an estate or trust in the same manner as an individual.
\1263\State and local taxes include taxes imposed by a State, a
U.S. possession, or a political subdivision of any of the foregoing, or
by the District of Columbia. Sec. 164(b)(2).
\1264\Sec. 164(b)(6).
\1265\Sec. 164(b)(6)(B).
---------------------------------------------------------------------------
For taxable years beginning after January 1, 2026, an
individual is permitted a deduction for certain taxes paid or
accrued, whether or not incurred in a trade or business. These
taxes are: (i) State and local and foreign real property
taxes,\1266\ (ii) State and local personal property
taxes,\1267\ (iii) State and local and foreign income, war
profits, and excess profits taxes,\1268\ and (iv) other State
and local and foreign taxes not described in the preceding
clauses which are paid or accrued in carrying on a trade or
business or an activity described in section 212.\1269\ At the
election of the taxpayer, an itemized deduction may be taken
for State and local general sales taxes in lieu of the itemized
deduction for State and local income taxes.\1270\ Property
taxes are allowed as a deduction in computing adjusted gross
income if incurred in connection with property used in a trade
or business; otherwise, they are an itemized deduction.\1271\
In the case of State and local income taxes, the deduction is
an itemized deduction notwithstanding that the tax may be
imposed on profits from a trade or business.\1272\ Individuals
also are permitted a deduction for Federal and State
generation-skipping transfer taxes imposed on certain income
distributions that are included in the gross income of the
distributee.\1273\
---------------------------------------------------------------------------
\1266\Sec. 164(a)(1).
\1267\Sec. 164(a)(2).
\1268\Sec. 164(a)(3). A foreign tax credit, in lieu of a deduction,
is allowable for foreign income, war profits, and excess profits taxes
if the taxpayer so elects. Sec. 901.
\1269\Sec. 164(a).
\1270\Sec. 164(b)(5).
\1271\Sec. 62(a)(1).
\1272\See Committee Report to accompany H.R. 4646, Individual
Income Tax Bill of 1944, H.R. Rep. No. 78-1365, April 24, 1944, p. 23.
\1273\Sec. 164(a)(4).
---------------------------------------------------------------------------
In determining a taxpayer's alternative minimum taxable
income, no itemized deduction for property, income, or sales
tax is allowed.\1274\
---------------------------------------------------------------------------
\1274\Sec. 56(b)(1)(A).
---------------------------------------------------------------------------
State and taxpayer responses to Public Law 115-97
Credits for charitable contributions
In response to the temporary limitation on individual
deductions for tax payments enacted by Public Law 115-97, some
taxpayers sought to rely on State or local tax credit programs
under which States or local jurisdictions provide tax credits
in return for contributions by taxpayers to or for the use of
certain entities described in section 170(c). On June 13, 2019,
the IRS issued final regulations,\1275\ effective for transfers
made after August 27, 2018, generally providing that if a
taxpayer makes a payment or transfers property to or for the
use of an entity described in section 170(c), the amount of the
taxpayer's charitable contribution deduction under section
170(a) is reduced by the amount of any State or local tax
credit the taxpayer receives or expects to receive in
consideration for the payment or transfer.\1276\
---------------------------------------------------------------------------
\1275\T.D. 9864, 84 Fed. Reg. 27513, June 13, 2019.
\1276\Treas. Reg. sec. 1.170A-1(h)(3)(i). A corresponding
regulation was issued for estates and trusts. Treas. Reg. sec.
1.642(c)-3(g).
---------------------------------------------------------------------------
Employer wage tax and employee credit
In 2018, the State of New York implemented an Employer
Compensation Expense Program, under which employers may elect
to pay a quarterly tax to New York of up to 5% of certain wages
and compensation paid to employees employed in New York. A New
York employee of an electing employer may then claim a
nonrefundable credit against such employee's New York State
personal income tax, equal to the tax paid by the employer with
respect to such employee's wages and compensation. In effect,
such employee may partially avoid the temporary Federal
limitation on individual tax deductions by converting a
personal income tax liability (potentially nondeductible for
the employee) into an employer-level tax liability (deductible
for the employer).
Passthrough entity taxes
For Federal tax purposes, a partner of a partnership must
take into account separately such partner's distributive share
of the partnership's: (1) short-term capital gain or loss, (2)
long-term capital gain or loss, (3) gain or loss from the sale
or exchange of section 1231 business property, (4) charitable
contributions, (5) qualified dividend income and dividends
eligible for certain deductions,\1277\ (6) income taxes paid to
foreign countries and U.S. possessions, (7) other items of
income, gain, loss, deduction or credit to the extent provided
by regulations prescribed by the Secretary, and (8) partnership
taxable income or loss exclusive of the items listed above
requiring separate computation.\1278\ The Secretary has
provided by regulation that a partner of a partnership must
take into account separately such partner's distributive share
of any partnership item which, if separately taken into account
by any partner, would result in an income tax liability for
that partner, or for any other person, different from that
which would result if that partner did not take the item into
account separately.\1279\ For a partner's Federal income tax
purposes, the character of the partner's distributive share of
any separately stated item of income, gain, loss, deduction, or
credit (i.e., (1)-(7) above) is determined as if such item were
realized directly from the source from which realized by the
partnership, or incurred in the same manner as incurred by the
partnership.\1280\
---------------------------------------------------------------------------
\1277\See secs. 243, 245, and 245A.
\1278\Sec. 702(a).
\1279\Treas. Reg. sec. 1.702-1(a)(8)(ii).
\1280\Sec. 702(b).
---------------------------------------------------------------------------
A partnership computes its taxable income in the same
manner as an individual, except that the items required to be
taken into account separately by the partners must be
separately stated, and the following deductions are disallowed:
(1) the deduction for personal exemptions, (2) the deduction
for income taxes paid to foreign countries and U.S.
possessions, (3) the charitable contribution deduction, (4) the
net operating loss deduction, (5) certain additional itemized
deductions for individuals, and (5) the deduction for depletion
with respect to oil and gas wells.\1281\
---------------------------------------------------------------------------
\1281\Sec. 703(a).
---------------------------------------------------------------------------
An S corporation shareholder must take into account
separately such shareholder's pro rata share of the
corporation's items of income, loss, deduction, or credit, the
separate treatment of which could affect the liability for tax
of any shareholder.\1282\ The character of any such separately
stated item included in the shareholder's pro rata share is
determined as if such item were realized directly from the
source from which realized by the corporation, or incurred in
the same manner as incurred by the corporation.\1283\ An S
corporation computes its taxable income in the same manner as
an individual, except that (among other things) the items
required to be taken into account separately by the
shareholders must be separately stated, and any deductions
which must be taken into account separately by the shareholders
are disallowed.\1284\
---------------------------------------------------------------------------
\1282\Sec. 1366(a) and (b).
\1283\Sec. 1366(b).
\1284\Sec. 1363(b).
---------------------------------------------------------------------------
In the Committee Report to accompany H.R. 1, Tax Cuts and
Jobs Act, the explanation of the temporary limitation on
individual tax deductions contained the following
clarification: ``[T]axes imposed at the entity level, such as a
business tax imposed on pass-through entities, that are
reflected in a partner's or S corporation shareholder's
distributive or pro-rata share of income or loss on a Schedule
K-1 (or similar form), will continue to reduce such partner's
or shareholder's distributive or pro-rata share of income as
under present law.''\1285\
---------------------------------------------------------------------------
\1285\Conference Report to accompany H.R. 1, Tax Cuts and Jobs Act,
H.R. Rep. No. 115-466, December 15, 2017, p. 260 n. 172.
---------------------------------------------------------------------------
In a Notice published on November 30, 2020, the IRS
announced its intention to issue regulations providing that
State and local income tax payments made by partnerships and S
corporations are deductible by such partnerships and S
corporations in computing non-separately stated income or
loss.\1286\ Although the IRS has not issued any such
regulations to date, many States have enacted passthrough
entity tax regimes, under which certain partnerships and S
corporations may elect to pay an entity-level income tax to a
State, in return for which some or all of the entity's owners
may claim a credit against their personal income tax liability
owed to such State, of equal or approximately equal value to
their distributive or pro rata share of the entity's tax
payment. In effect, Notice 2020-75 provided authority for
certain passthrough entity owners to partially avoid the
temporary Federal limitation on individual tax deductions by
converting a personal income tax liability (potentially
nondeductible for such owners) into an entity-level tax
liability (putatively deductible for the entity in computing
non-separately stated income).
---------------------------------------------------------------------------
\1286\Notice 2020-75, 2020-49 I.R.B. 1453, November 30, 2020.
---------------------------------------------------------------------------

Limitation on allowance of partnership losses

A partner's distributive share of partnership loss
(including capital loss) is allowed only to the extent of the
adjusted basis (before reduction by current year's losses) of
the partner's interest in the partnership at the end of the
partnership taxable year in which the loss occurred.\1287\ Any
disallowed loss is allowable as a deduction at the end of the
first succeeding partnership taxable year, and subsequent
taxable years, to the extent that the partner's adjusted basis
in its partnership interest at the end of any such year exceeds
zero (before reduction by the loss for the year).\1288\ A
partner's basis in its partnership interest is increased each
year by such partner's distributive share of partnership income
(including tax exempt income), and the partner's basis is
decreased each year (but not below zero) by distributions by
the partnership to such partner and by such partner's
distributive share of partnership losses and of expenditures of
the partnership not deductible in computing partnership taxable
income and not properly chargeable to capital account.\1289\
---------------------------------------------------------------------------
\1287\Sec. 704(d)(1).
\1288\Sec. 704(d)(2) and Treas. Reg. 1.704-1(d)(1).
\1289\Sec. 705(a).
---------------------------------------------------------------------------
In determining a partner's distributive share of
partnership loss for purposes of the basis limitation
on losses, there is taken into account not only the
partner's distributive shares of separately stated and
non-separately stated partnership losses but also the
partner's distributive share of the partnership's
charitable contributions and income taxes paid to
foreign countries and to U.S. possessions.\1290\ If the
aggregate of a partner's distributive shares of the
items of partnership loss for these purposes (including
capital loss, section 1231 business property loss, non-
separately stated loss, charitable contributions, and
foreign and U.S. possession income taxes) exceeds the
partner's adjusted basis (before reduction by current
year's losses), the limitation on loss is allocated to
the partner's distributive share of each such loss
item. This allocation is determined by taking the
proportion that the partner's distributive share of
each loss item bears to the aggregate of the partner's
distributive shares of the loss items (including losses
disallowed and carried forward from prior years).\1291\
---------------------------------------------------------------------------
\1290\Sec. 704(d)(3)(A). In the case of a charitable contribution
by the partnership of property whose fair market value exceeds its
adjusted basis, a special rule provides that the basis limitation on
partner losses does not apply to the extent of the partner's
distributive share of the excess. Sec. 704(d)(3)(B).
\1291\Treas. Reg. sec. 1.704-1(d)(2).
---------------------------------------------------------------------------

Capitalization of State and local and foreign taxes

A taxpayer generally may not deduct and, instead, must
capitalize amounts paid to facilitate the acquisition of real
or personal property, including sales and transfer taxes.\1292\
---------------------------------------------------------------------------
\1292\Sec. 263(a); Treas. Reg. sec. 1.263(a)-2(f).
---------------------------------------------------------------------------
In the case of real or tangible property produced by a
taxpayer, as well as inventory acquired by the taxpayer for
resale, the taxpayer generally must capitalize, or include in
inventory costs, both the direct costs of such property and
such property's proper share of indirect costs (including
taxes) allocable to such property.\1293\
---------------------------------------------------------------------------
\1293\Sec. 263A(a) and (b).
---------------------------------------------------------------------------
A taxpayer may elect, as provided by regulations, to
capitalize certain taxes and carrying charges with respect to
property that are otherwise deductible,\1294\ including annual
taxes on unimproved and unproductive real property, certain
taxes on real property paid or incurred for such property's
development or improvement before the development or
improvement work has been completed, and taxes on personal
property paid or incurred before such property's installation
or being first put into use by the taxpayer.\1295\
---------------------------------------------------------------------------
\1294\Sec. 266.
\1295\Treas. Reg. sec. 1.266-1(b)(1).
---------------------------------------------------------------------------
Except in the case of real property taxes, personal
property taxes, and income taxes, any State or local or foreign
tax paid or accrued in connection with an acquisition or
disposition of property is treated as part of the cost of the
acquired property or, in the case of a disposition, as a
reduction in the amount realized on the disposition.\1296\
---------------------------------------------------------------------------
\1296\Sec. 164(a).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the deduction for State and
local taxes provides an unjustified subsidy to high-tax
jurisdictions and their residents, unduly narrows the Federal
tax base, and increases tax complexity for families and
individuals. However, the Committee recognizes that losing this
deduction entirely may be a hardship for many individuals, and
accordingly has retained a substantial itemized deduction for
an individual's State and local income and property taxes.
The Committee believes that the State and local
``workarounds'' developed in response to Public Law 115-97
undermine the integrity of the cap on the deductibility of
State and local taxes. Furthermore, these workarounds are
generally unfair, inefficient, and regressive. Accordingly, the
Committee believes that rules are needed to substantially limit
current workarounds and prevent the proliferation of additional
workarounds. The Committee also believes that certain
exceptions to these rules are appropriate for businesses
predominantly operating in non-service sectors. These
exceptions are warranted due to the substantial competition
that these businesses often face from C corporations, which are
generally permitted to deduct State and local taxes without
limitation.

EXPLANATION OF PROVISION

Limitation on individual deductions for certain tax payments

The provision removes the temporary limitation, enacted by
Public Law 115-97, on individual State and local and foreign
tax deductions taken under section 164. In its place, the
provision modifies section 275, which denies deductions for
certain taxes, to permanently deny individuals\1297\ a
deduction for certain State and local\1298\ and foreign taxes.
---------------------------------------------------------------------------
\1297\See sec. 641(b) regarding the computation of taxable income
of an estate or trust in the same manner as an individual. See secs.
703(a) and 1363(b) regarding the computation of taxable income of a
partnership or S corporation, respectively, in the same manner as an
individual. However, see below for a description of the provision's
complete denial of a deduction for ``specified taxes'' in the case of a
partnership or S corporation.
\1298\State and local taxes include taxes imposed by a State, a
U.S. possession, or a political subdivision of any of the foregoing, or
by the District of Columbia. Sec. 164(b)(2).
---------------------------------------------------------------------------
The provision denies a deduction for ``disallowed foreign
real property taxes,'' defined as foreign real property taxes
other than those paid or accrued in carrying on a trade or
business or an activity described in section 212 (relating to
expenses for the production of income).
The provision limits the deduction for the taxpayer's
aggregate of ``specified taxes,'' defined to comprise: (i)
State and local and foreign property taxes, other than
disallowed foreign real property taxes and State and local
property taxes paid or accrued in a trade or business or an
activity described in section 212, (ii) State and local income,
war profits, excess profits, and general sales taxes, other
than income, etc. taxes paid or accrued by a partnership or S
corporation in carrying on a qualified trade or business
(within the meaning of section 199A(d)(1))\1299\ if at least 75
percent of the gross receipts (within the meaning of section
448(c)) of all trades or businesses under common control with
such partnership or S corporation are derived from qualified
trades or business,\1300\ (iii) real estate taxes paid by a
cooperative housing corporation, and (iv) ``substitute
payments,'' as defined below.
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\1299\A qualified trade or business means any trade or business
other than a specified service trade or business or the trade or
business of performing services as an employee. A specified service
trade or business means any trade or business involving the performance
of services in the fields of health, law, accounting, actuarial
science, performing arts, consulting, athletics, financial services, or
brokerage services, or any trade or business where the principal asset
of such trade or business is the reputation or skill of one or more of
its employees or owners, or which involves the performance of services
that consist of investing and investment management, trading, or
dealing in securities, partnership interests, or commodities. Sec.
199A(d)(2).
\1300\For these purposes, common control is determined under the
rules of sec. 52(b).
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A substitute payment is generally defined as any amount
(other than a tax already defined as a specified tax) paid,
incurred, or accrued to a State or local jurisdiction if, by
reason of the payment, one or more persons are entitled to
``specified tax benefits'' equal to or exceeding 25 percent of
the payment. Specified tax benefits are benefits determined
with respect to such payment and allowed against, or determined
by reference to, a tax already defined as a specified tax. In
determining whether a payment is a substitute payment, the
following two assumptions apply: First, the value of a tax
credit or refund is assumed to be the amount of such credit or
refund, and the value of a tax deduction or exclusion is
assumed to be 15 percent of the amount of such deduction or
exclusion. Second, in the case of a payment by a partnership or
S corporation, it is assumed that all the owners of such entity
are individuals resident in the jurisdiction of the entity or
entities providing the specified tax benefits (and otherwise
eligible for such benefits).\1301\
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\1301\The provision excludes a payment from the definition of
``substitute payment'' to the extent it is nondeductible (other than by
reason of the limitation on the charitable contribution deduction, the
specific deduction disallowance provisions for partnerships and S
corporations, the basis limitation on a partner's current-year share of
partnership loss, and the provision's new limitation on specified tax
deductions). For instance, if a partnership makes a State income tax
withholding payment in respect of distributions to its partners, the
payment is not a substitute payment (notwithstanding that the partners
receive State income tax credits in the amount of the withholding
payment) because it is a nondeductible distribution. The provision also
authorizes the Secretary to issue regulations excluding a payment from
the definition of ``substitute payment'' if the payment is an amount
withheld on behalf of another person and the full amount is included in
such person's Federal gross income. For instance, if a partnership pays
a State withholding tax on the wages owed to an employee, the payment
should not be a substitute payment (notwithstanding that it is
deductible by the partnership and that the employee receives a State
income tax credit in the amount of the payment) because the full
payment included in the employee's Federal gross income as wages.
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For example, if a taxpayer makes a charitable payment to a
State or local entity described in section 170(c) and receives
a State or local tax credit in the amount of at least 25
percent payment, or a deduction equal to at least 167 percent
of the payment, then the payment is a substitute payment and is
included in the taxpayer's aggregate of specified taxes.
Likewise, if a partnership not engaged in a qualified trade or
business pays a gross receipts tax or personal property tax
imposed on the partnership by a State, and by reason of such
payment the partnership's partners receive credits against
their State personal income tax liabilities, the partnership
tax payment is a substitute payment and is included in the
partnership's aggregate of specified taxes.
The individual deduction for the aggregate of specified
taxes is limited to $30,000 ($15,000 in the case of a married
individual filing a separate return). This limitation amount is
reduced by 20 percent of the excess of the taxpayer's modified
adjusted gross income over $400,000 ($200,000 in the case of a
married individual filing separately). However, the limitation
amount may not be reduced below $10,000 ($5,000 in the case of
a married individual filing separately). Modified adjusted
gross income is defined as adjusted gross income increased by
any exclusion for foreign earned income, foreign housing costs,
and income from sources within certain U.S. possessions.\1302\
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\1302\Secs. 911, 931, and 933.
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Partnerships and S corporations must separately state, and not deduct,
specified taxes

The provision modifies the list of items for which a
partner of a partnership must separately take into account such
partner's distributive share.\1303\ The provision requires
separate accounting of a partner's distributive share of the
partnership's: (i) foreign income, war profits, and excess
profits taxes, (ii) income, war profits, and excess profits
taxes paid or accrued to U.S. possessions, (iii) specified
taxes (other than income, etc. taxes paid or accrued to U.S.
possessions), and (iv) disallowed foreign real property taxes.
The provision further denies the partnership a deduction for
any such taxes or payments in computing its taxable
income.\1304\ The provision thereby abrogates IRS Notice 2020-
75.
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\1303\Sec. 702(a).
\1304\These modifications to the provisions governing partnerships
and partners induce corresponding modifications (via cross-reference)
to the provisions governing S corporations and their shareholders. See
secs. 1366(a)(1) and 1363(b)(2).
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Allowable specified tax deductions taken into account for purposes of
the basis limitation on partnership losses

The provision modifies the basis limitation on a partner's
current-year deduction for such partner's distributive share of
partnership losses.\1305\ The provision provides that for
purposes of the basis limitation, a partner's distributive
share of partnership loss generally includes such partner's
distributive share of the partnership's specified taxes to the
extent that the partner otherwise would be able to deduct such
distributive share (taking into account the provision's new
limitation on specified tax deductions). If the partner elects
the tax credit for income taxes paid to foreign countries and
U.S. possessions,\1306\ then for purposes of the basis
limitation the partner must take into account such partner's
full distributive share of the partnership's income taxes paid
to U.S. possessions. Otherwise, for purposes of the basis
limitation the partner takes into account such partner's
distributive share of income taxes paid to U.S. possessions
only to the extent that, when added to such partner's
distributive share of the rest of the partnership's specified
taxes, such amount is otherwise deductible by the partner.
Accordingly, if a partner does not have adequate basis to
account for such partner's full distributive share of otherwise
deductible specified taxes (in addition to other partnership
items taken into account for purposes of the basis limitation),
some or all of such distributive share is denied as a deduction
in the current year and carried forward to future years.
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\1305\Sec. 704(d).
\1306\ Sec. 901.
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Addition to tax for State and local allocation mismatches

The provision imposes an addition to the Federal income tax
owed by an individual, estate, or trust in the case of a
``State and local tax allocation mismatch.'' Such a mismatch
occurs whenever (1) a partnership of which the taxpayer is a
direct or indirect partner pays or accrues a specified tax, (2)
the taxpayer is entitled to specified tax benefits with respect
to the partnership specified tax payment, and (3) such
specified tax benefits exceed the taxpayer's distributive share
of the partnership specified tax payment. For these purposes, a
specified tax benefit is any benefit determined with respect to
the partnership specified tax payment and allowed against, or
determined by reference to, a specified tax (other than a
substitute payment) owed by the taxpayer.
The addition to tax equals the product of (i) the highest
rate in effect under section 1 of the Code, and (ii) the
taxpayer's aggregate State and local tax allocation mismatches
for the taxable year. For purposes of computing the value of an
allocation mismatch, any specified tax benefit received by the
taxpayer is deemed to equal the increase in specified tax
liability (or reduction in credit or refund) that the taxpayer
would incur in the taxable year if such benefit were not taken
into account, plus, in the case of any carryforward of some or
all of the specified tax benefit, the amount of such
carryforward (in the case of a credit or refund) or the amount
of such carryforward multiplied by the highest rate imposed on
individuals under the relevant State or local tax (in the case
of a deduction or exclusion). In lieu of the foregoing
computation, the taxpayer may elect to determine the value of a
specified tax benefit under the following simplified approach:
The value of a credit or refund is the amount of such credit or
refund, and the value of a deduction or exclusion is 15 percent
of such deduction or exclusion.
The operation of the provision's new addition to tax may be
illustrated by the following example: Partnership P is a State
S partnership. One of P's partners is individual I (whose
specified taxes exceed his Federal deduction limitation for the
year), and the other is corporation C (a C corporation). P pays
an entity-level income tax imposed by S, by reason of which I
is entitled to a credit against his personal income tax
liability owed to S. For Federal tax purposes, P allocates the
entire entity-level income tax payment to C, which is not
subject to a Federal deduction limitation on specified taxes.
Unless P is compelled to modify the allocation for lack of
substantial economic effect,\1307\ the provision's new addition
to tax increases I's Federal income tax liability to
approximately the amount that I would have owed had P allocated
the entity-level income tax payment to I in proportion to I's
S-level tax credit (relative to C's S-level tax credit, if
any).
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\1307\See sec. 704(b)(2).
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Limitation on capitalization of specified taxes

The provision prohibits an individual\1308\ from charging
any specified tax (including a substitute payment) to capital
account under any provision of the Code, including without
limitation sections 263 (dealing with amounts paid out for
property or improvements), 263A (dealing with real or personal
property produced by the taxpayer or acquired for resale), 471
(dealing with inventories), 266 (providing an election to treat
certain otherwise deductible taxes as chargeable to capital
account), and 164(a) (dealing with certain State and local and
foreign taxes paid or accrued in connection with an acquisition
or disposition of property).
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\1308\See section 641(b) regarding the computation of taxable
income of an estate or trust in the same manner as an individual. See
secs. 703(a) and 1363(b) regarding the computation of taxable income of
a partnership or S corporation, respectively, in the same manner as an
individual.
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Accordingly, a taxpayer may not rely on capitalization to
take future-year deductions for specified taxes that are denied
in the current taxable year.

Reporting by partnerships and S corporations with respect to specified
service trade or business income

The provision requires partnerships and S corporations to
report, both on their own returns (Form 1065 and Form 1120-S,
respectively) and their reports to owners (Schedule K-1),
whether or not they derived any gross receipts (within the
meaning of section 448(c)) from specified service trades or
businesses (within the meaning of section 199A(d)(2)) in the
taxable year.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Excessive Employee Remuneration From Controlled Group Members and
Allocation of Deduction (sec. 112019 of the bill and sec. 162(m) of the
Code)

PRESENT LAW

In general

Under present law, an employer generally may deduct
reasonable compensation for personal services as an ordinary
and necessary business expense. Section 162(m) provides an
explicit limitation on the deductibility of compensation
expenses in the case of publicly traded corporate
employers.\1309\ The otherwise allowable deduction for
compensation with respect to a covered employee of a publicly
held corporation is limited to no more than $1 million per
year.\1310\ The deduction limitation applies when the deduction
attributable to the compensation would otherwise be taken.
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\1309\Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-
66, sec. 13211, August 10, 1993 (``OBRA 1993''). Pub. L. No. 115-97,
sec. 13601, December 22, 2017 (``Public Law No. 115-97''), modified
section 162(m) for taxable years beginning after December 31, 2017
(with a transition rule for remuneration provided pursuant to a binding
contract which was in effect on November 2, 2017, and which was not
modified in any material respect on or after such date). For a detailed
description of prior law and the changes made by Public Law No. 115-97,
see Joint Committee on Taxation, General Explanation of Public Law No.
115-97 (JCS-1-18), December 2018, pp. 257-263. This document can be
found on the Joint Committee on Taxation website at www.jct.gov.
\1310\Sec. 162(m)(1).
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Publicly held corporation

For purposes of the section 162(m) deduction disallowance,
a publicly held corporation means any corporation which is an
issuer of securities required to be registered under section 12
of the Securities Exchange Act of 1934\1311\ (``Exchange
Act''), or any issuer that is required to file reports under
section 15(d) of such Act.\1312\ All U.S. publicly traded
companies, including their foreign affiliates, and foreign
companies publicly traded through American depository receipts
(``ADRs'') are subject to the registration requirement of
section 12 of the Exchange Act. An issuer required to file
reports under section 15(d) of the Exchange Act may also
include certain additional corporations that are not publicly
traded, such as large private C corporations or S corporations.
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\1311\Pub. L. No. 73-291, June 6, 1934; 15 U.S.C. sec. 78a, et seq.
\1312\Sec. 162(m)(2). See also Treas. Reg. sec. 1.162-33(c)(1).
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Under present law, section 162(m) does not include an
entity aggregation rule.

Covered employee

Section 162(m)(3)(A), (B) and (D) defines a covered
employee as (1) the principal executive officer or principal
financial officer of the corporation (or an individual acting
in such capacity) at any time during the taxable year, or was
an individual acting in such a capacity, (2) any employee whose
total compensation is required to be reported to shareholders
under the Exchange Act by reason of being among the
corporation's three most highly compensated officers for the
taxable year (other than the principal executive officer or
principal financial officer), and (3) any individual who was a
covered employee with respect to the corporation for any
preceding taxable year beginning after December 31, 2016.\1313\
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\1313\See also, Treas. Reg. sec. 1.162-33(c)(2).
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In the case of taxable years beginning after December 31,
2026, the definition of a ``covered employee'' (in section
162(m)(3)(C)) also includes the next five highest-compensated
employees of the corporation (regardless of whether they are
officers), for a total of at least 10 covered employees for
each taxable year.\1314\ However, these additional covered
employees are only covered employees for the taxable year(s) in
which they are among the five highest compensated employees of
the corporation, other than the five officers whose
compensation is subject to the deduction limitation.
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\1314\Sec. 162(m)(3)(C) as added by section 9708 of the American
Rescue Plan Act of 2021 (``ARPA''), Pub. L. No. 117-2, March 11, 2021.
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REASONS FOR CHANGE

The Committee believes that adding an entity aggregation
rule would eliminate the ability of taxpayers to avoid the
application of the section 162(m) deduction disallowance rule
by, for example, paying a covered employee's compensation from
an affiliated partnership rather than directly from the
publicly held corporation.

EXPLANATION OF PROVISION

The provision adds an entity aggregation rule to section
162(m) for purposes of the deduction disallowance. The rule
provides that in the case of any publicly held corporation
which is a member of a controlled group, if any person which is
a member of such controlled group provides applicable employee
remuneration to an individual who is a specified covered
employee of such controlled group and the aggregate amount of
applicable employee remuneration provided by all such members
with respect to such specified covered employee exceeds
$1,000,000 then the deduction allowed to such members of the
controlled group for the applicable employee remuneration paid
to such specified covered employee is limited to
$1,000,000.\1315\ Controlled group means any group treated as a
single employer under the rules used to treat related entities
as a single employer for other employee benefit purposes.\1316\
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\1315\In other words, if the renumeration of an employee exceeds $1
million in a taxable year taking into account remuneration paid to that
employee by any member of the employer's controlled group, the amount
of the remuneration paid to such employee that exceeds $1 million
results in a disallowance of the deduction to the employer(s) in the
amount of the excess. For example, if the publicly held corporation
pays $750,000 in remuneration to Employee A and another member of the
controlled group pays $750,000 to Employee A, the total amount of
remuneration to that employee in the taxable year is $1,500,000,
however, the deduction to the publicly held corporation and the member
of the controlled group that paid the remuneration to Employee A is
limited between them to $1,000,000 and the excess of $500,000
[$1,500,000-$1,000,000] is subject to a deduction disallowance.
\1316\Under sec. 414(b), (c), (m), and (o).
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A specified covered employee means (1) a covered employee
described in paragraphs (A), (B) or (D) of section
162(m)(3)\1317\ with respect to the publicly held corporation
which is a member of such controlled group, and (2) any
employee described in section 162(m)(3)(C)\1318\ if such
subparagraph were applied by taking into account the employees
of all members of the controlled group.
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\1317\As described above.
\1318\As described above.
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In any case in which remuneration is paid to the specified
covered employee by more than one member of the controlled
group for a taxable year and the aggregate amount of such
remuneration exceeds $1 million (determined without regard to
this rule), the provision allocates the amount of the $1
million deduction among each member of the controlled group
that paid remuneration to such specified covered employee for
the taxable year. The term ``allocable limitation amount''
means with respect to any member of the controlled group with
respect to any specified covered employee of such controlled
group, the amount which bears the same ratio to $1,000,000 as
(1) the amount of applicable employee remuneration provided by
such member with respect to such specified covered employee
bears to (2) the aggregate amount of applicable employee
remuneration provided by all such members with respect to such
specified covered employee.\1319\
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\1319\In the example described in footnote 1314, the amount of the
$1,000,000 deduction would be allocated equally to the publicly held
corporation and the member of the controlled group that each paid
$750,000 in applicable employee remuneration to Employee A. Each would
be permitted to deduct $500,000 [$1,000,000 [$750,000 divided
by $1,500,000] = $500,000]. The excess amount of $500,000 [$1,500,000 -
$1,000,000] results in a $250,000 deduction disallowance to each of the
two members of the controlled group, since each paid $750,000 in
remuneration to the covered employee [$750,000 - $500,000, or
$250,000].
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EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2025.

Expanding Application of Tax on Excess Compensation Within Tax-Exempt
Organizations (sec. 112020 of the bill and sec. 4960 of the Code)

PRESENT LAW

In general

The Code imposes an excise tax on employers who pay over $1
million in remuneration or who pay an excess parachute payment
to certain highly-paid employees of tax-exempt
organizations.\1320\ Specifically, an employer is liable for an
excise tax equal to the corporate tax rate (21 percent)
multiplied by the sum of (1) any remuneration (other than an
excess parachute payment) in excess of $1 million paid to a
covered employee by an applicable tax-exempt organization for a
taxable year, and (2) any excess parachute payment paid by the
applicable tax-exempt organization to a covered employee.
Accordingly, the excise tax applies as a result of an excess
parachute payment even if the covered employee's remuneration
does not exceed $1 million.
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\1320\Sec. 4960.
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A covered employee for this purpose is an employee
(including any former employee) of an applicable tax-exempt
organization if the employee is one of the five highest
compensated employees of the organization for the taxable year
or was a covered employee of the organization (or a
predecessor) for any preceding taxable year beginning after
December 31, 2016.\1321\
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\1321\Sec. 4960(c)(2).
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An ``applicable tax-exempt organization'' is an
organization exempt from tax under section 501(a), an exempt
farmers' cooperative,\1322\ a Federal, State or local
governmental entity with excludable income,\1323\ or a
political organization.\1324\
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\1322\Sec. 521(b).
\1323\Sec. 115(1).
\1324\Sec. 527(e)(1).
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Rules regarding remuneration

For purposes of the timing of application of the excise
tax, remuneration is treated as paid when there is no
substantial risk of forfeiture of the rights to such
remuneration. The rights of a person to compensation are
subject to a substantial risk of forfeiture if such rights are
conditioned upon the future performance of substantial services
by any individual.\1325\ Accordingly, the tax imposed by this
provision may apply to the value of remuneration that is vested
even if it is not yet received. Therefore, the excise tax may
apply to remuneration at a time that is different than the time
remuneration is required to be included in gross income as
wages.\1326\
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\1325\Substantial risk of forfeiture is defined with reference to
section 457(f)(3)(B). Sec. 4960(a).
\1326\For example, even though remuneration may be vested in one
year but paid within the first two and one-half months of the following
year such that the income inclusion is required in the year paid, the
remuneration is treated as paid for this purpose in the year when
vested. Additionally, earnings on previously vested remuneration, even
if paid or payable in future years, are treated as paid for this
purpose as they accrue.
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Remuneration for this purpose means wages as defined for
income tax withholding purposes,\1327\ but does not include any
designated Roth contribution.\1328\ In addition, the definition
of remuneration for this purpose includes amounts required to
be included in gross income under section 457(f), which applies
to certain deferred compensation plans of a State or local
government or a tax-exempt entity.\1329\ Remuneration paid to a
licensed medical professional (including a veterinarian) that
is directly related to the performance of medical or veterinary
services by such professional is not taken into account,
whereas remuneration paid to such a professional in any other
capacity is taken into account.\1330\ Thus, for example, if a
surgeon performs direct medical services as part of his or her
medical practice, and also performs services that are not
direct medical services (such as teaching, research, or acting
as dean, officer, or board member of a hospital), that portion
of such a medical professional's remuneration attributable to
those services that are direct medical services is not treated
as remuneration.
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\1327\Sec. 3401(a).
\1328\Under section 402A(c), a designated Roth contribution is an
elective deferral (that is, a contribution to a tax-favored employer-
sponsored retirement plan made at the election of an employee) that the
employee designates as not being excludable from income.
\1329\Such amounts may not be treated as wages under section
3401(a), but are treated as remuneration for purposes of the excise tax
application. Sec. 457(f) applies to an ``ineligible'' deferred
compensation plan of a State or local government or a tax-exempt
employer (that is, a plan that does not meet the requirements to be an
eligible plan under section 457(b)). Under an ineligible plan, deferred
amounts are treated as nonqualified deferred compensation and
includible in income for the first taxable year in which there is no
substantial risk of forfeiture of the rights to such compensation. For
this purpose, a person's rights to compensation are subject to a
substantial risk of forfeiture if the rights are conditioned on the
future performance of substantial services by any individual. Earnings
post-vesting are generally taxed when paid.
\1330\Sec. 4960(c)(3)(B).
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Remuneration of a covered employee includes any
remuneration paid with respect to employment of the covered
employee by any person or governmental entity related to the
applicable tax-exempt organization.\1331\ A person or
governmental entity is treated as related to an applicable tax-
exempt organization if the person or governmental entity (1)
controls, or is controlled by, the organization, (2) is
controlled by one or more persons that control the
organization, (3) is a supported organization\1332\ during the
taxable year with respect to the organization, (4) is a
supporting organization\1333\ during the taxable year with
respect to the organization, or (5) in the case of a voluntary
employees' beneficiary association (``VEBA''),\1334\
establishes, maintains, or makes contributions to the
VEBA.\1335\ The Secretary is directed to prescribe regulations
as may be necessary to prevent avoidance of the excise tax,
including preventing such avoidance through the performance of
services other than as an employee or by providing compensation
through a pass-through or other entity.
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\1331\Sec. 4960(c)(4). Under Treasury regulations, remuneration
paid to a covered employee of an applicable tax-exempt organization
includes remuneration paid by a related organization with respect to
services performed as an employee for the related organization. Treas.
Reg. sec. 53.4960-2(b)(2).
\1332\Sec. 509(f)(3).
\1333\Sec. 509(a)(3).
\1334\Sec. 501(c)(9).
\1335\Sec. 4960(c)(4)(B); see also Treas. Reg. sec. 53.4960-1(i)
(providing rules for determining whether a person or governmental
entity is a related organization with respect to an applicable tax-
exempt organization).
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Remuneration of a covered employee that is not deductible
by reason of the $1 million limit on deductible compensation
under section 162(m) is not taken into account for this
purpose.\1336\
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\1336\Sec. 4960(c)(6).
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Excess parachute payment

An excess parachute payment is the amount by which any
parachute payment exceeds the portion of the base amount
allocated to the payment. A parachute payment is a payment in
the nature of compensation to (or for the benefit of) a covered
employee if the payment is contingent on the employee's
separation from employment and the aggregate present value of
all such payments equals or exceeds three times the base
amount. The base amount is the average annualized compensation
includible in the covered employee's gross income for the five
taxable years ending before the date of the employee's
separation from employment. Parachute payments do not include
payments under a qualified retirement plan, a simplified
employee pension plan, a simple retirement account, a tax-
deferred annuity,\1337\ or an eligible deferred compensation
plan of a State or local government employer.\1338\ Parachute
payments include amounts contingent on separation from
employment from severance and deferred compensation plans
(including supplemental executive retirement plans), and do not
exclude bona fide severance or separation pay plans under
section 457(f) or section 409A.
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\1337\Sec. 403(b).
\1338\Sec. 457(b).
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Payments to employees who are not highly compensated
employees (within the meaning of section 414(q), $160,000 for
2025), and payments attributable to medical services of certain
licensed medical professionals,\1339\ are exempt from the
definition of parachute payment.
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\1339\Sec. 4960(c)(4)(C). The principles of allocation described
above that apply to determine exempt remuneration attributable to
medical services also apply to determine exempt payments attributable
to medical services for purposes of parachute payments.
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The employer of a covered employee is liable for the excise
tax. If remuneration of a covered employee from more than one
employer is taken into account in determining the excise tax,
each employer is liable for the tax in an amount that bears the
same ratio to the total tax as the remuneration paid by that
employer bears to the total remuneration paid by all of the
employers to the covered employee.

REASONS FOR CHANGE

The Committee believes that the excise tax on excess
compensation within a tax-exempt organization should apply to
any employee who is paid over $1 million or who receives an
excess parachute payment, not only to the five highest-paid
employees. The Committee believes that an organization's
funding should be used to further its tax-exempt purpose and
should not be used to provide numerous employees with
exorbitant salaries. Any funding used towards highly-paid
employee compensation, and not in furtherance of its tax-exempt
purpose, may circumvent Congress's original intent when tax-
exempt status was created for certain organizations.

EXPLANATION OF PROVISION

The provision revises the definition of a covered employee
to mean any employee or former employee of an applicable tax-
exempt organization. Thus, an employee need not be one of the
five highest compensated employees of the organization for the
taxable year or have been a covered employee of the
organization (or predecessor) in a taxable year beginning after
December 31, 2016, in order to be a covered employee.

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2025.

Modification of Excise Tax on Investment Income of Certain Private
Colleges and Universities (sec. 112021 of the bill and sec. 6033 and
new sec. 4968 of the Code)

PRESENT LAW

In general

Section 4968 imposes an excise tax on an applicable
educational institution for each taxable year equal to 1.4
percent of the net investment income of the institution for the
taxable year. Net investment income is determined using rules
similar to the rules of section 4940(c) (relating to the net
investment income of a private foundation). Net investment
income generally is the amount by which the sum of gross
investment income and the capital gain net income exceeds
certain deductions.\1340\ Gross investment income is the gross
amounts of income from interest, dividends, rents, payments
with respect to securities loans, and royalties, but not
including any such income to the extent included in computing
unrelated business income tax under section 511.\1341\ The
following items are excluded from gross investment income: (1)
interest income from a student loan that was made by the
applicable educational institution or a related organization to
a student of the institution in connection with the student's
attendance at the institution; (2) rental income from the
provision of housing by the applicable educational institution
or a related organization to students of the institution and
from housing for faculty and staff if the housing is provided
contingent on their roles as faculty or staff of the
institution; and (3) royalty income that is derived from
patents, copyrights, and other intellectual property and
intangible property to the extent those assets resulted from
the work of students or faculty members in their capacities as
such with the applicable educational institution.\1342\
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\1340\Treas. Reg. sec. 53.4968-2(a)(1).
\1341\Treas. Reg. sec. 53.4968-2(b)(1).
\1342\Treas. Reg. sec. 53.4968-2(b)(2).
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An applicable educational institution is an eligible
education institution (as defined in section 25A):\1343\ (1)
that has at least 500 tuition-paying students during the
preceding taxable year; (2) more than 50 percent of the
tuition-paying students of which are located in the United
States; (3) that is not described in the first sentence of
section 511(a)(2)(B) of the Code (generally describing State
colleges and universities); and (4) the aggregate fair market
value of the assets of which at the end of the preceding
taxable year (other than those assets that are used directly in
carrying out the institution's exempt purpose)\1344\ is at
least $500,000 per student (the ``asset-per-student
threshold''). For these purposes, the number of students of an
institution is based on the average daily number of full-time
students attending the institution, with part-time students
being taken into account on a full-time student equivalent
basis.
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\1343\Section 25A(f)(2) defines an eligible educational institution
as an institution that (1) is described in section 481 of the Higher
Education Act of 1965 (20 U.S.C. sec. 1088), as in effect on August 5,
1997, and (2) is eligible to participate in a program under title IV of
such Act.
\1344\Assets used directly in carrying out the institution's exempt
purpose include, for example, classroom buildings and physical
facilities used for educational activities and office equipment or
other administrative assets used by employees of the institution in
carrying out exempt activities, among other assets.
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For purposes of determining whether an educational
institution meets the asset-per-student threshold\1345\ and for
purposes of determining net investment income, assets and net
investment income of a related organization with respect to the
educational institution are treated as assets and net
investment income, respectively, of the educational
institution, except that:
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\1345\In cross-referencing the asset-per-student threshold for this
purpose, section 4968(d)(1) includes a reference to subsection
``(b)(1)(C)'' that should instead read ``(b)(1)(D).'' A clerical
correction may be necessary to correct this cross-reference.
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No such amount is taken into account with
respect to more than one educational institution; and
Unless the related organization is
controlled by the educational institution or is a
supporting organization (described in section
509(a)(3)) with respect to the institution for the
taxable year, assets and net investment income that are
not intended or available for the use or benefit of the
educational institution are not taken into account. For
example, assets of a related organization that are
earmarked or restricted for (or fairly attributable to)
the educational institution would be treated as assets
of the educational institution, whereas assets of a
related organization that are held for unrelated
purposes (and are not fairly attributable to the
educational institution) would be disregarded.
An organization is treated as related to the institution
for this purpose if the organization: (1) controls, or is
controlled by, the institution; (2) is controlled by one or
more persons that control the institution; or (3) is a
supported organization\1346\ or a supporting organization\1347\
during the taxable year with respect to the institution.
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\1346\Sec. 509(f)(3).
\1347\Sec. 509(a)(3).
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Reporting requirements

A private college or university generally must file an
annual information return with the IRS using IRS Form 990,
``Return of Organization Exempt from Income Tax.'' Part V,
question 16 of the Form 990 for the year 2024 asks whether the
filing organization is an educational institution that is
subject to the section 4968 excise tax on net investment
income. The instructions to the form include a worksheet to
assist the organization in making this determination.\1348\
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\1348\See 2024 Instructions for Form 990, pp. 18-19. The student
counts used in determining whether an institution is an applicable
educational institution are referenced in the worksheet but are not
provided to the IRS.
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An organization that answers ``yes'' to question 16 is
required to complete Schedule O of IRS Form 4720, ``Return of
Certain Excise Taxes Under Chapters 41 and 42 of the Internal
Revenue Code.'' Form 4720 is used to report certain excise
taxes that apply to tax-exempt organizations, including the
section 4968 excise tax on the net investment income of private
colleges and universities. On Schedule O, the organization must
provide information about the net investment income of the
filing organization and its related organizations and compute
the amount of section 4968 excise tax owed by the organization.

REASONS FOR CHANGE

The Code provides generous tax benefits to private colleges
and universities. Despite these generous tax benefits, tax-
exempt colleges and universities have been subject to scrutiny
in recent years for failing to operate primarily for their tax-
exempt purpose, protect students on campus and foster an
environment where students can receive an education free from
discrimination and harassment, and abuse the tax code in ways
that Congress did not intend. Congress believes that in order
to allocate tax burdens more fairly, the wealthiest of these
institutions should be required to contribute a greater share
of their income in taxes.

EXPLANATION OF PROVISION

The provision replaces the excise tax on applicable
educational institutions with a new rate structure. Under the
provision, the amount of tax imposed on an applicable
educational institute for each taxable year is equal to the
applicable percentage of the net investment income for the
taxable year. The applicable percentage is 1.4 percent in the
case of an institution with a student adjusted endowment in
excess of $500,000 and not in excess of $750,000; 7 percent in
the case of an institution with a student adjusted endowment in
excess of $750,000 and not in excess of $1,250,000; 14 percent
in the case of an institution with a student adjusted endowment
in excess of $1,250,000 and not in excess of $2,000,000; and 21
percent in the case of an institution with a student adjusted
endowment in excess of $2,000,000.
The provision modifies the term ``applicable educational
institution'' to mean an eligible education institution (as
defined in section 25A(f)(2)): (1) that has at least 500
tuition-paying students during the preceding taxable year; (2)
more than 50 percent of the tuition-paying students of which
are located in the United States; (3) that is not described in
the first sentence of section 511(a)(2)(B) of the Code
(generally describing State colleges and universities); (4)
that is not a qualified religious institution; and (5) the
student adjusted endowment of which is at least $500,000. A
qualified religious institution is an institution (i)
established after July 4, 1776; (ii) that was established by,
or in association with, and has continuously maintained an
affiliation with an organization described in section
170(b)(1)(A)(i) (churches and conventions or associations of
churches); and (iii) which maintains a published institutional
mission that is approved by the governing body of the
institution and that includes, refers to, or is predicated upon
religious tenets, beliefs, or teachings. For purposes of
determining a qualified religious institution, an institution's
continuous affiliation applies in cases where the qualified
religious institution was affiliated with an organization
described in section 170(b)(1)(A)(i) at the time of its
establishment and maintains a continuous affiliation with that
organization or a successor organization. The student adjusted
endowment of an institution for a taxable year is equal to the
aggregate fair market value of the assets of the institution
(determined as of the end of the preceding taxable year), other
than those assets which are used directly in carrying out the
institution's exempt purpose, divided by the number of eligible
students of the institution. For this purpose, the term
``eligible student'' means a student of the institution that
meets the eligibility requirements under section 484(a)(5) of
the Higher Education Act of 1965.\1349\ That section requires
that the student ``be a citizen or national of the United
States, a permanent resident of the United States, or able to
provide evidence from the Immigration and Naturalization
Service that he or she is in the United States for other than a
temporary purpose with the intention of becoming a citizen or
permanent resident.''
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\1349\20 U.S.C. sec. 1091(a)(5).
---------------------------------------------------------------------------
Under the provision, the Secretary is directed to prescribe
regulations or other guidance as necessary to prevent avoidance
of the tax, including regulations or other guidance to prevent
avoidance of tax through the restructuring of endowment funds
or other arrangements designed to reduce or eliminate the value
of net investment income or assets subject to the tax.
The provision also requires an applicable educational
institution that is required to file an annual information
return (Form 990) to include on the return the number of
eligible students taken into account for purposes of
calculating student adjusted endowment, and the number of
students determined after application of section 4968(e)
(determining number of students of an institution based on
daily attendance).

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Increase in Rate of Tax on Net Investment Income of Certain Private
Foundations (sec. 112022 of the bill and sec. 4940 of the Code)

PRESENT LAW

Under section 4940(a), private foundations that are
recognized as exempt from Federal income tax under section
501(a) (other than exempt operating foundations)\1350\ are
subject to an excise tax of 1.39 percent on their net
investment income.\1351\ Net investment income generally
includes interest, dividends, rents, royalties (and income from
similar sources), and capital gain net income, and is reduced
by expenses incurred to earn this income.
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\1350\Sec. 4940(d)(1). Exempt operating foundations generally
include organizations such as museums or libraries that devote their
assets to operating charitable programs but have difficulty meeting the
``public support'' tests necessary not to be classified as a private
foundation. To be an exempt operating foundation, an organization must:
(1) be an operating foundation (as defined in section 4942(j)(3)); (2)
be publicly supported for at least 10 taxable years; (3) have a
governing body no more than 25 percent of whom are disqualified persons
and that is broadly representative of the general public; and (4) have
no officers who are disqualified persons. Sec. 4940(d)(2).
\1351\Sec. 4940(a). The Taxpayer Certainty and Disaster Relief Act
of 2019, Pub. L. 116-94, Div. Q, sec. 206(a), revised the excise tax
from two percent to 1.39 percent, effective for taxable years beginning
after December 20, 2019. This act also repealed the special reduction
in excise tax (to one percent) that applied if the private foundation
met certain distribution requirements. Ibid. sec. 206(b).
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Private foundations that are not exempt from tax under
section 501(a), such as certain charitable trusts, are subject
to an excise tax under section 4940(b). The tax is equal to the
excess of the sum of the excise tax that would have been
imposed under section 4940(a) if the foundation were tax exempt
and the amount of the tax on unrelated business income that
would have been imposed if the foundation were tax exempt, over
the income tax imposed on the foundation under subtitle A of
the Code.
Private foundations are required to make a minimum amount
of qualifying distributions each year to avoid tax under
section 4942. The minimum amount of qualifying distributions a
foundation has to make to avoid tax under section 4942 is
reduced by the amount of section 4940 excise taxes paid.\1352\
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\1352\Sec. 4942(d)(2).
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REASONS FOR CHANGE

The Committee believes that private foundations receive
generous tax benefits. Despite these generous tax benefits,
some tax-exempt private foundations have prioritized amassing
large amounts of assets instead of distributing these assets in
furtherance of their tax-exempt purpose. As such, the Committee
believes certain private foundations should contribute a
greater share to our tax system than they currently contribute
(with the increased tax corresponding to the amount of assets).
In addition, a private foundation should not be able to avoid
or escape tax by holding assets in a related organization or
transferring assets to a related organization.

EXPLANATION OF PROVISION

The provision replaces the 1.39 percent excise tax with a
tiered structure. The 1.39 percent rate continues to apply to a
private foundation with assets of less than $50 million. In the
case of a private foundation with assets equal to or greater
than $50 million, but less than $250 million, the rate of the
excise tax is 2.78 percent. In the case of a private foundation
with assets equal to or greater than $250 million, but less
than $5 billion, the rate of the excise tax is five percent,
and the rate is 10 percent for a foundation with assets of at
least $5 billion.
Assets of a private foundation are determined for this
purpose with respect to any taxable year as being the aggregate
fair market value of all assets of such private foundation, as
of the close of the taxable year. There is no reduction for any
liabilities.
Under the provision, assets and net investment income of an
organization that is related to the private foundation are
treated as assets and net investment income (respectively) of
the private foundation. However, no such amount is taken into
account with respect to more than one private foundation, and
assets and net investment income that are not intended or
available for the use or benefit of the private foundation are
not taken into account unless the related organization is
controlled by the private foundation. For this purpose, an
organization is a related organization with respect to a
private foundation if the organization controls or is
controlled by the private foundation, or the organization is
controlled by one or more persons that also control the private
foundation. Thus, assets of related organizations are taken
into account for purposes of determining the rate of excise tax
that applies to the private foundation, and net investment
income of related organizations is included for purposes of
calculating the excise tax.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after the date of enactment.

Certain Purchases of Employee-Owned Stock Disregarded for Purposes of
Foundation Tax on Excess Business Holdings (sec. 112023 of the bill and
sec. 4943 of the Code)

PRESENT LAW

Public charities and private foundations

An organization qualifying for tax-exempt status under
section 501(c)(3) is further classified as either a public
charity or a private foundation. An organization may qualify as
a public charity in several ways.\1353\ Certain organizations
are classified as public charities per se, regardless of their
sources of support. These include churches, certain schools,
hospitals and other medical organizations (including medical
research organizations), certain organizations providing
assistance to colleges and universities, and governmental
units.\1354\ Other organizations qualify as public charities
because they are broadly publicly supported. First, a charity
may qualify as publicly supported if at least one-third of its
total support is from gifts, grants or other contributions from
governmental units or the general public.\1355\ Alternatively,
it may qualify as publicly supported if it receives more than
one-third of its total support from a combination of gifts,
grants, and contributions from governmental units and the
public plus revenue arising from activities related to its
exempt purposes (e.g., fee for service income). In addition,
this category of public charity must not rely excessively on
endowment income as a source of support.\1356\ A supporting
organization, i.e., an organization that provides support to
another section 501(c)(3) entity that is not a private
foundation and meets certain other requirements of the Code,
also is classified as a public charity.\1357\
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\1353\The Code does not expressly define the term ``public
charity,'' but rather provides exceptions to those entities that are
treated as private foundations.
\1354\Sec. 509(a)(1) (referring to sections 170(b)(1)(A)(i) through
(iv) for a description of these organizations).
\1355\Treas. Reg. sec. 1.170A-9(f)(2). Failing this mechanical
test, the organization may qualify as a public charity if it passes a
``facts and circumstances'' test. Treas. Reg. sec. 1.170A-9(f)(3).
\1356\To meet this requirement, the organization must normally
receive more than one-third of its support from a combination of (1)
gifts, grants, contributions, or membership fees and (2) certain gross
receipts from admissions, sales of merchandise, performance of
services, and furnishing of facilities in connection with activities
that are related to the organization's exempt purposes. Sec.
509(a)(2)(A). In addition, the organization must not normally receive
more than one-third of its public support in each taxable year from the
sum of (1) gross investment income and (2) the excess of unrelated
business taxable income as determined under section 512 over the amount
of unrelated business income tax imposed by section 511. Sec.
509(a)(2)(B).
\1357\Sec. 509(a)(3). Organizations organized and operated
exclusively for testing for public safety also are classified as public
charities. Sec. 509(a)(4). Such organizations, however, are not
eligible to receive deductible charitable contributions under section
170.
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A section 501(c)(3) organization that does not fit within
any of the above categories is a private foundation. In
general, private foundations receive funding from a limited
number of sources (e.g., an individual, a family, or a
corporation).
The deduction for charitable contributions to private
foundations is in some instances less generous than the
deduction for charitable contributions to public charities. In
addition, private foundations are subject to a number of
operational rules and restrictions that do not apply to public
charities, as well as a tax on their net investment
income.\1358\
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\1358\Unlike public charities, private foundations are subject to
tax on their net investment income at a rate of 1.39 percent. Sec.
4940. Private foundations also are subject to more restrictions on
their activities than are public charities. For example, private
foundations are prohibited from engaging in self-dealing transactions
(sec. 4941), are required to make a minimum amount of charitable
distributions each year (sec. 4942), are limited in the extent to which
they may control a business (sec. 4943), may not make speculative
investments (sec. 4944), and may not make certain expenditures (sec.
4945). Violations of these rules result in excise taxes on the
foundation and, in some cases, may result in excise taxes on the
managers of the foundation.
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Excess business holdings of private foundations

A private foundation is subject to tax on excess business
holdings if it holds more than certain permitted percentages of
a business enterprise.\1359\ In general, a private foundation
is permitted to hold 20 percent of the voting stock in a
corporation, reduced by the percentage of voting stock held by
all disqualified persons (as defined in section 4946).\1360\ A
private foundation can hold any amount of nonvoting stock in a
corporation if disqualified persons do not own more than 20
percent of the voting stock of the corporation. If it is
established that effective control of the corporation is in one
or more persons who are not disqualified persons with respect
to the foundation, a private foundation and disqualified
persons together may own up to 35 percent of the voting stock
of a corporation. A private foundation is not treated as having
excess business holdings in any corporation if it owns
(together with certain other related private foundations) not
more than two percent of the voting stock and not more than two
percent in value of all outstanding shares of all classes of
stock in that corporation. Similar rules apply with respect to
holdings in a partnership (substituting ``profits interest''
for ``voting stock'' and ``capital interest'' for ``nonvoting
stock'') and to other unincorporated enterprises (by
substituting ``beneficial interest'' for ``voting stock'').
Private foundations are not permitted to have holdings in a
proprietorship.\1361\
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\1359\Sec. 4943. Taxes imposed may be abated if certain conditions
are met. Secs. 4961 and 4962.
\1360\Disqualified persons include, among others, substantial
contributors to the foundation, foundation managers, and certain family
members of disqualified persons. See sec. 4946.
\1361\The excess business holdings rules do not apply to holdings
in a functionally related business or to holdings in a trade or
business at least 95 percent of the gross income of which is derived
from passive sources. Sec. 4943(d)(3).
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The initial tax is equal to 10 percent of the value of the
excess business holdings held during the foundation's
applicable taxable year. The tax is imposed on the last day of
the taxable year, but the amount of the tax is computed using
the greatest amount of the excess business holdings during the
taxable year.\1362\ An additional tax is imposed if an initial
tax is imposed and, at the close of the taxable period\1363\
with respect to such holdings, the foundation continues to have
excess business holdings. The amount of the additional tax is
equal to 200 percent of such excess business holdings.
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\1362\This initial tax is not levied on excess business holdings
(other than those acquired by purchase) if the foundation disposes of
such excess business holdings within 90 days from the date on which it
knows or has reason to know of the event that caused it to have such
excess holdings. Treas. Reg. sec. 53.4943-2(a)(1)(ii).
\1363\For this purpose, the term ``taxable period'' means the
period beginning on the first day on which there are excess holdings
and ending on the earlier of (1) the date of the mailing of a notice of
deficiency with respect to tax on such holdings and (2) the date on
which the tax on excess business holdings with respect to such excess
holdings is assessed. Sec. 4943(d)(2).
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If there is a change in the holdings in a business
enterprise (other than by purchase by the foundation or a
disqualified person) that causes the private foundation to have
excess business holdings, the private foundation generally has
five years from the date of the change to dispose of the excess
without being subject to tax.\1364\ This five-year period may
be extended an additional five years in limited
circumstances.\1365\
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\1364\Sec. 4943(c)(6).
\1365\Sec. 4943(c)(7).
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Special grandfathering rules apply to private foundations
that had holdings in a business enterprise in excess of the
applicable percentage limitations on May 26, 1969. In general,
the actual percentage of such holdings as of that date is
substituted for 20 percent.\1366\ If holdings in the business
enterprise subsequently decrease for any reason, the decreased
percentage generally is substituted for the previously
applicable percentage, and the decreased percentage applies for
all subsequent periods (known as the ``downward ratchet''
rule).\1367\
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\1366\Sec. 4943(c)(4)(a)(i).
\1367\Sec. 4943(c)(4)(a)(ii).
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Employee stock ownership plans

An employee stock ownership plan (``ESOP'') is a type of
qualified retirement plan\1368\ that is a stock bonus plan that
is designated as an ESOP and is designed to invest primarily in
stock of the employer, referred to as ``qualifying employer
securities.''\1369\ ESOPs are subject to numerous requirements
under the Code, including the requirement that a participant
who is entitled to a distribution from the plan has a right to
demand that his or her benefits be distributed in the form of
employer securities.\1370\ If the employer securities are not
readily tradable on an established market, a participant who is
entitled to a distribution from the plan has a right to require
that the employer repurchase employer securities under a fair
valuation formula.\1371\
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\1368\Sec. 401(a).
\1369\Sec. 4975(e)(7). Participant accounts in other types of
defined contribution plans can also be invested in employer stock.
\1370\Sec. 409(h)(1)(A).
\1371\Sec. 409(h)(1)(B).
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REASONS FOR CHANGE

The Committee believes that a private foundation should not
be subject to the tax on excess business holdings in certain
cases where the tax may be imposed merely because of the
application of the ESOP rules relating to repurchases to a
business held by the private foundation.

EXPLANATION OF PROVISION

The provision amends the excess business holdings rules so
that certain voting stock repurchased by a business enterprise
is treated as outstanding stock when calculating a private
foundation's present and permitted holdings in the business
enterprise under the excess business holdings rules. The
provision applies to voting stock that is: (1) not readily
tradable on an established securities market; (2) purchased by
the business enterprise on or after January 1, 2020, from an
employee stock ownership plan (described in Code section
4975(e)(7)) in which employees of such business enterprise
participate, in connection with a distribution from such plan;
and (3) held by the business enterprise as treasury stock,
cancelled, or retired.
The provision applies only to the extent that treating the
repurchased stock as outstanding voting stock does not result
in permitted holdings exceeding 49 percent (i.e., a minority
voting stake). The provision does not apply to purchases of
stock made during the 10-year period beginning on the date the
plan is established.
The ``downward ratchet'' rule, described above, does not
apply with respect to any decrease in the percentage of
holdings in a business enterprise by reason of application of
the provision.

EFFECTIVE DATE

The provision is effective for taxable years ending after
the date of enactment and to purchases by a business enterprise
of voting stock in taxable years beginning after December 31,
2019.

Unrelated Business Taxable Income Increased by Amount of Certain Fringe
Benefit Expenses for Which Deduction Is Disallowed (sec. 112024 of the
bill and sec. 512 of the Code)

PRESENT LAW

Unrelated business income tax

Tax exemption for certain organizations
Section 501(a) exempts certain organizations from Federal
income tax. Such organizations include: (1) tax-exempt
organizations described in section 501(c) (including among
others section 501(c)(3) charitable organizations and section
501(c)(4) social welfare organizations); (2) religious and
apostolic organizations described in section 501(d); and (3)
trusts forming part of a pension, profit-sharing, or stock
bonus plan of an employer described in section 401(a).
Unrelated business income tax, in general
The unrelated business income tax (``UBIT'') generally
applies to income derived from a trade or business regularly
carried on by the organization that is not substantially
related to the performance of the organization's tax-exempt-
functions.\1372\ An organization that is subject to UBIT and
that has $1,000 or more of gross unrelated business taxable
income must report that income on Form 990-T (Exempt
Organization Business Income Tax Return).
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\1372\Secs. 511-514.
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Most exempt organizations may operate an unrelated trade or
business so long as the organization remains primarily engaged
in activities that further its exempt purposes. Therefore, an
organization may generally engage in a substantial amount of
unrelated business activity without jeopardizing exempt status.
A section 501(c)(3) (charitable) organization, however, may not
operate an unrelated trade or business as a substantial part of
its activities.\1373\ Therefore, the unrelated trade or
business activity of a section 501(c)(3) organization must be
insubstantial.
---------------------------------------------------------------------------
\1373\Treas. Reg. sec. 1.501(c)(3)-1(e).
---------------------------------------------------------------------------
An organization determines its unrelated business taxable
income by subtracting from its gross unrelated business income
the deductions directly connected with the unrelated trade or
business.\1374\
---------------------------------------------------------------------------
\1374\Sec. 512(a).
---------------------------------------------------------------------------
Organizations subject to tax on unrelated business income
Most exempt organizations are subject to UBIT.
Specifically, organizations subject to UBIT generally include:
(1) organizations exempt from tax under section 501(a),
including organizations described in section 501(c) (except for
U.S. instrumentalities and certain charitable trusts);\1375\
(2) qualified pension, profit-sharing, and stock bonus plans
described in section 401(a);\1376\ and (3) certain State
colleges and universities.\1377\
---------------------------------------------------------------------------
\1375\Sec. 511(a)(2)(A).
\1376\Sec. 511(a)(2)(A).
\1377\Sec. 511(a)(2)(B).
---------------------------------------------------------------------------
Exclusions from unrelated business taxable income
Certain types of income are specifically excluded from
unrelated business taxable income, such as dividends, interest,
royalties, and certain rents,\1378\ unless derived from debt-
financed property or from certain 50-percent controlled
subsidiaries.\1379\ Certain types of activities are not
considered unrelated trade or business activities, such as
activities in which substantially all the work is performed by
volunteers, which involve the sale of donated goods, or which
are carried on for the convenience of members, students,
patients, officers, or employees of a charitable
organization.\1380\ Additional activities exempt from UBIT
include certain activities of trade shows and State
fairs,\1381\ conducting bingo games,\1382\ and the distribution
of low-cost items incidental to the solicitation of charitable
contributions.\1383\
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\1378\Sec. 512(b).
\1379\Sec. 512(b)(13).
\1380\Sec. 513(a).
\1381\Sec. 513(d).
\1382\Sec. 513(f).
\1383\Sec. 513(h).
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Specific deduction against unrelated business taxable
income
In computing unrelated business taxable income, an exempt
organization may take a specific deduction of $1,000. This
specific deduction may not be used to create a net operating
loss that will be carried back or forward to another
year.\1384\
---------------------------------------------------------------------------
\1384\Sec. 512(b)(12).
---------------------------------------------------------------------------
In the case of a diocese, province of a religious order, or
a convention or association of churches, there is also allowed
a specific deduction with respect to each parish, individual
church, district, or other local unit. The specific deduction
is equal to the lower of $1,000 or the gross income derived
from any unrelated trade or business regularly carried on by
the local unit.\1385\
---------------------------------------------------------------------------
\1385\Ibid.
---------------------------------------------------------------------------

Limitation on employer deductions for qualified transportation fringe

A deduction for the expense of any qualified transportation
fringe provided to an employee of the taxpayer is
disallowed.\1386\ The term ``qualified transportation fringe''
includes qualified parking,\1387\ and therefore encompasses
costs associated with providing parking on or near the business
premises of the employer.\1388\ Under IRS guidance, this
includes appropriate allocations of costs with respect to
facilities used for parking (e.g., parking lot attendant
expenses, property taxes, repairs and maintenance, rent or
lease payments, etc.), but does not include depreciation on a
parking facility owned by a taxpayer and used for parking by
the taxpayer's employees.\1389\ The term ``qualified
transportation fringe'' also includes transportation in a
commuter highway vehicle if such transportation is in
connection with travel between the employee's residence and
place of employment, any transit pass, and any qualified
bicycle commuting reimbursement.\1390\
---------------------------------------------------------------------------
\1386\Sec. 274(a)(4).
\1387\Sec. 132(f)(1).
\1388\Sec. 132(f)(5)(C).
\1389\Treas. Reg. sec. 1.274-13(b)(12)(i).
\1390\Sec. 132(f)(1). The term ``qualified transportation fringe''
does not include any qualified bicycle commuting reimbursement for
taxable years beginning after December 31, 2017, and before January 1,
2026. Sec. 132(f)(8).
---------------------------------------------------------------------------
The amount of the deduction disallowance is equal to the
amount of direct and other properly allocable costs of the
taxpayer to provide the qualified transportation fringe.\1391\
Accordingly, the deduction disallowance is not determined by
reference to the value of the transportation fringe benefit to
the employee.
---------------------------------------------------------------------------
\1391\See Treas. Reg. sec. 1.274-13(d)(2)(i)(A) and (d)(3).
---------------------------------------------------------------------------
Generally, the deduction disallowance does not apply to
qualified transportation fringe expenses that are treated by
the taxpayer as compensation to its employees.\1392\
---------------------------------------------------------------------------
\1392\Sec. 274(e)(2); Treas. Reg. sec. 1.274-13(e)(2)(i).
---------------------------------------------------------------------------

Annual filing requirement for tax-exempt organizations

A tax-exempt organization generally is required to file an
annual information return with the IRS. An organization that
has not received a determination of its tax-exempt status, but
that claims tax-exempt status under section 501(a), is subject
to the same annual reporting requirements and exceptions as
organizations that have received a formal determination.
In general, organizations described in section 501(c) and
exempt from taxation under section 501(a) are required to file
an annual return (Form 990 series), stating specifically the
items of gross income, receipts, disbursements, and such other
information as the Secretary may prescribe.\1393\ An
organization that is required to file an information return,
but that has gross receipts of less than $200,000 during its
taxable year, and total assets of less than $500,000 at the end
of its taxable year, may file Form 990-EZ. Section 501(c)(3)
private foundations are required to file Form 990-PF rather
than Form 990. Any organization that is subject to UBIT and
that has $1,000 or more of gross unrelated business taxable
income must also file Form 990-T (Exempt Organization Business
Income Tax Return).\1394\
---------------------------------------------------------------------------
\1393\Sec. 6033(a).
\1394\Tax-exempt organizations also generally must file reports and
returns applicable to taxable entities with respect to Social Security
taxes and, in certain instances, Federal unemployment taxes.
---------------------------------------------------------------------------
The requirement that an exempt organization file an annual
information return (Form 990 or Form 990-EZ) does not apply to
certain tax-exempt organizations. There are three mandatory
exceptions from the filing requirement: (1) churches, their
integrated auxiliaries, and conventions or associations of
churches;\1395\ (2) certain organizations (other than private
foundations) the gross receipts of which in each taxable year
normally are not more than $5,000;\1396\ (3) the exclusively
religious activities of any religious order.\1397\
---------------------------------------------------------------------------
\1395\Sec. 6033(a)(3)(A)(i).
\1396\Sec. 6033(a)(3)(A)(ii).
\1397\Sec. 6033(a)(3)(A)(iii).
---------------------------------------------------------------------------
The IRS has relieved certain other organizations from the
filing requirement pursuant to its statutory discretionary
authority, including certain church-affiliated elementary and
high schools and any organization described in section
501(c)(3) (other than a private foundation of a section
509(a)(3) supporting organization) that normally has annual
gross receipts of not more than $50,000, among other
organizations.\1398\
---------------------------------------------------------------------------
\1398\Sec. 6033(a)(3)(B); Treas. Reg. sec. 1.6033-2(g)(1). Treas.
Reg. sec. 1.6033-2(g)(1) provides a partial list of organizations that
are not required to file annual returns either because they are
excepted by statute or because the IRS has exercised its discretionary
authority. Organizations that are excused from filing an information
return by reason of normally having gross receipts below $50,000 must
furnish to the Secretary an annual notice (Form 990-N), in electronic
form, containing certain basic information about the organization. Sec.
6033(i).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that aligning the tax treatment
between for-profit and tax-exempt employers with respect to
nontaxable transportation fringe benefits provided to employees
will make the tax system simpler and fairer for all
organizations. The Committee believes it is desirable to
minimize tax and reporting burdens on churches, their
integrated auxiliaries, conventions or associations of
churches, the exclusively religious activities of any religious
order, and certain church-affiliated organizations by exempting
such organizations from these rules. The Committee believes
that tax-exempt organizations should prioritize using funds to
further its tax-exempt purpose instead of providing certain
fringe benefits to employees.

EXPLANATION OF PROVISION

Under the provision, unrelated business taxable income of a
tax-exempt organization is increased to include any amounts
paid or incurred by the organization for any qualified
transportation fringe\1399\ or any parking facility used in
connection with qualified parking\1400\ for which a deduction
is not allowable by reason of section 274.\1401\ The provision
does not apply to any amounts that are directly connected with
an unrelated trade or business that is regularly carried on by
the organization.
---------------------------------------------------------------------------
\1399\As defined in sec. 132(f).
\1400\As defined in sec. 132(f)(5)(C).
\1401\Sec. 274(a)(4).
---------------------------------------------------------------------------
For purposes of computing unrelated business taxable income
for organizations with more than one unrelated trade or
business,\1402\ any increase in unrelated business taxable
income under the provision is treated as unrelated business
taxable income with respect to an unrelated trade or business
separate from any other unrelated trade or business of the
organization.
---------------------------------------------------------------------------
\1402\See sec. 512 (a)(6).
---------------------------------------------------------------------------
However, the provision does not apply to the following
organizations: (1) organizations that do not have a filing
requirement by reason of section 6033(a)(3)(A)(i) or (iii)
(i.e., churches, their integrated auxiliaries, and conventions
or associations of churches, and the exclusively religious
activities of any religious order), and (2) any church-
affiliated organization described in section 501(c) which is
not required to file an annual return under section 6033(a)(1)
by reason of section 6033(a)(3)(B).
The provision directs the Secretary to issue regulations or
other guidance as may be necessary or appropriate to carry out
the purposes of this provision, including regulations or other
guidance providing for the appropriate allocation of costs with
respect to facilities used for parking.

EFFECTIVE DATE

The provision applies to amounts paid or incurred after
December 31, 2025.

Name and Logo Royalties Treated as Unrelated Business Taxable Income
(sec. 112025 of the bill and secs. 512 and 513 of the Code)

Tax exemption for certain organizations

Section 501(a) exempts certain organizations from Federal
income tax. Such organizations include: (1) tax-exempt
organizations described in section 501(c) (including among
others section 501(c)(3) charitable organizations and section
501(c)(4) social welfare organizations); (2) religious and
apostolic organizations described in section 501(d); and (3)
trusts forming part of a pension, profit-sharing, or stock
bonus plan of an employer described in section 401(a).

Unrelated business income tax, in general

The unrelated business income tax (``UBIT'') generally
applies to income derived from a trade or business regularly
carried on by the organization that is not substantially
related to the performance of the organization's tax-exempt-
functions.\1403\ An organization that is subject to UBIT and
that has $1,000 or more of gross unrelated business taxable
income must report that income on Form 990-T (Exempt
Organization Business Income Tax Return).
---------------------------------------------------------------------------
\1403\Secs. 511-514.
---------------------------------------------------------------------------
Most exempt organizations may operate an unrelated trade or
business so long as the organization remains primarily engaged
in activities that further its exempt purposes. Therefore, an
organization may generally engage in a substantial amount of
unrelated business activity without jeopardizing exempt status.
A section 501(c)(3) (charitable) organization, however, may not
operate an unrelated trade or business as a substantial part of
its activities.\1404\ Therefore, the unrelated trade or
business activity of a section 501(c)(3) organization must be
insubstantial.
---------------------------------------------------------------------------
\1404\Treas. Reg. sec. 1.501(c)(3)-1(e).
---------------------------------------------------------------------------
An organization determines its unrelated business taxable
income by subtracting from its gross unrelated business income
the deductions directly connected with the unrelated trade or
business.\1405\
---------------------------------------------------------------------------
\1405\Sec. 512(a).
---------------------------------------------------------------------------

Organizations subject to tax on unrelated business income

Most exempt organizations are subject to UBIT.
Specifically, organizations subject to UBIT generally include:
(1) organizations exempt from tax under section 501(a),
including organizations described in section 501(c) (except for
U.S. instrumentalities and certain charitable trusts);\1406\
(2) qualified pension, profit-sharing, and stock bonus plans
described in section 401(a);\1407\ and (3) certain State
colleges and universities.\1408\
---------------------------------------------------------------------------
\1406\Sec. 511(a)(2)(A).
\1407\Sec. 511(a)(2)(A).
\1408\Sec. 511(a)(2)(B).
---------------------------------------------------------------------------

Exclusions from unrelated business taxable income

Certain types of income are specifically excluded from
unrelated business taxable income, such as dividends, interest,
royalties, and certain rents,\1409\ unless derived from debt-
financed property or from certain 50-percent controlled
subsidiaries.\1410\ Certain types of activities are not
considered unrelated trade or business activities, such as
activities in which substantially all the work is performed by
volunteers, which involve the sale of donated goods, or which
are carried on for the convenience of members, students,
patients, officers, or employees of a charitable
organization.\1411\ Additional activities exempt from UBIT
include certain activities of trade shows and State
fairs,\1412\ conducting bingo games,\1413\ and the distribution
of low-cost items incidental to the solicitation of charitable
contributions.\1414\
---------------------------------------------------------------------------
\1409\Sec. 512(b).
\1410\Sec. 512(b)(13).
\1411\Sec. 513(a).
\1412\Sec. 513(d).
\1413\Sec. 513(f).
\1414\Sec. 513(h).
---------------------------------------------------------------------------
Specific deduction against unrelated business taxable
income In computing unrelated business taxable income, an
exempt organization may take a specific deduction of $1,000.
This specific deduction may not be used to create a net
operating loss that will be carried back or forward to another
year.\1415\
---------------------------------------------------------------------------
\1415\Sec. 512(b)(12).
---------------------------------------------------------------------------
In the case of a diocese, province of a religious order, or
a convention or association of churches, there is also allowed
a specific deduction with respect to each parish, individual
church, district, or other local unit. The specific deduction
is equal to the lower of $1,000 or the gross income derived
from any unrelated trade or business regularly carried on by
the local unit.\1416\
---------------------------------------------------------------------------
\1416\Ibid.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that aligning the tax treatment
between taxable entities and tax- exempt organizations with
respect to income derived from the sale or licensing of a name
or logo will make the tax system simpler and fairer for all
businesses. The Committee believes that tax-exempt
organizations that earn income derived from the sale or
licensing of a name or logo go beyond Congress's initial intent
when tax-exempt status was created and that such activity is
akin to an unrelated trade or business.

EXPLANATION OF PROVISION

The provision modifies the UBIT treatment of the licensing
of a tax-exempt organization's name or logo generally to
subject royalty income derived from such a license to UBIT.
Specifically, the provision provides that any sale or licensing
by an organization of any name or logo of the organization
(including any trademark or copyright related to a name or
logo) is treated as an unrelated trade or business that is
regularly carried on by the organization.
In addition, the provision provides that income derived
from any such sale or licensing of a name or logo of the
organization is included in the organization's gross unrelated
business taxable income, notwithstanding the provisions of
section 512 that otherwise exclude certain types of passive
income (including royalties) from unrelated business taxable
income.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Exclusion of Research Income Limited to Publicly Available Research
(sec. 112026 of the bill and sec. 512 of the Code)

PRESENT LAW

Tax exemption for certain organizations

UNRELATED BUSINESS INCOME TAX, IN GENERAL

The unrelated business income tax (``UBIT'') generally
applies to income derived from a trade or business regularly
carried on by the organization that is not substantially
related to the performance of the organization's tax-exempt-
functions.\1417\ An organization that is subject to UBIT and
that has $1,000 or more of gross unrelated business taxable
income must report that income on Form 990-T (Exempt
Organization Business Income Tax Return).
---------------------------------------------------------------------------
\1417\Secs. 511-514.
---------------------------------------------------------------------------
Most exempt organizations may operate an unrelated trade or
business so long as the organization remains primarily engaged
in activities that further its exempt purposes. Therefore, an
organization may generally engage in a substantial amount of
unrelated business activity without jeopardizing exempt status.
A section 501(c)(3) (charitable) organization, however, may not
operate an unrelated trade or business as a substantial part of
its activities.\1418\ Therefore, the unrelated trade or
business activity of a section 501(c)(3) organization must be
insubstantial.
---------------------------------------------------------------------------
\1418\Treas. Reg. sec. 1.501(c)(3)-1(e).
---------------------------------------------------------------------------
An organization determines its unrelated business taxable
income by subtracting from its gross unrelated business income
the deductions directly connected with the unrelated trade or
business.\1419\
---------------------------------------------------------------------------
\1419\Sec. 512(a).
---------------------------------------------------------------------------

Organizations subject to tax on unrelated business income

Most exempt organizations are subject to UBIT.
Specifically, organizations subject to UBIT generally include:
(1) organizations exempt from tax under section 501(a),
including organizations described in section 501(c) (except for
U.S. instrumentalities and certain charitable trusts);\1420\
(2) qualified pension, profit-sharing, and stock bonus plans
described in section 401(a);\1421\ and (3) certain State
colleges and universities.\1422\
---------------------------------------------------------------------------
\1420\Sec. 511(a)(2)(A).
\1421\Sec. 511(a)(2)(A).
\1422\Sec. 511(a)(2)(B).
---------------------------------------------------------------------------

Exclusions from unrelated business taxable income

In general
Certain types of income are specifically excluded from
unrelated business taxable income, such as dividends, interest,
royalties, and certain rents,\1423\ unless derived from debt-
financed property or from certain 50-percent controlled
subsidiaries.\1424\ Certain types of activities are not
considered unrelated trade or business activities, such as
activities in which substantially all the work is performed by
volunteers, which involve the sale of donated goods, or which
are carried on for the convenience of members, students,
patients, officers, or employees of a charitable
organization.\1425\ Additional activities exempt from UBIT
include certain activities of trade shows and State
fairs,\1426\ conducting bingo games,\1427\ and the distribution
of low-cost items incidental to the solicitation of charitable
contributions.\1428\
---------------------------------------------------------------------------
\1423\Sec. 512(b).
\1424\Sec. 512(b)(13).
\1425\Sec. 513(a).
\1426\Sec. 513(d).
\1427\Sec. 513(f).
\1428\Sec. 513(h).
---------------------------------------------------------------------------
Research income
Certain income derived from research activities of exempt
organizations is excluded from unrelated business taxable
income. For example, income derived from research performed for
the United States, a State, and certain agencies and
subdivisions is excluded.\1429\ Income from research performed
by a college, university, or hospital for any person also is
excluded.\1430\ Finally, if an organization is operated
primarily for purposes of carrying on fundamental research the
results of which are freely available to the general public,
all income derived by research performed by such organization
for any person may be excluded, not only income derived from
fundamental research available to the general public.\1431\
---------------------------------------------------------------------------
\1429\Sec. 512(b)(7).
\1430\NSec. 512(b)(8).
\1431\Sec. 512(b)(9).
---------------------------------------------------------------------------

Specific deduction against unrelated business taxable income

In computing unrelated business taxable income, an exempt
organization may take a specific deduction of $1,000. This
specific deduction may not be used to create a net operating
loss that will be carried back or forward to another
year.\1432\
---------------------------------------------------------------------------
\1432\Sec. 512(b)(12).
---------------------------------------------------------------------------
In the case of a diocese, province of a religious order, or
a convention or association of churches, there is also allowed
a specific deduction with respect to each parish, individual
church, district, or other local unit. The specific deduction
is equal to the lower of $1,000 or the gross income derived
from any unrelated trade or business regularly carried on by
the local unit.\1433\
---------------------------------------------------------------------------
\1433\Ibid.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes it is desirable to carefully tailor
the exclusions from the UBIT rules to better encourage tax-
exempt organizations to engage in fundamental research the
results of which are made available to the general public. The
Committee believes that if an organization is operated
primarily for purposes of carrying on fundamental research the
results of which are freely available to the public, that only
such income derived from research available to the general
public should be exempt from UBIT.

EXPLANATION OF PROVISION

The provision modifies the exclusion from unrelated
business taxable income for income that is derived from
research performed by an organization operated primarily for
purposes of carrying on fundamental research the results of
which are freely available to the general public. Under the
provision, the organization may exclude from unrelated business
taxable income only the income that is derived from such
fundamental research the results of which are freely available
to the general public.

EFFECTIVE DATE

The provision is effective for amounts received or accrued
after December 31, 2025.

Limitation on Excess Business Losses of Noncorporate Taxpayers (sec.
112027 of the bill and sec. 461 of the Code)

PRESENT LAW

Limitation on excess business losses of noncorporate taxpayers

In general

An excess business loss of a taxpayer other than a
corporation is not allowed for the taxable year.\1434\
---------------------------------------------------------------------------
\1434\Sec. 461(1), as modified in 2017 by section 11012 of Public
Law 115-97, was applicable to taxable years beginning after December
31, 2017, and before January 1, 2026. Section 2304 of Division A of
Public Law 116-136 further modified Code section 461(1) so that it does
not apply for a taxable year beginning in 2018, 2019, or 2020. In 2021,
section 9041 of Public Law 117-2 extended section 461(1) for one year,
effective for taxable years beginning after December 31, 2025, and
beginning before January 1, 2027. In 2022, section 13903(b) of Public
Law 117-169 extended section 461(1) for two additional years, effective
for taxable years beginning after December 31, 2026, and beginning
before January 1, 2029.
---------------------------------------------------------------------------
An excess business loss not allowed for a taxable year is
treated as a net operating loss (``NOL'') for the taxable year
that is carried over to subsequent taxable years under the
applicable NOL carryover rules.\1435\
---------------------------------------------------------------------------
\1435\See generally sec. 172. The amount of the taxpayer's NOL
(including any excess business loss that is not allowed for the taxable
year) carried to a subsequent taxable year is limited to 80 percent of
the taxable income (determined without regard to the NOL deduction and
deductions under sections 199A and 250) for that subsequent taxable
year. Sec. 172(a)(2). For a discussion of the changes made in 2017 to
section 172, see the description of section 13302 of Public Law 115-97
(Modification of Net Operating Loss Deduction) in Joint Committee on
Taxation, General Explanation of Public Law 115-97 (JCS-1-18), December
2018, page 180. Changes made by section 2303 of the Division A of
Public Law 116-136 to rules governing NOLs (section 172) are described
in Joint Committee on Taxation, General Explanation of the Tax
Legislation Enacted in the 116th Congress (JCS-1-22), February 2022,
page 325.
---------------------------------------------------------------------------
An excess business loss for the taxable year is the excess
of aggregate deductions of the taxpayer attributable to trades
or businesses of the taxpayer (determined without regard to the
limitation of the provision)\1436\ over the sum of aggregate
gross income or gain attributable to trades or businesses of
the taxpayer plus a threshold amount. The threshold amount is
indexed for inflation for taxable years beginning after 2018.
The threshold amount for a taxable year beginning in 2025 is
$313,000 as indexed (or, in the case of a joint return, twice
the otherwise applicable threshold amount, or $626,000 for 2025
as indexed).\1437\
---------------------------------------------------------------------------
\1436\Aggregate deductions (for purposes of section 461(1)) do not
include the amount of any NOL carryback or carryover under section 172
that is attributable to such trades or businesses from a different
taxable year.
\1437\Sec. 2.32 of Rev. Proc. 2024-40, 2024-45 I.R.B., November 4,
2024.
---------------------------------------------------------------------------
The aggregate business deductions taken into account to
determine the excess business loss of the taxpayer for the
taxable year that are attributable to trades or businesses of
the taxpayer are determined without regard to any deduction
under section 172 (relating to NOLs) or 199A (relating to the
deduction for qualified business income). For example, assume
that a taxpayer has an NOL carryover from a prior taxable year
to the current taxable year. Such NOL carryover is not part of
the taxpayer's aggregate deductions attributable to the trade
or business for the current taxable year under section 461(1).
An excess business loss under section 461(1) does not take
into account any deductions, gross income, or gains
attributable to any trade or business of performing services as
an employee.\1438\ For this purpose, the trade or business of
performing services as an employee has the same meaning as it
does under section 62(a)(1). For example, assume married
taxpayers filing jointly for the taxable year have a loss from
a trade or business conducted by one spouse as a sole
proprietorship, as well as wage income of the other spouse from
employment. The wage income is not taken into account in
determining the amount of the deduction limited under section
461(1).
---------------------------------------------------------------------------
\1438\See also the IRS explanation of ``Excess business losses'' at
https://www.irs.gov/newsroom/excess-business-losses, which conforms to
this rule. The rule was clarified in Pub. L. No. 116-136, Div. A, sec.
2304(b), effective as if included in section 11012 of Public Law 115-97
(that is, starting with the taxable year beginning after December 31,
2017; Pub. L. No 116-136, Div. A, sec. 2304, however, later provided
that section 461(1) does not apply for a taxable year beginning in
2018, 2019, or 2020).
---------------------------------------------------------------------------
In the case of a partnership or S corporation, the
provision applies at the partner or shareholder level. Each
partner's distributive share and each S corporation
shareholder's pro rata share of items of income, gain,
deduction, or loss of a partnership or S corporation are taken
into account in applying the limitation under the provision for
the taxable year of the partner or S corporation shareholder.
Regulatory authority is provided to require any additional
reporting as the Secretary determines is appropriate to carry
out the purposes of the provision (including with respect to
any other passthrough entity to the extent necessary to carry
out the purposes of the provision).
Section 461(1) applies after the application of certain
other limitations on losses, namely, the passive activity loss
limitation,\1439\ the at-risk limitation,\1440\ and in the case
of a taxpayer who is a partner or S corporation shareholder,
the rules limiting the taxpayer's distributive or pro rata
share of loss for the taxable year to the taxpayer's adjusted
basis in the partnership interest or in the S corporation stock
and debt.\1441\ Thus, for example, the amount of any income,
deduction, gain, or loss from a passive activity that is taken
into account under the passive activity loss limitation is not
taken into account in determining whether a taxpayer has an
excess business loss.
---------------------------------------------------------------------------
\1439\Sec. 469.
\1440\Sec. 465.
\1441\Sec. 704(d) (for partners) and sec. 1366(d) (for S
corporation shareholders). See sec. 461(1)(6) (applying section 461(1)
after section 469), and Treas. Reg. sec. 1.469-2T(d)(6) (applying
section 469 after sections 704(d), 1366(d), and 465). Note that other
rules could potentially limit a taxpayer's loss (e.g., section 267). A
discussion of all potential loss limitation rules is beyond the scope
of the description of this provision.
---------------------------------------------------------------------------

Treatment of capital losses

In the case of a taxpayer other than a corporation, section
1211(b) limits the deduction for losses from sales or exchanges
of capital assets to gains from such sales or exchanges plus up
to $3,000. Section 172(d)(2)(A), relating to NOLs, provides a
similar limitation but without regard to the $3,000 additional
amount. Because capital losses cannot offset ordinary income
under the NOL rules, any capital loss deductions are not taken
into account in computing the section 461(1) limitation.
Further, the amount of capital gain taken into account in
calculating the section 461(1) limitation cannot exceed the
lesser of capital gain net income from a trade or business or
capital gain net income.

Excess farm losses

A limitation on excess farm losses applies to taxpayers
other than C corporations.\1442\ For taxable years beginning
after December 31, 2017, and before January 1, 2026, the
limitation relating to excess farm losses does not apply.\1443\
---------------------------------------------------------------------------
\1442\Sec. 461(j).
\1443\In 2021, section 9041 of Public Law 117-2 extended the period
in which section 461(j) does not apply for one year, effective for
taxable years beginning after December 31, 2017, and beginning before
January 1, 2027. In 2022, section 13903(b) of Public Law 117-169
extended the period in which section 461(j) does not apply for two
additional years, effective for taxable years beginning after December
31, 2020, and beginning before January 1, 2029.
---------------------------------------------------------------------------
Under the limitation relating to excess farm losses, if a
taxpayer other than a C corporation receives an applicable
subsidy\1444\ for the taxable year, the amount of the excess
farm loss is not allowed for the taxable year and is carried
forward and treated as a deduction attributable to farming
businesses in the next taxable year. An excess farm loss for a
taxable year means the excess of aggregate deductions that are
attributable to farming businesses over the sum of aggregate
gross income or gain attributable to farming businesses plus
the threshold amount. The threshold amount is the greater of
(1) $300,000 ($150,000 for married individuals filing
separately), or (2) for the five-consecutive-year period
preceding the taxable year, the excess of the aggregate gross
income or gain attributable to the taxpayer's farming
businesses over the aggregate deductions attributable to the
taxpayer's farming businesses.
---------------------------------------------------------------------------
\1444\For this purpose, an applicable subsidy means (A) any direct
or counter-cyclical payment under title I of the Food, Conservation,
and Energy Act of 2008, or any payment elected to be received in lieu
of such payment, or (B) any Commodity Credit Corporation loan. Sec.
461(j)(3). Note that the Agricultural Act of 2014 repealed direct and
counter-cyclical payments under the Food, Conservation, and Energy Act
of 2008. See secs. 1101 and 1102 of Pub. L. No. 113-79, February 7,
2014. Thus, only Commodity Credit Corporation loans currently fall
within the definition of an applicable subsidy for purposes of section
461(j).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes the excess business loss limitation
improves the functionality of the income tax rules and should
be made permanent along with other provisions of the Tax Cuts
and Jobs Act. The Committee believes that the excess business
loss limitation could be improved by limiting taxpayers'
ability to deduct excess business losses against non-business
income, not only for the taxable year in which such losses
arise, but for subsequent taxable years as well. The prior-law
limitation on excess farm losses has no continuing utility and
the Committee has concluded that it should be terminated.

EXPLANATION OF PROVISION

Permanency

The provision makes permanent the limitation on excess
business loss of a taxpayer other than a corporation (section
461(1)). Specifically, the section 461(1) limitation applies
for taxable years beginning after December 31, 2020. The
provision also provides that the limitation on excess farm
losses (section 461(j)) does not apply for taxable years
beginning after December 31, 2017.

MODIFICATION OF LIMITATION

Additionally, the provision modifies the section 461(1)
limitation. A loss disallowed under the section 461(1)(1)
limitation for a taxable year beginning after December 31, 2024
is carried forward to the subsequent taxable year as a loss
attributable to a trade or business (other than a trade or
business of performing services as an employee) arising in the
subsequent taxable year. The amount carried forward is
therefore included in calculating the subsequent taxable year's
section 461(1)(1) limitation.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

1-Percent Floor on Deduction of Charitable Contributions Made by
Corporations (sec. 112028 of the bill and sec. 170 of the Code)

PRESENT LAW

In general

Section 170(a) allows for a deduction for any charitable
contribution payment made within the taxable year. Total
deductions for charitable contributions by corporate taxpayers
for any taxable year are generally limited to 10 percent of the
taxpayer's taxable income.\1445\ For purposes of the charitable
deduction, a corporate taxpayer's taxable income is computed
without regard to any deduction for charitable contributions
under section 170, the dividends received deduction, the
deductions allowable to corporations under Subtitle A, Chapter
1, Subchapter B, Part VIII (except section 248), any net
operating loss carryback to the taxable year under section 172,
and capital loss carryback to the taxable year under section
1212(a)(1), and section 199A(g). Charitable contributions over
the percentage limitation in any taxable year can be carried
forward to the next five taxable years.\1446\ The amount of
charitable contributions carried forward are reduced to the
extent that the contributions in excess of the percentage
limitation reduces taxable income (as computed for purposes of
the second sentence of section 172(b)(2)) and increases a net
operating loss carryover under section 172 to a succeeding
taxable year.
---------------------------------------------------------------------------
\1445\Sec. 170(b)(2)(A).
\1446\Sec. 170(d)(2)(A).
---------------------------------------------------------------------------

Qualified conservation contributions by certain corporate farmers and
ranchers

A qualified conservation contribution is a type of partial-
interest contribution that is deductible.\1447\ A qualified
conservation contribution is a contribution of a qualified real
property interest to a qualified organization exclusively for
conservation purposes.\1448\ A qualified real property interest
is defined as: (1) the entire interest of the donor other than
a qualified mineral interest; (2) a remainder interest; or (3)
a restriction (granted in perpetuity) on the use that may be
made of the real property (generally, a conservation
easement).\1449\ Qualified organizations include certain
governmental units, public charities that meet certain public
support tests, and certain supporting organizations.\1450\
Conservation purposes include: (1) the preservation of land
areas for outdoor recreation by, or for the education of, the
general public; (2) the protection of a relatively natural
habitat of fish, wildlife, or plants, or similar ecosystem; (3)
the preservation of open space (including farmland and forest
land) where such preservation will yield a significant public
benefit and is either for the scenic enjoyment of the general
public or pursuant to a clearly delineated Federal, State, or
local governmental conservation policy; and (4) the
preservation of an historically important land area or a
certified historic structure.\1451\
---------------------------------------------------------------------------
\1447\Secs. 170(f)(3)(B)(iii) and 170(h).
\1448\Sec. 170(h)(1).
\1449\Sec. 170(h)(2).
\1450\Sec. 170(h)(3).
\1451\Sec. 170(h)(4).
---------------------------------------------------------------------------
In the case of a corporation (other than a publicly traded
corporation) that is a qualified farmer or rancher for the
taxable year in which the contribution is made, any qualified
conservation contribution is allowable up to 100 percent of the
excess of the corporation's taxable income (as computed under
section 170(b)(2)) over the amount of all other allowable
charitable contributions.\1452\ Any excess may be carried
forward for up to 15 years as a contribution subject to the 100
percent limitation.\1453\ The qualified conservation
contribution must be a contribution of property that is used in
agriculture or livestock production and is subject to a
restriction that such property remain available for such
production.\1454\ A qualified farmer or rancher means a
taxpayer whose gross income from the trade or business of
farming (within the meaning of section 2032A(e)(5)) is greater
than 50 percent of the taxpayer's gross income for the taxable
year.\1455\
---------------------------------------------------------------------------
\1452\Sec. 170(b)(2)(B)(i).
\1453\Sec. 170(b)(2)(B)(ii).
\1454\Sec. 170(b)(2)(B)(i).
\1455\Sec. 170(b)(1)(E)(v).
---------------------------------------------------------------------------

Qualified conservation contributions by certain native corporations

In the case of a Native Corporation, any qualified
conservation contribution which is a contribution of land
conveyed under the Alaska Native Claims Settlement Act is
allowable up to 100 percent of the excess of the Native
Corporation's taxable income (as computed under section
170(b)(2)) over the amount of all other allowable charitable
contributions.\1456\ Any excess may be carried forward for up
to 15 years as a contribution subject to the 100 percent
limitation.\1457\ A Native Corporation has the meaning given
the term by section 3(m) of the Alaska Native Claims Settlement
Act.\1458\
---------------------------------------------------------------------------
\1456\Sec. 170(b)(2)(C)(i).
\1457\Sec. 170(b)(2)(C)(ii).
\1458\Sec. 170(b)(2)(C)(iii).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that it is important to provide a
tax benefit to promote charitable giving. The Committee
believes that setting a floor on deductions for corporate
charitable contributions will limit the tax benefit afforded to
inframarginal contributions (i.e., contributions that would be
made regardless of any associated tax benefit), and target tax
benefits at marginal contributions (i.e., contributions that
might not occur if not for an associated tax benefit).

EXPLANATION OF PROVISION

The provision allows a deduction for a corporate charitable
deduction only to the extent that the aggregate of corporate
charitable contributions exceeds one percent of a taxpayer's
taxable income (the ``one-percent floor'') and does not exceed
10 percent of the taxpayer's taxable income (the ``10-percent
limit'').
Contributions in excess of the 10-percent limit may be
carried forward to the subsequent five taxable years and are
treated as allowed on a first-in, first-out basis. The amount
of charitable contributions disallowed under the one-percent
floor may be carried forward only from years in which the
taxpayer's charitable contributions exceed the 10-percent
limit. Any carryforward is applied after contributions made in
the current taxable year for the purposes of the one-percent
floor and 10-percent limit. The amount of charitable
contributions carried forward is reduced to the extent that the
carryforward otherwise would reduce taxable income (as computed
for purposes of the second sentence of section 172(b)(2)) and
increase a net operating loss carryover under section 172 to a
succeeding taxable year.
The provision does not modify the treatment of qualified
conservation contributions by certain corporate farmers and
ranchers or Native Corporations, including the percentage
limitations with respect to such qualified conservation
contributions.

EFFECTIVE DATE

The provision applies to taxable years beginning after
December 31, 2025.

Enforcement of Remedies Against Unfair Foreign Taxes (sec. 112029 of
the bill and new sec. 899 of the Code)

PRESENT LAW

U.S. tax rules applicable to foreign activities of U.S. persons

In general, income earned directly by a U.S. person from
the conduct of a foreign trade or business is taxed
currently,\1459\ while income earned indirectly through certain
related foreign entities (e.g., controlled foreign corporations
(``CFCs''))\1460\ is taxed in the year earned or not at
all.\1461\ Earnings and profits of CFCs are generally taxable
in one of two ways. First, the earnings may constitute income
to U.S. shareholders under the traditional anti-deferral regime
of subpart F, which applies to certain passive income and
income that is readily movable from one jurisdiction to
another.\1462\ Subpart F was designed as an anti-abuse regime
to prevent U.S. taxpayers from shifting passive and mobile
income to low-tax jurisdictions.\1463\ Second, the earnings may
be subject to section 951A, which applies to some foreign-
source income of a CFC that is not subpart F income. Such
income is referred to as global intangible low-taxed income
(``GILTI''). GILTI was enacted as a base protection measure to
counter the participation exemption system, established by the
dividends-received-deduction, under which the income could
potentially be distributed back to the U.S. corporation with no
U.S. tax imposed.\1464\ Subpart F inclusions are taxed at full
rates with related foreign taxes generally eligible for the
foreign tax credit; GILTI inclusions are taxed at reduced rates
with additional limitations on the use of related foreign tax
credits. Both subpart F and GILTI are generally included in
income by the U.S. shareholder without regard to whether the
earnings are distributed by the CFC.
---------------------------------------------------------------------------
\1459\Such income is called foreign branch income.
\1460\A CFC generally is defined as any foreign corporation in
which U.S. persons own (directly, indirectly, or constructively) more
than 50 percent of the corporation's stock (measured by vote or value),
taking into account only ``U.S. shareholders,'' that is, U.S. persons
who own at least 10 percent of the stock (measured by vote or value).
See secs. 951(b), 957, and 958. Special rules apply with respect to
U.S. persons that are shareholders (regardless of their percentage
ownership) in any foreign corporation that is not a CFC but is a
passive foreign investment company (``PFIC''). See secs. 1291 through
1298. The PFIC rules generally seek to prevent the deferral of passive
income through the use of foreign corporations.
\1461\For a more detailed discussion of the rules, see Joint
Committee on Taxation, Background and Analysis of the Taxation of
Income Earned by Multinational Enterprises (JCX-35R-23), July 17, 2023,
Part I.B. This document can be found on the Joint Committee on Taxation
website at www.jct.gov.
\1462\Subpart F comprises sections 951 through 965.
\1463\See Joint Committee on Taxation, Tax Effects of Conducting
Foreign Business through Foreign Corporations (JCT-5-61), July 21,
1961, Part V. This document can be found on the Joint Committee on
Taxation website at www.jct.gov. See also Rev. Act. of 1962, Pub. L.
No. 87-834.
\1464\See Reconciliation Recommendations Pursuant to H. Con. Res.
71 (December 2017).
---------------------------------------------------------------------------

U.S. tax rules applicable to foreign persons

Nonresident aliens and foreign corporations generally are
subject to U.S. tax only on their U.S.-source income. There are
two broad types of taxation of U.S.-source income of foreign
taxpayers: (1) gross-basis tax on income that is ``fixed or
determinable annual or periodical gains, profits, and income''
(``FDAP income''); and (2) net-basis tax on income that is
``effectively connected with the conduct of a trade or business
within the United States'' (``ECI''). FDAP income, although
nominally subject to a statutory 30-percent gross-basis tax
withheld at its source, in many cases is subject to a reduced
rate of, or entirely exempt from, U.S. tax under the Code or a
bilateral income tax treaty. ECI generally is subject to the
same U.S. tax rules and rates that apply to business income
earned by U.S. persons.

Gross-basis taxation of U.S.-source income

FDAP income received by foreign persons from U.S. sources
is subject to a 30-percent gross-basis tax (i.e., a tax on
gross income without reduction for related expenses), which is
collected by withholding at the source of the payment. FDAP
income includes interest, dividends, rents, salaries, wages,
premiums, annuities, compensations, remunerations, and
emoluments.\1465\ The items enumerated in defining FDAP income
are illustrative, and the words ``annual or periodical'' are
``merely generally descriptive'' of the payments within the
purview of the statute.\1466\ Capital gains of nonresident
aliens generally are foreign source; however, capital gains of
nonresident aliens present in the United States for 183 days or
more\1467\ during the year are income from U.S. sources subject
to gross-basis taxation.\1468\ In addition, U.S.-source gains
from the sale or exchange of intangibles are subject to tax and
withholding if they are contingent on the productivity, use, or
disposition of the property sold.\1469\ The categories of
income subject to the 30-percent tax and the categories for
which withholding is required generally are coextensive.\1470\
---------------------------------------------------------------------------
\1465\Secs. 871(a) and 881. FDAP income that is ECI is taxed as
ECI.
\1466\Commissioner v. Wodehouse, 337 U.S. 369, 393 (1949).
\1467\For purposes of this rule, whether a person is considered a
resident in the United States is determined by application of the rules
under section 7701(b).
\1468\Sec. 871(a)(2). In addition, certain capital gains from sales
of U.S. real property interests are subject to tax as ECI under the
Foreign Investment in Real Property Tax Act of 1980 (``FIRPTA''). See
sec. 897(a)(1).
\1469\Secs. 871(a)(1)(D) and 881(a)(4).
\1470\See secs. 1441 and 1442.
---------------------------------------------------------------------------
Exclusions from FDAP income
FDAP income encompasses a broad range of gross income but
has important exceptions.
Interest on bank deposits may qualify for exemption from
treatment as FDAP income on two grounds. First, interest on
deposits with domestic banks and savings and loan associations,
and certain amounts held by insurance companies, is U.S.-source
income but is exempt from the 30-percent tax when paid to a
foreign person.\1471\ Second, interest on deposits with foreign
branches of domestic banks and domestic savings and loan
associations is not U.S.-source income and, thus, is not
subject to U.S. tax.\1472\ Interest and original issue discount
on certain short-term obligations also is exempt from U.S. tax
when paid to a foreign person.\1473\ In addition, an exception
to information reporting requirements may apply with respect to
payments of such exempt amounts.\1474\
---------------------------------------------------------------------------
\1471\Secs. 871(i)(2)(A) and 881(d); Treas. Reg. sec. 1.1441-
1(b)(4)(ii).
\1472\Sec. 861(a)(1); Treas. Reg. sec. 1.1441-1(b)(4)(iii).
\1473\Secs. 871(g)(1)(B) and 881(a)(3); Treas. Reg. sec. 1.1441-
1(b)(4)(iv).
\1474\Treas. Reg. sec. 1.1461-1(c)(2)(ii)(A) and (B). A bank must
report interest if the recipient is a nonresident alien who resides in
a country with which the United States has a satisfactory exchange of
information program under a bilateral agreement and the deposit is
maintained at an office in the United States. Treas. Reg. secs. 1.6049-
4(b)(5) and 1.6049-8. The IRS publishes lists of the countries whose
residents are subject to the reporting requirements, and those
countries with respect to which the reported information is
automatically exchanged. See Rev. Proc. 2024-42, 2024-52 I.R.B. 1433.
---------------------------------------------------------------------------
Although FDAP income includes U.S.-source portfolio
interest, such interest is specifically exempt from the 30-
percent gross-basis tax. Portfolio interest is any interest
(including original issue discount) that is paid on an
obligation that is in registered form and for which the
beneficial owner has provided to the U.S. withholding agent a
statement certifying that the beneficial owner is not a U.S.
person.\1475\ Portfolio interest, however, does not include
interest received by a 10-percent shareholder,\1476\ certain
contingent interest,\1477\ interest received by a CFC from a
related person,\1478\ or interest received by a bank on an
extension of credit made pursuant to a loan agreement entered
into in the ordinary course of its trade or business.\1479\
---------------------------------------------------------------------------
\1475\Sec. 871(h)(2).
\1476\Sec. 871(h)(3).
\1477\Sec. 871(h)(4).
\1478\Sec. 881(c)(3)(C).
\1479\Sec. 881(c)(3)(A).
---------------------------------------------------------------------------
Withholding of 30-percent gross-basis tax
The 30-percent tax on FDAP income is generally collected by
means of withholding.\1480\ Withholding on FDAP payments to
foreign payees is required unless the withholding agent (i.e.,
the person making the payment to the foreign person) can
establish that the beneficial The exemption does not apply to
interest payments made to a foreign lender that owns 10 percent
or more of the voting power (but not value) of the stock of the
borrower owner of the amount is eligible for an exemption from
withholding or a reduced rate of withholding under an income
tax treaty.\1481\
---------------------------------------------------------------------------
\1480\Secs. 1441 and 1442.
\1481\A withholding agent includes any U.S. or foreign person that
has the control, receipt, custody, disposal, or payment of an item of
income of a foreign person subject to withholding. Treas. Reg. sec.
1.1441-7(a). See also Treas. Reg. sec. 1.1441-6 (providing, in part,
the requirements (including documentary evidence) that must be
satisfied for purposes of claiming the benefits of an exemption from,
or reduced rate of, withholding under a treaty).
---------------------------------------------------------------------------
Often, the income subject to withholding is the only income
of the foreign person subject to any U.S. tax. If the foreign
person has no ECI and the withholding is sufficient to satisfy
the tax liability with respect to FDAP income, the foreign
person generally is not required to file a U.S. Federal income
tax return. Accordingly, the withholding of the 30-percent
gross-basis tax generally represents the collection of the
foreign person's final U.S. tax liability.
To the extent that a withholding agent withholds an amount,
the withheld tax is credited to the foreign recipient of the
income.\1482\ If the agent withholds more than is required, and
that results in an overpayment of tax, the foreign recipient
may file a claim for refund.
---------------------------------------------------------------------------
\1482\Sec. 1462.
---------------------------------------------------------------------------

Net-basis taxation of income from conduct of a trade or business within
the United States

Income that is effectively connected with the conduct of a
trade or business within the United States (i.e., ECI)
generally is subject to tax on a net basis under the same U.S.
tax rules and rates that apply to business income earned by
U.S. persons.\1483\
---------------------------------------------------------------------------
\1483\Secs. 871(b) and 882.
---------------------------------------------------------------------------
U.S. trade or business
A foreign person is subject to U.S. tax on a net basis if
the person is engaged in a U.S. trade or business. Partners in
a partnership and beneficiaries of an estate or trust are
treated as engaged in a U.S. trade or business if the
partnership, estate, or trust is so engaged.\1484\
---------------------------------------------------------------------------
\1484\Sec. 875.
---------------------------------------------------------------------------
Whether a foreign person is engaged in a U.S. trade or
business is a factual question that has generated a significant
amount of case law. Basic issues include whether the activity
rises to the level of a trade or business, whether a trade or
business has sufficient connections to the United States, and
whether the relationship between the foreign person and persons
performing activities in the United States for the foreign
person is sufficient to attribute those activities to the
foreign person.
For eligible foreign persons, U.S. bilateral income tax
treaties restrict the application of net-basis U.S. taxation.
Under each treaty, the United States is permitted to tax
business profits only to the extent those profits are
attributable to a U.S. permanent establishment of the foreign
person. The threshold level of activities that constitute a
permanent establishment is generally higher than the threshold
level of activities that constitute a U.S. trade or business.
For example, a permanent establishment typically requires the
maintenance of a fixed place of business over a significant
period of time.
Effectively connected income
A foreign person that is engaged in the conduct of a trade
or business within the United States is subject to U.S. net-
basis taxation on ECI from that trade or business. Specific
statutory rules govern whether income is ECI.\1485\
---------------------------------------------------------------------------
\1485\Sec. 864(c).
---------------------------------------------------------------------------
In general, for a foreign person engaged in the conduct of
a U.S. trade or business, all income, gain, or loss from
sources within the United States is treated as ECI.\1486\
---------------------------------------------------------------------------
\1486\Sec. 864(c)(3).
---------------------------------------------------------------------------
In the case of U.S.-source capital gain and U.S.-source
income of a type that would be subject to gross-basis U.S.
taxation, the factors taken into account in determining whether
the income is ECI include whether the income is derived from
assets used in or held for use in the conduct of the U.S. trade
or business, and whether the activities of the U.S. trade or
business were a material factor in the realization of the
amount (the ``asset use'' and ``business activities''
tests).\1487\ Under the asset use and business activities
tests, due regard is given to whether such asset or such
income, gain, deduction, or loss was accounted for through the
trade or business.
---------------------------------------------------------------------------
\1487\Sec. 864(c)(2).
---------------------------------------------------------------------------
A foreign person that is engaged in a U.S. trade or
business may have limited categories of foreign-source income
that are considered to be ECI.\1488\ A foreign tax credit may
be allowed with respect to foreign income tax imposed on such
income.\1489\ Foreign-source income not included in one of
those categories generally is exempt from U.S. tax.
---------------------------------------------------------------------------
\1488\A foreign person's income from foreign sources generally is
considered to be ECI only if the person has an office or other fixed
place of business within the United States to which the income is
attributable and the income is in one of the following categories: (1)
rents or royalties for the use of patents, copyrights, secret processes
or formulas, goodwill, trademarks, trade brands, franchises, or other
like intangible properties derived in the active conduct of the trade
or business; (2) interest or dividends derived in the active conduct of
a banking, financing, or similar business within the United States or
received by a corporation the principal business of which is trading in
stocks or securities for its own account; or (3) income derived from
the sale or exchange (outside the United States), through the U.S.
office or fixed place of business, of inventory or property held by the
foreign person primarily for sale to customers in the ordinary course
of the trade or business, unless the sale or exchange is for use,
consumption, or disposition outside the United States and an office or
other fixed place of business of the foreign person in a foreign
country participated materially in the sale or exchange. Foreign-source
dividends, interest, and royalties are not treated as ECI if the items
are paid by a foreign corporation more than 50 percent (by vote) of
which is owned directly, indirectly, or constructively by the recipient
of the income. Sec. 864(c)(4)(B) and (D)(i).
\1489\See sec. 906.
---------------------------------------------------------------------------
Allowance of deductions
Taxable ECI is computed by taking into account deductions
associated with gross ECI. Regulations address the allocation
and apportionment of deductions between ECI and other income.
Certain deductions may be allocated and apportioned on the
basis of units sold, gross sales or receipts, costs of goods
sold, profits contributed, expenses incurred, assets used,
salaries paid, space used, time spent, or gross income
received. Specific rules provide for the allocation and
apportionment of research and experimental expenditures, legal
and accounting fees, income taxes, losses on dispositions of
property, and net operating losses. In general, interest is
allocated and apportioned based on assets rather than income.
Sales of partnership interests
Gain or loss from the sale or exchange of a partnership
interest is treated as effectively connected with a U.S. trade
or business to the extent that the transferor would have had
effectively connected gain or loss had the partnership sold all
of its assets at fair market value as of the date of the sale
or exchange.\1490\ Any gain or loss from such hypothetical
asset sale by the partnership must be allocated to interests in
the partnership in the same manner as non-separately stated
income and loss.
---------------------------------------------------------------------------
\1490\Sec. 864(c)(8)(B).
---------------------------------------------------------------------------
The transferee of a partnership interest must withhold 10
percent of the amount realized on the sale or exchange of a
partnership interest unless the transferor certifies that the
sale qualifies for an exception from withholding (e.g., that
the transferor is not a nonresident alien individual or foreign
corporation or that there is no realized gain from the
sale).\1491\ If the transferee fails to withhold the correct
amount, the partnership is required to deduct and withhold from
distributions to the transferee partner an amount equal to the
amount the transferee failed to withhold.\1492\
---------------------------------------------------------------------------
\1491\Sec. 1446(f)(1).
\1492\Sec. 1446(f)(4); Treas. Reg. sec. 1.1446(f)-2(b).
---------------------------------------------------------------------------
Foreign Investment in Real Property Act (``FIRPTA'')
A foreign person's gain or loss from the disposition of a
U.S. real property interest (``USRPI'') is treated as
ECI.\1493\ Thus, a foreign person subject to tax on such a
disposition is required to file a U.S. tax return. In the case
of a foreign corporation, the gain from the disposition of a
USRPI may also be subject to the branch profits tax at a 30-
percent rate (or lower treaty rate). Certain sales of USRPI are
exempt from this tax. For example, qualified foreign pension
funds are not treated as nonresident alien individuals or
foreign corporations subject to tax under FIRPTA,\1494\ foreign
governments are exempt from FIRPTA tax on gain from certain
sales of stock of U.S. real property holding
corporations,\1495\ and equity interests in ``domestically
controlled'' REITs are not USRPIs.\1496\
---------------------------------------------------------------------------
\1493\Sec. 897(a).
\1494\Sec. 897(l)(1).
\1495\Treas. Reg. sec. 1.892-3T(a).
\1496\Sec. 897(h)(2).
---------------------------------------------------------------------------
The payor of income that FIRPTA treats as ECI is generally
required to withhold U.S. tax from the payment.\1497\ The
foreign person can request a refund with its U.S. tax return,
if appropriate, based on that person's overall tax liability
for the taxable year.
---------------------------------------------------------------------------
\1497\Sec. 1445 and regulations thereunder.
---------------------------------------------------------------------------

Base erosion and anti-abuse tax

The BEAT is an additional tax imposed on certain
multinational corporations with respect to payments to foreign
affiliates, intended as a special measure to address potential
tax avoidance.\1498\
---------------------------------------------------------------------------
\1498\Sec. 59A. For a description of the BEAT, see supra the
description of present law for section 111005, Extension of base
erosion minimum tax amount.
---------------------------------------------------------------------------

OECD global agreement and Pillar Two

At the direction of the G-20, the Organization of Economic
Co-operation and Development (``OECD'') has coordinated
international efforts to agree on a new means of allocating
certain income of multinational enterprises (``Pillar One'')
and to coordinate the implementation of a global minimum tax
(``Pillar Two'').
Pillar Two provides for a minimum global level of income
taxation for multinational enterprises (``MNEs'') based on a
certain set of rules, including rules for calculating income
subject to the minimum tax, calculating the effective tax rate
imposed on such income before applying Pillar Two, determining
priority of jurisdictions to collect the minimum tax, and
establishing reporting requirements.
In December 2021, the OECD published ``Global Anti-Base
Erosion Model Rules (Pillar Two),'' which provides for a system
of taxation based on financial accounts applying a minimum rate
of 15 percent on a jurisdictional (``country-by-country'')
basis (the ``Model Rules'').\1499\ In March 2022, the OECD
published general commentary (and related examples) on the
Model Rules,\1500\ and in December 2022, the OECD published
guidance on a transitional safe harbor, a framework for a
permanent safe harbor, and transitional penalty relief.\1501\
In 2023 through 2025, the OECD published several sets of
administrative guidance on the Model Rules to address certain
specific questions in need of clarification and simplification.
A number of jurisdictions have agreed in principle to adopt
Pillar Two, and many have already enacted legislation or
proposed legislation to adopt (or partially adopt) the Model
Rules.
---------------------------------------------------------------------------
\1499\OECD, ``Tax Challenges Arising from the Digitalisation of the
Economy--Global Anti-Base Erosion Model Rules (Pillar Two): Inclusive
Framework on BEPS,'' 2022, available at https://www.oecd.org/tax/beps/
tax-challenges-arising-from-the-digitalisation-of-the-economy-global-
anti-base-erosion-model-rules-pillar-two.htm.
\1500\OECD, ``Tax Challenges Arising from the Digitalisation of the
Economy--Commentary to the Global Anti-Base Erosion Model Rules (Pillar
Two), First Edition: Inclusive Framework on BEPS,'' 2022, available at
https://web-archive.oecd.org/2022-03-14/626821-tax-challenges-arising-
from-the-digitalisation-of-the-economy-global-anti-base-erosion-model-
rules-pillar-two-commentary.pdf. For the related examples, see OECD,
``Tax Challenges Arising from the Digitalisation of the Economy--Global
Anti-Base Erosion Model Rules (Pillar Two) Examples,'' 2022, available
at https://www.oecd.org/tax/beps/tax-challenges-arising-from-the-
digitalisation-of-the- economy-global-anti-base-erosion-model-rules-
pillar-two-examples.pdf.
\1501\OECD, ``Safe Harbours and Penalty Relief: Global Anti-Base
Erosion Rules (Pillar Two), OECD/G20 Inclusive Framework on BEPS,''
2022, available at https://www.oecd.org/tax/beps/safe-harbours-and-
penalty-relief-global-anti-base-erosion-rules-pillar-two.pdf.
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The Model Rules apply to MNE groups (and their constituent
entities) that have annual revenue of e750 million or more in
the consolidated financial statements of the ultimate parent
entity in at least two of the four fiscal years immediately
preceding the tested fiscal year.\1502\
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\1502\Art. 1.1.1 of the Model Rules. An MNE group (or here just
MNE) means a collection of entities that are related through ownership
or control such that the assets, liabilities, income, expenses, and
cash flows of those entities are included in the consolidated financial
statements of the ultimate parent entity with at least one entity (or
permanent establishment) that is not located in the jurisdiction of the
ultimate parent entity. Art. 1.1.1 and Art. 1.2.2 of the Model Rules.
The ultimate parent entity generally is one that owns (directly or
indirectly) a controlling interest in any other entity and in which no
other entity owns a controlling interest. Art. 1.4.1 of the Model
Rules.
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Application of the top-up tax
Top-up tax is due with respect to income in a jurisdiction
if book income, subject to certain adjustments (``Globe
income'') in the jurisdiction is subject to an effective tax
rate (``ETR'') of less than 15 percent. The additional top-up
tax may be collected first by the source country pursuant to a
qualified domestic minimum top-up tax (``QDMTT''), second by
the residence country of the MNE's ultimate parent entity
pursuant to the income inclusion rule (``IIR''), third by the
residence country of a lower-tier parent entity (also pursuant
to the IIR), and finally by the residence country of any other
affiliated entity pursuant to the so-called undertaxed profits
rule (``UTPR'').
Globe income and the base of the top-up tax
Globe income (or loss) in a country generally is the net
income (or loss) determined for an entity in preparing
consolidated financial statements of the ultimate parent
entity.\1503\ If Globe income in a country is subject to an ETR
of less than 15 percent, then the Globe income is subject to a
top-up tax.
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\1503\Art. 3.1.2 of the Model Rules. Several adjustments are made.
Art 3.2.1 of the Model Rules.
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The ETR for a jurisdiction is equal to the sum of the
``adjusted covered taxes'' paid in that jurisdiction divided by
the net Globe income in that jurisdiction.\1504\ Adjusted
covered taxes are the current tax expenses that have accrued
for purposes of calculating that year's financial accounting
net income, adjusted for taxes on certain temporary differences
between tax and financial reporting.\1505\
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\1504\Art. 5.1.1 of the Model Rules.
\1505\Art. 4.1 of the Model Rules.
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The base of the top-up tax (``excess profit'') generally is
Globe income\1506\ less the substance-based income exclusion
for the country.\1507\ The substance-based income exclusion is
five percent of (1) eligible payroll costs in the country and
(2) the carrying value of eligible tangible assets in the
country.\1508\
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\1506\``Globe'' income is an acronym for Global Anti-Base Erosion
income (officially, ``GloBE'' income).
\1507\Art. 5.2.3 of the Model Rules.
\1508\Art. 5.3 of the Model Rules. Initially, the substance-based
income exclusion is set to be 10 percent for eligible payroll costs and
eight percent for the carrying value of eligible tangible assets, both
phased down to five percent over a 10-year transition period.
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QDMTT
The primary right to tax income (including Globe income)
arising in a jurisdiction is with the jurisdiction (the source
country) itself. Thus, if in country X an MNE earns Globe
income that is subject to an ETR of less than 15 percent,
country X has priority in applying a top-up tax. The mechanism
for applying that top-up tax (i.e., a top-up tax on domestic
income) is the QDMTT.
A natural question arises: why would country X choose to
apply a new tax (the QDMTT) instead of simply changing its
local corporate tax, whether by increasing the rate (to 15
percent) or expanding the base (to resemble Globe income more
closely)? The answer is that the tax base for purposes of
determining an MNE's ETR is generally greater than the tax base
for purposes of determining the top-up tax. A 15-percent
corporate tax that followed the Model Rules in determining its
tax base would tend to collect more corporate tax than required
under the top-up tax.\1509\ In other words, the QDMTT
represents the only way under Pillar Two for a country to
collect in every case the minimum tax liability due with
respect to Globe income arising in its jurisdiction while
increasing its effective tax rate by as little as possible.
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\1509\A 15-percent corporate tax imposed on only the base of the
top-up tax would be treated in most cases as having an ETR of less than
15 percent.
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As described below, if a source country does not impose a
QDMTT, the Model Rules allow other countries to collect any
top-up tax due with respect to Globe income earned in the
source country.
IIR
The secondary right to collect a top-up tax with respect to
Globe income earned in a source country is with the
jurisdiction of the MNE's ultimate parent entity.\1510\ This
top-up tax is known as the IIR. The mechanism is like other tax
regimes (``CFC taxes'') that require a parent entity to pay
current tax on the income of CFCs, including Subpart F income
and GILTI under U.S. law. In terms of ordering, QDMTTs come
before CFC taxes, and CFC taxes come before IIRs (which all
come before the UTPR, as discussed below).
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\1510\Art. 2.1.1 to 2.1.3 of the Model Rules.
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If the jurisdiction of the ultimate parent entity does not
impose an IIR, the jurisdiction of an intermediate parent
entity (i.e., between the ultimate parent entity and the source
country) is allowed to collect under their own IIRs any top-up
tax due with respect to Globe income earned in the source
country.\1511\
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\1511\The IIR has ordering rules to ensure that Globe income in a
country is subject to top-up tax exactly once.
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UTPR
The final mechanism providing for the collection of top-up
tax is the UTPR. If the source country does not impose a QDMTT
and no parent entity is in a jurisdiction imposing an IIR, but
a top-up tax is due, then countries in which other MNE
affiliates are located may collect the top-up tax under a UTPR.
Those countries share the top-up tax according to the number of
employees in each UTPR jurisdiction and the value of tangible
assets in each UTPR jurisdiction.\1512\
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\1512\The formula is: UTPR percentage = (50 percent of number of
employees in a UTPR jurisdiction/number of employees in all UTPR
jurisdictions) + (50 percent of net book value of tangible assets in a
UTPR jurisdiction / net book value of tangible assets in all UTPR
jurisdictions). Thus, the allocation of UTPR liability is half by
number of employees and half by net book value of tangible assets.
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ETR
The ETR on Globe income in a source country may depend on
the treatment of certain incentives provided by the country.
Grants are treated as additions to Globe income, whereas tax
credits are treated as reductions to taxes paid for purposes of
calculating the ETR. Certain refundable tax credits (i.e.,
``qualified refundable tax credits'' or ``QRTCs''), however,
are treated as grants and, therefore, increase Globe income
rather than reduce taxes paid.\1513\
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\1513\Art. 4.1.2(d) of the Model Rules. The Model Rules generally
define QRTC as ``a refundable tax credit designed in a way such that it
must be paid as cash or available as cash equivalents within four years
from when . . . [the MNE] satisfies the conditions for receiving the
credit under the laws of the jurisdiction granting the credit.''
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For example, consider an MNE in country X with Globe income
of 100x, taxes of 20x, and tax credits of 6x. Before accounting
for credits, the MNE has an ETR of 20 percent (20x/100x).
Whether the MNE is subject to top-up tax depends on the
treatment of the credits. If the tax credits are QRTCs, then
the ETR is 18.9 percent (20x/106x), well above 15 percent. If
the tax credits are not QRTCs, however, then the ETR is 14
percent (14x/100x) and the MNE is subject to top-up tax.

Digital services taxes

Overview
Digital services taxes (``DSTs'') refer to unilateral
attempts by countries to impose taxes on the revenue generated
by the digital activity of (largely) foreign multinational
companies operating within their jurisdiction. Often, companies
who generate digital revenue across many jurisdictions do not
maintain a physical presence in the countries in which they
operate. DSTs are a mechanism for taxing the activity of
companies who might otherwise fall out of the country's income
tax base. DSTs can target a range of digital activities,
including advertising, streaming, the operation of intermediary
services (such as online marketplaces), and the collection and
sale of user data. For example, the United Kingdom's DST
imposes a two-percent tax on the revenue from online
marketplaces, search engines, and social media platforms which
derive value from United Kingdom users. Austria's DST imposes a
five percent tax on revenues from digital advertisement
services. Certain countries like Colombia have enacted laws
that deem a foreign company to have a significant economic
presence (``SEP'') if they provide digital services to domestic
users. Companies with SEP status are subject either to the
country's income tax or to a tax on their revenues.
DSTs and Pillar One
One of the original goals of Pillar One was to stop the
promulgation of DSTs. In October 2021, the OECD and the G-20
announced that the Inclusive Framework had agreed in principle
to the proposed two-pillar solution to address the tax
challenges arising from the current state of international
taxation of MNEs. The statement included a moratorium on
adoption or enforcement of unilateral measures. The signatories
agreed that ``[n]o newly enacted Digital Services Taxes or
other relevant similar measures will be imposed on any company
from [October 8, 2021] and until the earlier of [December 31,
2023] or the coming into force of the [Multilateral Convention
on Pillar One].''\1514\
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\1514\OECD, ``Statement on a Two-Pillar Solution to Address the Tax
Challenges Arising from the Digitalisation of the Economy'' (``October
2021 Statement''), 2021, available at https://www.oecd.org/tax/beps/
statement-on-a-two-pillar-solution-to-address-the-tax-challenges-
arising-from-the-digitalisation-of-the-economy-october-2021.htm.
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In addition, the statement included an Annex describing the
planned implementation of the two pillars. Pillar One provides
for the removal of unilateral measures such as DSTs and revises
the principles governing profit allocation among related
parties and the amount and kind of contact between a business
and a country (i.e., nexus) that is deemed sufficient to
justify that country's taxation of that business.
In October 2023, the OECD published a consolidated draft of
a proposed Multilateral Convention on Pillar One (the ``MLC''),
limited to implementation of Amount A.\1515\ Under the terms of
the Pillar One Blueprint, as well as all subsequent iterations
of the terms of Pillar One, members of the Inclusive Framework
agree to rescind existing, and forgo future, DSTs and other
unilateral measures in return for international consensus
regarding the proper allocation of taxing rights with respect
to certain profits of the largest MNEs.\1516\ Such allocation
requires determination of the residual profit that is allocated
to market jurisdictions (``Amount A'') and ceding taxing rights
to market jurisdictions within a framework that ensures tax
certainty for the affected firms within scope of the measure.
In addition, Pillar One provides for a streamlined
determination and allocation of profit from routine controlled
transactions (``Amount B''). A jurisdiction joining the MLC may
not enact or enforce a DST and if in violation of that
prohibition, cannot receive any allocation of residual profits
under Amount A.\1517\
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\1515\The three documents published by the OECD on October 11,
2023, are ``Multilateral Convention to Implement Amount A of Pillar
One'' (``MLC''), available at https://www.oecd.org/tax/beps/
multilateral-convention-to-implement-amount-a-of-pillar-one.pdf;
``Explanatory Statement to the Multilateral Convention to Implement
Amount A of Pillar One,'' available at https://www.oecd.org/tax/beps/
explanatory-statement-multilateral-convention-to-implement-amount-a-of-
pillar-one.pdf; and ``Understanding on the Application of Certainty for
Amount A of Pillar One'' (``Tax Certainty Understanding''), available
at https://www.oecd.org/tax/beps/understanding-on-the-application-of-
certainty-for-amount-a-of-pillar-one.pdf.
\1516\Pillar One Blueprint, pars. 9, 89, and 847.
\1517\MLC, Article 39(1).
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The MLC includes a definition of DSTs and similar measures
prohibited under Pillar One.\1518\ Whether a tax is a DST or
similar measure is determined by reference to criteria such as
whether the tax is based on location of users or other market-
based factors; is applicable only to nonresidents, either
explicitly or in practice, because of revenue thresholds or
other factors that insulate local business from such taxes; and
is not within the scope of covered taxes in bilateral
agreements intended to relieve double taxation. Value-added
taxes, transaction taxes, and anti- abuse measures are
generally not within the scope of the prohibited measures under
the MLC.
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\1518\MLC, Article 39(2); see also MLC, Article 38 (Removal of
Existing Measures) and Annex A (List of Existing Measures Subject to
Removal).
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The MLC enters into force only when ratified by 30
countries accounting for at least 60 percent of the ultimate
parent entities of MNEs initially expected to be in scope for
Amount A. Thus, the MLC cannot enter into force without
ratification by the United States.\1519\
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\1519\MLC, Article 48 (Entry into Force) and Annex I. Ratifying
jurisdictions must represent at least 600 points of the 1000 points
available. Of the total 1000 points available, 463 points are allocated
to the United States.
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The MLC neither resolves how to ensure the rescission of
DSTs nor how to preclude any new such measures. As stated
above, the revocation or removal of the unilateral measures and
DSTs enacted in several jurisdictions was a predicate to the
agreement that resulted in the new taxing right proposed under
Pillar One. However, as the likelihood of the MLC entering into
force became more uncertain, various other countries began to
consider the enactment of DSTs again. As of February 27, 2025,
over 30 countries, including several large trading partners of
the United States, have enacted DSTs, and several others have
proposed legislation or announced an intention to implement
DSTs.
On January 20, 2025, the President signed an Executive
Order stating that the OECD global tax deal has no force or
effect in the United States,\1520\ followed the next day by a
memorandum announcing that the United States would take action
against countries enacting DSTs and other discriminatory
taxes.\1521\
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\1520\White House, The Organization for Economic Cooperation and
Development (OECD) Global Tax Deal (Global Tax Deal), January 20, 2025,
available at https://www.whitehouse.gov/presidential-actions/2025/01/
the-organization-for-economic-co-operation-and-development-oecd-global-
tax-deal-global-tax-deal/.
\1521\White House, Defending American Companies and Innovators From
Overseas Extortion and Unfair Fines and Penalties, February 21, 2025,
available at https://www.whitehouse.gov/presidential-actions/2025/02/
defending-american-companies-and-innovators-from-overseas-extortion-
and-unfair-fines-and-penalties/.
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REASONS FOR CHANGE

The Committee is concerned about the proliferation of
extraterritorial and discriminatory taxes imposed on American
businesses. The UTPR allows extraterritorial jurisdiction over
American income by imposing a tax on a resident subsidiary or
branch of a foreign country on income generated outside the
foreign country. This extraterritorial jurisdiction violates
countries' obligations under tax treaties with the United
States and contravenes the longstanding international agreement
on which international taxing rights are founded. Further, the
tax discriminates against American businesses by imposing a tax
on their subsidiaries or related parties that is not imposed on
other, similar businesses. In addition, it limits the ability
of the United States to enact tax policies that promote growth
and investment in the United States. Under the UTPR, both U.S.-
headquartered companies and foreign-headquartered companies
that operate in the United States face retaliation in the form
of higher taxes imposed on foreign sister companies and
subsidiaries if the United States does not comply with foreign
tax policy objectives. The Committee is also concerned about
the proliferation of DSTs. DSTs are often drafted to appear
nondiscriminatory on their face, but are designed to
disproportionately impact American companies and therefore are
discriminatory in effect.
This provision will deter foreign countries from
inappropriately taxing the income of U.S. corporations and
their subsidiaries by increasing the tax imposed on a foreign
country's residents (and their subsidiaries) and other entities
connected to such country if the country has an
extraterritorial or discriminatory tax and by increasing the
BEAT tax rate and generally revoking certain favorable BEAT
provisions for U.S. corporations that are owned by such
entities. The provision creates an incentive for foreign
jurisdictions to remove the unfair treatment of U.S.-
headquartered or otherwise U.S.-parented companies, since it
ceases to apply to these entities if the country revokes its
discriminatory or extraterritorial tax or if the country
provides that the discriminatory or extraterritorial tax does
not apply to U.S. persons and their subsidiaries. Finally, the
provision is designed to encourage foreign countries to act
quickly by increasing in effect over time.

EXPLANATION OF PROVISION

The provision adds a new section 899, ``Enforcement of
Remedies Against Unfair Foreign Taxes,'' to the Code. Under the
provision, the specified rate of tax that applies to an
``applicable person'' is increased by an ``applicable number of
percentage points.'' The specified rates of tax generally are:
(i) the 30-percent rate imposed on FDAP income,
certain capital gains, and certain other types of U.S.-
source income of a nonresident alien individual;\1522\
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\1522\This refers to the 30-percent rate imposed under section
871(a)(1) and section 871(a)(2).
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(ii) the individual income tax rates imposed on a
nonresident alien individual subject to tax on ECI, but
only to the extent imposed on gains and losses from the
disposition of a United States real property
interest;\1523\
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\1523\This refers to the individual income tax rates in section 1
imposed under section 871(b), but only to the extent imposed on gains
and losses under section 897(a)(1)(A).
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(iii) the 30-percent rate imposed on FDAP income and
certain other types of U.S.-source income of a foreign
corporation;\1524\
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\1524\This refers to the 30-percent rate imposed under section
881(a).
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(iv) the 21-percent corporate income tax imposed on a
foreign corporation's ECI;\1525\
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\1525\This refers to the 21-percent rate imposed on income treated
as ECI under section 882(a).
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(v) the 30-percent rate imposed on divided equivalent
amounts of a branch (i.e., branch profits tax);\1526\
and
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\1526\This refers to the tax imposed under section 884.
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(vi) the four-percent rate imposed on U.S.-source
gross investment income of foreign private
foundations.\1527\
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\1527\This refers to the four-percent tax rate imposed under
section 4948.
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However, if another rate of tax applies in lieu of such
rate, such other rate is increased by the applicable number of
percentage points. The tax rate increase is the applicable
number of percentage points in effect for the relevant
discriminatory foreign country during the taxpayer's taxable
year. If more than one applicable number of percentage points
is in effect during the taxable year, the applicable number of
percentage points is determined by using a weighted average,
based on each applicable number of percentage points in effect
during the taxable year and the number of days during which it
was in effect. For purposes of determining the weighted
average, the applicable number of percentage points is treated
as zero for periods before the discriminatory foreign country's
applicable date and after the taxpayer ceases to be an
applicable person.
Furthermore, the provision provides that the gross income
exclusion in section 892(a), which exempts from taxation income
of foreign governments received from certain investments in the
United States and certain interests on deposits in U.S. banks
shall be exempt from taxation, does not apply to any government
(within the meaning of section 892) of a discriminatory foreign
country.\1528\
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\1528\The tax-exempt status of other entities eligible for a
statutory exemption are not impacted by this provision. For example,
entities exempt under section 501(c) retain their exemption from tax.
Similarly, the provision does not change the exemption for
international organizations described in section 892(b) or foreign
central banks under section 895.
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The provision also modifies the treatment of the BEAT with
respect to certain corporations that are more than 50-percent
owned (by vote or value), within the meaning of section 958(a),
by certain other applicable persons. For those corporations,
the BEAT is applied as if:
(i) the corporation has sufficient average annual
gross receipts and a sufficient base erosion percentage
to be an applicable taxpayer subject to the BEAT,
provided the corporation meets the other requirements
of an applicable taxpayer;\1529\
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\1529\For the other requirements for meeting the definition of an
applicable taxpayer, see section 59(e)(1)(A).
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(ii) for purposes of calculating the base erosion
minimum tax amount, modified taxable income is subject
to a rate of 12.5 percent, and regular tax liability is
reduced by all credits allowed under chapter 1 of the
Code;
(iii) base erosion tax benefits attributable to base
erosion payments are not reduced for amounts on which
tax is imposed or withheld, and the base erosion
percentage and base erosion payments are computed
without regard to the exception for certain services in
section 59A(d)(5); and
(iv) any amount (other than the purchase price of
depreciable or amortizable property or inventory) that
would have been a base erosion payment (as an amount
paid or accrued to a related foreign party for which a
deduction is allowable) but for the fact that the
taxpayer capitalizes the amount is treated as if the
amount had been deducted rather than capitalized for
purposes of calculating the taxpayer's base erosion
payments and base erosion tax benefits and is therefore
added to taxable income for purposes of calculating
modified taxable income.
In addition, the provision increases certain withholding
taxes. Specifically, the provision increases the following
rates of tax by the applicable number of percentage points in
effect on the date of payment or disposition:
(i) the 30-percent rate on payments of FDAP income,
certain capital gains, and certain other types of U.S.
source income to an applicable person;\1530\
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\1530\This refers to the 30-percent rate specified in sections
1441(a) and 1442(a).
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(ii) the 15-percent rate on dispositions of United
States real property interests by an applicable
person;\1531\ and
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\1531\This refers to the 15-percent rate specified in section
1445(a).
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(iii) the rate applicable in the case of certain
dispositions, distributions, or other transactions
involving or connected to an applicable person.\1532\
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\1532\This refers to the rate specified in section 1445(e).
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However, if another rate of tax applies in lieu of such
statutory rate, such other rate is increased by the applicable
number of percentage points.\1533\ No penalties or interest are
imposed with respect to the failure to deduct or withhold under
this rule before January 1, 2027, if the person required to
deduct or withhold demonstrates to the satisfaction of the
Secretary that they made best efforts to do so in a timely
manner.
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\1533\Because the provision only increases the specified rates of
tax, it does not apply to income that is explicitly excluded from the
application of the specified tax. Thus, for example, the provision does
not apply to portfolio interest, to the extent that portfolio interest
is excluded from the tax imposed on FDAP income. See section 871(h).
Contrast certain categories of income that are subject to a reduced or
zero rate of tax in lieu of the statutory rate, such as amounts that
are exempted or subject to a reduced or zero rate of tax under a treaty
obligation.
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The applicable number of percentage points means, with
respect to any foreign country that is not a discriminatory
foreign country, zero, and with respect to any discriminatory
foreign country, five percentage points during the first one-
year period beginning on the applicable date, and such amount
increased by an additional five percentage points for each one-
year period thereafter. However, the rate increases are limited
such that the rate cannot exceed the relevant statutory rate
(determined without regard to any rate applicable in lieu of
such statutory rate) by more than 20 percentage points. The
applicable date means, with respect to any discriminatory
foreign country, the first day of the first calendar year
beginning on or after the latest of (i) 90 days after the date
of enactment of the provision; (ii) 180 days after the date of
enactment of the unfair foreign tax that causes the country to
be treated as a discriminatory foreign country, or (iii) the
first date that an unfair foreign tax of the country begins to
apply. If, on any day, the taxpayer is an applicable person
with respect to more than one discriminatory foreign country,
the highest applicable number of percentage points in effect
applies. For purposes of the provision, an ``applicable
person'' means:
(i) any government (within the meaning of section
892) of a discriminatory foreign country;
(ii) any individual (other than a U.S. citizen or
resident) who is a tax resident of a discriminatory
foreign country;
(iii) any foreign corporation that is a tax resident
of a discriminatory foreign country, other than U.S.-
owned foreign corporations;\1534\
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\1534\U.S.-owned foreign corporations are as defined in section
904(h)(6).
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(iv) any private foundation (within the meaning of
section 4948) created or organized in a discriminatory
foreign country;
(v) any foreign corporation, other than a publicly
held corporation, that is more than 50 percent owned
(by vote or value) directly or indirectly after
applying certain attribution rules by other applicable
persons;\1535\
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\1535\Direct or indirect ownership after application of attribution
rules is as specified in section 958(a).
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(vi) any trust for which the majority of beneficial
interests are held (directly or indirectly) by
applicable persons; and (vii) foreign partnerships,
branches, and any other entity identified by the
Secretary with respect to a discriminatory foreign
country.
If a person who was an applicable person would have ceased
to be an applicable person for a period of less than one year,
they continue to be treated as an applicable person during that
period.
The provision defines ``unfair foreign tax'' to include a
UTPR, DST, diverted profits tax, and, to the extent provided by
the Secretary, an extraterritorial tax, discriminatory tax, or
any other tax enacted with a public or stated purpose that the
tax be economically born, directly or indirectly,
disproportionately by U.S. persons. However, an unfair foreign
tax does not include any tax that neither applies to any U.S.
person (or trade or business thereof) nor to any foreign
corporation (or trade or business thereof) that is a CFC and is
more than 50 percent owned (by vote or value) directly or
indirectly by U.S. persons.\1536\
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\1536\Direct or indirect ownership after application of attribution
rules is as specified in section 958(a).
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The provision defines ``extraterritorial tax'' to generally
mean any tax imposed by a foreign country on a corporation (or
the corporation's trade or business) that is determined by
reference to the income or profits of any person (or the
person's trade or business) by reason of such person being
connected to the corporation through a chain of ownership
(determined without regard to the ownership interests of any
individual) other than as a result of the corporation having a
direct or indirect ownership interest in such person.
The provision defines ``discriminatory tax'' to generally
mean any tax imposed by a foreign country if:
(i) the tax applies more than incidentally to items
of income that would not be considered to be from
sources, or effectively connected to a trade or
business, within the foreign country;
(ii) the tax is imposed on a base other than net
income and is not computed by permitting recovery of
costs and expenses;
(iii) the tax is exclusively or predominantly
applicable to nonresident individuals and foreign
corporations or partnerships because of the application
of revenue thresholds, exemptions, or exclusions for
taxpayers subject to the foreign country's corporate
income tax or other restrictions of scope that ensure
that substantially all residents supplying comparable
goods or services are excluded from the tax; or
(iv) the tax is not treated as an income tax under
the laws of the foreign country or is otherwise treated
as outside the scope of any agreements that are in
force between such country and one or more other
jurisdictions for the avoidance of double taxation with
respect to taxes on income.
However, except to the extent provided by the Secretary, an
extraterritorial tax and a discriminatory tax do not include
any generally applicable tax that constitutes:
(i) an income tax generally imposed on the citizens
or residents of the foreign country, even if the
computation of income includes payments that would be
foreign source income;
(ii) an income tax that would otherwise be an unfair
foreign tax solely because it is imposed on the income
of nonresidents attributable to a trade or business in
such foreign country;
(iii) an income tax that would otherwise be an unfair
foreign tax solely because it is imposed on citizens or
residents of such foreign country by reference to the
income of a corporate subsidiary of such person;
(iv) a withholding tax or gross basis tax on any
amount described in section 871(a)(1) or 881(a)
(generally, FDAP income withholding), other than a
withholding tax or gross basis tax imposed with respect
to services performed by persons other than
individuals;
(v) a value added tax, goods and services tax, sales
tax, or other similar tax on consumption;
(vi) a tax imposed with respect to transactions on a
per-unit or per-transaction basis;
(vii) a tax on real or personal property, an estate
tax, gift tax, or other similar tax;
(viii) a tax that would otherwise be an
extraterritorial tax or discriminatory tax solely by
reason of consolidation or loss sharing rules, provided
that the consolidation or loss sharing rules generally
apply only with respect to income of tax residents of
the foreign country; or
(ix) any other tax identified by the Secretary.
For purposes of the provision, the term ``discriminatory
foreign country'' means any foreign country that has unfair
foreign taxes; ``foreign country'' includes foreign countries,
political subdivisions thereof, and dependent territories or
possessions of the country (but not any possession of the
United States); and a ``tax'' includes any increase in tax,
whether effectuated by an increase in the rate of tax or the
base on which the tax is imposed, or by a denial of deductions,
denial of credits, or other means.
The provision instructs the Secretary to issue regulations
or other guidance that are necessary and appropriate to carry
out the purposes of new section 899, including to: (i) provide
for adjustments to its application to prevent the avoidance of
its purposes, including with respect to the application to
branches, partnerships, and other entities; (ii) quarterly
listing the discriminatory foreign countries (and each
country's applicable date);\1537\ (iii) notify Congress of any
changes to such list; (iv) exercise the authority to provide
exceptions to the definitions of applicable person,
extraterritorial tax, and discriminatory tax; and (v) prevent
certain payments to a foreign related party that are treated as
base erosion payments and base erosion tax benefits from being
double counted in the denominator of the base erosion
percentage for purposes of the BEAT.
---------------------------------------------------------------------------
\1537\The Secretary is expected to issue a list of discriminatory
foreign countries in a form and manner that allows for regular updates,
and which is easily accessible to taxpayers, withholding agents, and
the public. This is not required to be included in regulations or other
formal guidance to take effect.
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision is effective on the date of enactment.
The rate increases on FDAP income, ECI, the branch profits
tax, and the excise tax on foreign private foundations and the
modifications to the application of the BEAT apply to taxable
years beginning after the later of (i) 90 days after the date
of enactment of the provision, (ii) 180 days after the date of
enactment of the unfair foreign tax that causes such country to
be treated as a discriminatory foreign country, and (iii) the
first date that the unfair foreign tax of such country begins
to apply; and before the last date on which the discriminatory
foreign country imposes an unfair foreign tax. The rate
increases on withholding tax apply with respect to a person for
each calendar year beginning during the period that such person
is an applicable person, provided that they do not apply if the
foreign country is not listed as a discriminatory foreign
country by the Secretary (or in the case of certain foreign
corporations or trusts that are applicable persons because
their owners or beneficiaries are applicable persons, if the
discriminatory foreign country and its applicable date have not
been so listed for 90 days).

Reduction of Excise Tax on Firearms Silencers (sec. 112030 of the bill
and sec. 5811 of the Code)

PRESENT LAW

The National Firearms Act (the ``NFA''),\1538\ which is
codified as chapter 53 of the Code, requires importers,
manufacturers, and dealers in firearms to pay a special
occupational tax and register with the Treasury, and also
imposes excise taxes on the transfer and making of
firearms.\1539\ Generally, in order to engage in business, an
importer or manufacturer of firearms is required to pay a
special occupational tax of $1,000 for each year and for each
place of business; a dealer of firearms is required to pay an
special occupational tax of $500 for each year and for each
place of business.\1540\ However, persons who conduct
businesses exclusively with, or on behalf of, the United States
or any department or agency of the United States are generally
exempt from the special occupational tax.\1541\ Generally,
importers, manufacturers, and dealers in firearms are required
to register with the Secretary of the Treasury (the
``Secretary'') in each internal revenue district in which the
business is carried on.\1542\
---------------------------------------------------------------------------
\1538\Pub. L. No. 73-474.
\1539\Secs. 5801 et seq.
\1540\Sec. 5801(a).
\1541\Sec. 5851.
\1542\Sec. 5802.
---------------------------------------------------------------------------
An excise tax of $200 is generally imposed on each firearm
that is transferred (``transfer tax'') or made (``making
tax'').\1543\ However, a firearm may be transferred to the
United States, or a department, independent establishment, or
agency of the United States, without payment of the transfer
tax.\1544\ A firearm may also be transferred or made without
payment of the transfer tax or making tax, respectively, if the
firearm is transferred or made by or on behalf of a State,
possession of the United States, any political subdivision, or
any official police organization of a government entity engaged
in criminal investigations.\1545\ Further, a firearm registered
to a person that is qualified under the NFA to engage in
business as an importer, manufacturer, or dealer may be
transferred without payment of transfer tax to any other person
qualified to manufacture, import, or deal in that type of
firearm.\1546\ A manufacturer qualified under the NFA may also
make the type of firearm which the manufacturer is qualified to
manufacture without payment of the making tax.\1547\
---------------------------------------------------------------------------
\1543\Secs. 5811 and 5821.
\1544\Sec. 5852(a).
\1545\Sec. 5853.
\1546\Sec. 5852(d).
\1547\Sec. 5852(c).
---------------------------------------------------------------------------
Under the NFA, a ``firearm'' means (1) a shotgun having a
barrel or barrels of less than 18 inches in length; (2) a
weapon made from a shotgun if such weapon as modified has an
overall length of less than 26 inches or a barrel or barrels of
less than 18 inches in length; (3) a rifle having a barrel or
barrels of less than 16 inches in length; (4) a weapon made
from a rifle if such weapon as modified has an overall length
of less than 26 inches or a barrel or barrels of less than 16
inches in length; (5) any other weapon;\1548\ (6) a machine
gun; (7) a silencer; and (8) a destructive device. The term
``firearm'' does not include an antique firearm or any device
(other than a machine gun or destructive device) which,
although designed as a weapon, the Secretary finds by reason of
the date of its manufacture, value, design, and other
characteristics is primarily a collector's item and is not
likely to be used as a weapon.\1549\
---------------------------------------------------------------------------
\1548\As defined in sec. 5845(e). The term ``any other weapon''
includes, for example, a weapon or device capable of being concealed on
the person from which a shot can be discharged through the energy of an
explosive and a pistol or revolver having a barrel with a smooth bore
designed or redesigned to fire a fixed shotgun shell. The term does not
include a pistol or a revolver having a rifled bore.
\1549\Sec. 5845(a).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that silencers should not be treated
as firearms, are an important tool for protecting the hearing
of firearm users, and that the transfer tax, which generally
applies to firearms and inhibits Americans from exercising
their Second Amendment rights, should not apply to silencers.

EXPLANATION OF PROVISION

Under the provision, the transfer tax on silencers is
reduced from $200 to $0 for each silencer transferred.

EFFECTIVE DATE

The provision is effective for transfers after the date of
enactment.

Modifications to De Minimis Entry Privilege for Commercial Shipments
(sec. 112031 of the bill)

PRESENT LAW

Section 321 of the Tariff Act of 1930 generally allows
shipments bound for American businesses and consumers valued
under $800 to enter the U.S. free of duties and taxes. This is
known as the de minimis administrative exemption. Also, under
current law, the penalty for abusing de minimis is forfeiture
of the shipment (often valued at $55 or less).

REASONS FOR CHANGE

The original purpose of the de minimis privilege is to
avoid expense disproportionate to the amount of duty that would
otherwise be collected from the import. However, as a result of
the explosion of global e-commerce, de minimis trade has surged
to become a major source of imports to the United States and
has become a core aspect of the business model used by certain
companies that are based outside the United States and
primarily export from China. The scale of these de minimis-
focused companies has transformed the practical reality of de
minimis such that in many cases it provides advantages to
companies with fewer U.S. assets, production, and workers than
their competitors. U.S. authorities also generally have less
data on de minimis shipments than they do on other U.S.
imports, which creates trade enforcement challenges and
introduces gaps in U.S. import data. Finally, the current
penalty for abusing de minimis, mere forfeiture of the
shipment, has proven to be an inadequate deterrence to bad
actors.
Moreover, the provision aligns closely with President
Trump's Executive Order 14256 of April 2, 2025 (Further
Amendment to Duties Addressing the Synthetic Opioid Supply
Chain in the People's Republic of China as Applied to Low-Value
Imports), which on an emergency basis eliminated duty-free de
minimis treatment on articles of $800 or less sent to the
United States from the People' Republic of China. By repealing
Section 321(a)(2)(C), while leaving unchanged Sections
321(a)(2)(A) and (B), the Committee intends to eliminate de
minimis treatment for commercial shipments while leaving
unchanged the exemptions provided for bona fide gifts or
travelers bringing items for personal use.
No section of this provision should be interpreted to
diminish existing authorities of the President to enforce U.S.
laws by limiting the availability of the administrative
exemption under Section 321, including to protect the revenue
or to prevent unlawful importation. By repealing the statute
providing this exemption in 2027, the Committee is in no way
modifying or undermining actions the President has already
taken or may take in the future to restrict the availability of
the administrative exemption prior to the repeal date.
The Committee recognizes the unique challenges the repeal
may present in the postal environment and affirms that it may
be necessary for the President to direct the U.S. Department of
the Treasury and U.S. Customs and Border Protection to work
with the U.S. Postal Service to develop an alternative method
to collect appropriate customs duties and taxes applicable to
packages received in the postal environment.

EXPLANATION OF PROVISION

The provision will end the de minimis privilege for
commercial shipments from all countries starting on July 1,
2027. This will level the playing field by ending the advantage
that has been provided to e-commerce operators with a business
model of shipping directly from a foreign country to a U.S.
customer. This change also will aid law enforcement efforts to
address other unfair and illegal trade practices, including the
importation of fentanyl precursors and items made in whole or
in part using forced labor. Additionally, for any person who
violates U.S. law through de minimis shipments, the provision
imposes new civil penalties of up to $5,000 for the first
violation and up to $10,000 for each subsequent offense.

EFFECTIVE DATE

The provision that repeals the de minimis exemption will
take effect on July 1, 2027. The provision that creates a civil
penalty is effective 30 days after the date of enactment of
this act.

Limitation on Drawback of Taxes Paid With Respect to Substituted
Merchandise (sec. 112032 of the bill)

PRESENT LAW

Importers may be eligible for a ``drawback'' of excise tax
on certain products. A drawback of duties, taxes, and fees paid
when a product is imported is a refund provided of those
duties, taxes, or fees when the product is exported or
destroyed.
``Substitution drawback'' is one common type of drawback.
Substitution drawback involves refunding certain duties, taxes,
and fees that are paid upon importation and refunded when
similar goods (usually merchandise with the same 8-digit
Harmonized Tariff Schedule code) are exported. Since 2008,
substitution drawback has been allowed for similar types of
imported and exported wine.\1550\ As a result, some companies
that both import and export wine have claimed drawbacks for
duties, taxes, and fees paid on the imported wine based on
their exports of wine of similar type and quality. Substitution
drawback has included drawback of excise tax even though
exported wine is generally not subject to excise tax.\1551\
This practice is referred to as a ``double drawback'' because a
company receives a drawback refund of excise tax paid on the
imported product, even though excise tax either was never paid
on the exported product or any excise tax that was paid was
refunded outside of the drawback program.
---------------------------------------------------------------------------
\1550\See National Ass'n of Manufacturers v. Dep't of the Treasury,
10 F.4th 1279 (Fed. Cir. 2021).
\1551\Sec. 5362.
---------------------------------------------------------------------------
The Department of the Treasury and Customs and Border
Protection promulgated a series of regulations in 2018 to stop
the practice of double drawback by making exports that are not
subject to excise tax ineligible to serve as the basis for a
drawback claim of excise tax.\1552\ These regulations were not
limited to wine, but also covered other products, such as
tobacco products, exports of which are generally not subject to
tax.\1553\ However, in August 2021, the U.S. Court of Appeals
for the Federal Circuit in National Association of
Manufacturers v. Department of the Treasury affirmed a lower
court's ruling invalidating the regulations.\1554\ As a result,
U.S. companies that both import goods subject to excise tax and
export similar goods not subject to excise tax are allowed to
continue using double drawback to seek refunds of excise tax.
---------------------------------------------------------------------------
\1552\83 Fed. Reg. 64942, December 18, 2018.
\1553\Ibid.; see sec. 5704.
\1554\National Ass'n of Manufacturers v. Dep't of the Treasury, 10
F.4th 1279 (Fed. Cir. 2021).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that in order to ensure a level
playing field for U.S. producers of tobacco products that do
not import, drawback of excise tax on tobacco products should
not be allowed to exceed the amount of taxes that are actually
paid on substituted merchandise.

EXPLANATION OF PROVISION

Under the provision, for purposes of drawback of tax
imposed under chapter 52 of the Code (tobacco products and
related products), the amount of drawback granted under the
Code or the Tariff Act of 1930 on the export or destruction of
substituted merchandise may not exceed the amount of taxes paid
(and not returned by refund, credit, or drawback) on the
substituted merchandise.
This provision only applies to tobacco products.
This provision makes no other change with respect to the
drawback program. For emphasis, the Committee notes that this
provision makes no change with respect to double drawback for
products other than tobacco.

EFFECTIVE DATE

The provision is effective for claims filed on or after
July 1, 2026.

PART II--REMOVING TAXPAYER BENEFITS FOR ILLEGAL IMMIGRANTS

Permitting Premium Tax Credit Only for Certain Individuals (sec. 112101
of the bill and sec. 36B of the Code)

PRESENT LAW

In general

A refundable tax credit (the ``premium assistance credit''
or ``premium tax credit'') is provided for eligible individuals
and families to subsidize the purchase of ``qualified health
plans,''\1555\ which are health insurance plans offered through
an American Health Benefit Exchange (``Exchange'') created by
the Patient Protection and Affordable Care Act
(``PPACA'').\1556\ In general, the Secretary makes advance
payments with respect to the premium assistance credit during
the year directly to the insurer, as discussed below.\1557\
However, eligible individuals may instead pay their total
health insurance premiums without advance payments and claim
the credit for the taxable year on a Federal income tax return.
---------------------------------------------------------------------------
\1555\Sec. 36B. Qualified health plans generally must meet certain
requirements. Secs. 1301 and 1302 of the Patient Protection and
Affordable Care Act, 42 U.S.C. secs. 18021 and 18022.
\1556\Pub. L. No. 111-148, March 23, 2010. The PPACA was modified
by the Health Care and Education Reconciliation Act of 2010
(``HCERA''), Pub. L. No. 111-152, Title I, sec. 1001, March 30, 2010.
PPACA and HCERA are referred to collectively as the PPACA.
\1557\Sec. 1412 of the PPACA, 42 U.S.C sec. 18082.
---------------------------------------------------------------------------
The premium assistance credit is generally available for
individuals (single or joint filers) with household incomes
between 100 percent and 400 percent of the Federal poverty
level (``FPL'') for the applicable family size.\1558\ Household
income is defined as the sum of (1) the individual's modified
adjusted gross income (``AGI''), plus (2) the aggregate
modified AGI of all other individuals taken into account in
determining the individual's family size (but only if the other
individuals are required to file tax returns for the taxable
year).\1559\ Modified AGI is defined as AGI increased by (1)
any amount excluded from gross income for citizens or residents
living abroad,\1560\ (2) any tax-exempt interest received or
accrued during the tax year, and (3) any portion of the
individual's Social Security benefits not included in gross
income.\1561\ To be eligible for the premium assistance credit,
individuals who are married generally must file a joint
return.\1562\ Individuals who are listed as dependents on a
return are not eligible for the premium assistance credit.
---------------------------------------------------------------------------
\1558\Sec. 36B(c)(1). Federal poverty level refers to the most
recently published poverty guidelines determined by the Secretary of
Health and Human Services. Levels for 2025 are available at https://
aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines.
Levels for previous years are available at https://aspe.hhs.gov/prior-
hhs-poverty-guidelines-and-federal-register-references.
\1559\Sec. 36B(d)(2).
\1560\Sec. 911.
\1561\Under section 86, only a portion of an individual's Social
Security benefits is included in gross income.
\1562\Sec. 36B(c)(1)(C).
---------------------------------------------------------------------------
Currently, under sec. 36B(c)(1)(B), a taxpayer with
household income less than 100 percent of FPL who is an alien
lawfully present but is ineligible for Medicaid under title XIX
of the Social Security Act by reason of such alien status may
be treated as an applicable taxpayer with a household income
equal to 100 percent of FPL.
An individual who is eligible for minimum essential
coverage from a source other than the individual insurance
market generally is not eligible for the premium assistance
credit.\1563\ However, an individual who is offered minimum
essential coverage under an employer-sponsored health plan may
be eligible for the premium assistance credit if (1) the
coverage is either unaffordable or does not provide minimum
value, and (2) the individual declines the employer-offered
coverage.\1564\ Thus, an individual who enrolls in an employer-
sponsored health plan generally is ineligible for the premium
assistance credit even if the coverage is considered
unaffordable or does not provide minimum value. Coverage is
considered unaffordable if an employee's share of the premium
for self-only coverage under the plan exceeds 9.02 percent (for
2025)\1565\ of the employee's household income.\1566\ Coverage
is considered not to provide minimum value if the plan's share
of total allowed costs of plan benefits is less than 60 percent
of such costs.
---------------------------------------------------------------------------
\1563\Sec. 36B(c)(2). Minimum essential coverage is defined in
section 5000A(f).
\1564\Sec. 36B(c)(2)(C).
\1565\Rev. Proc. 2024-35, 2024-39 I.R.B. 638.
\1566\Employees and their family members who are provided a
qualified small employer health reimbursement arrangement (``QSEHRA'')
that constitutes affordable coverage are not eligible for the premium
assistance credit. Sec. 36B(c)(4)(C). The affordability determination
for QSEHRAs is similar to the affordability determination for an
employer-sponsored health plan. Specifically, a QSEHRA is treated as
constituting affordable coverage for a month if an employee's share of
the premium for self-only coverage under the second lowest cost silver
plan offered in the relevant individual health insurance market does
not exceed 9.02 percent (for 2025) of the employee's household income.
A QSEHRA is defined in section 9831(d)(2).
---------------------------------------------------------------------------
Beginning in 2023, Treasury regulations provide that
coverage affordability is determined separately for employees
and family members of employees. Affordability is determined
(1) for the employee, based on the employee's share of the
premium for self-only coverage, and (2) for the family members
of the employee, based on the employee's share of the premium
for covering the employee and those family members (i.e.,
family coverage).\1567\
---------------------------------------------------------------------------
\1567\T.D. 9968, 87 Fed. Reg. 61979, October 13, 2022.
---------------------------------------------------------------------------

Amount of credit

The premium assistance credit amount is generally the lower
of (1) the premium for the qualified health plan in which the
individual or family enrolls, and (2) the premium for the
second lowest cost silver plan in the rating area where the
individual resides,\1568\ reduced by the individual's or
family's share of premiums (the ``applicable contribution
percentage'').\1569\ The individual's or family's applicable
contribution percentage is indexed so that the individual's or
family's share of premiums rises if health coverage premium
increases are greater than increases in income across the
economy.\1570\
---------------------------------------------------------------------------
\1568\A ``silver plan'' refers to the level of coverage provided by
the health plan. Sec. 1302(d) of the PPACA, 42 U.S.C. sec. 18022. Most
health plans sold through an Exchange are required to meet actuarial
value (``AV'') standards, among other requirements. AV is a summary
measure of a plan's generosity, expressed as a percentage of medical
expenses estimated to be paid by the insurer for a standard population
and set of allowed charges. Silver-level plans are designed to provide
benefits that are actuarially equivalent to 70 percent of the full AV
of the benefits provided under the plan. The premium assistance credit
looks to the second lowest cost plan of all the silver plans available
in the relevant rating area.
An individual's ``rating area'' refers to the geographical unit
within the State where the individual resides. Insurers may vary
individual market premiums based on rating areas, among other factors.
See sec. 1201 of the PPACA, 42 U.S.C.sec. 300gg.
\1569\Sec. 36B(b). The amount of the premium assistance credit is
determined on a monthly basis, and the amount of the credit for a year
is the sum of the monthly amounts.
\1570\Sec. 36B(b)(3)(ii). In addition, beginning with calendar year
2019, this indexing incorporates an additional factor under which the
applicable contribution percentage is subject to an additional
adjustment to account for increases in premium growth over increases in
the consumer price index if the aggregate amount of premium tax credits
and cost-sharing reductions under section 1402 of the PPACA, 42 U.S.C
sec. 18071, for the preceding calendar year exceeds an amount equal to
0.504 percent of the gross domestic product for the preceding calendar
year.
\1571\Sec. 36B(b)(3)(ii)(II)-(III).
---------------------------------------------------------------------------
Table 3 shows an individual's or family's unindexed share
of premiums applicable to taxable years prior to 2021.

Table 3--Household's Share of Premiums1571
[Prior to 2021, unindexed]
------------------------------------------------------------------------
Initial Final
Household income (expressed as a percentage of percentage of
percent of FPL) household household
income* income
------------------------------------------------------------------------
Less than 133%........................ 2.0 2.0
133% up to 150%....................... 3.0 4.0
150% up to 200%....................... 4.0 6.3
200% up to 250%....................... 6.3 8.05
250% up to 300%....................... 8.05 9.5
300% up to 400%....................... 9.5 9.5
------------------------------------------------------------------------
*The initial percentage of household income corresponds to the bottom of
the corresponding FPL range, and the final percentage of household
income corresponds to the top of the corresponding FPL range.

For taxable year beginning in 2021 or 2022, Section 9661 of
the American Rescue Plan Act of 2021 (``ARP'')\1572\
temporarily reduced or eliminated an individual's or family's
share of premiums used in determining the amount of the premium
assistance credit and eliminated the indexing of these amounts.
The premium assistance credit was also made available to
taxpayers with incomes above the limitation of 400 percent of
FPL for the applicable family size. For taxable years beginning
after 2022, section 12001 of the Inflation Reduction Act of
2022 (``IRA'')\1573\ extends through 2025 the reduction or
elimination of an individual's or family's share of premiums
used in determining the amount of the premium assistance credit
and the elimination of indexing. The provision also extends
through 2025 the rule making the premium assistance credit
available to taxpayers with incomes above the limitation of 400
percent of FPL for the applicable family size.
---------------------------------------------------------------------------
\1572\Pub. L. No. 117-2, March 11, 2021.
\1573\Pub. L. No. 117-169, August 16, 2022.
---------------------------------------------------------------------------
Table 4 below shows an individual's or family's share of
premiums applicable for 2021 through 2025. The share of
premiums is a certain percentage of household income, ranging
from 0.0 percent of household income (up to 150 percent of FPL)
up to 8.5 percent of household income, determined on a sliding
scale in a linear manner.
---------------------------------------------------------------------------
\1574\Sec. 36(B)(b)(3)(A)(iii).

Table 4--Household's Share of Premiums1574
[for 2021 through 2025]
------------------------------------------------------------------------
Initial Final
Household income (expressed as a percentage of percentage of
percent of FPL) household household
income* income
------------------------------------------------------------------------
Less than 150%........................ 0.0 0.0
150% up to 200%....................... 0.0 2.0
200% up to 250%....................... 2.0 4.0
250% up to 300%....................... 4.0 6.0
300% up to 400%....................... 6.0 8.5
400% and higher....................... 8.5 8.5
------------------------------------------------------------------------
*The initial percentage of household income corresponds to the bottom of
the corresponding FPL range, and the final percentage of household
income corresponds to the top of the corresponding FPL range.

Advance payments of the premium assistance credit

As part of the process of enrollment in a qualified health
plan through an Exchange, an individual may apply and be
approved for advance payments with respect to a premium
assistance credit (``advance payments'').\1575\ The individual
must provide information on income, family size, changes in
marital or family status or income, and citizenship or lawful
presence status.\1576\ Eligibility for advance payments is
generally based on the individual's income for the taxable year
ending two years prior to the enrollment period. The Exchange
process is administered by the Department of Health and Human
Services (``HHS'') through the Centers for Medicare and
Medicaid Services (``CMS'') and includes a system through which
information provided by the individual is verified using
information from the Internal Revenue Service (``IRS'') and
certain other sources.\1577\ If an individual is approved for
advance payments, the Secretary pays the advance amounts on a
monthly basis directly to the issuer of the health plan in
which the individual is enrolled. The individual then pays to
the issuer of the plan the difference between the advance
payment amount and the total premium charged for the plan.
---------------------------------------------------------------------------
\1575\Secs. 1411 and 1412 of the PPACA, 42 U.S.C. secs. 18081 and
18082. Under section 1402 of the PPACA, 42 U.S.C sec. 18071, certain
individuals eligible for advance premium assistance payments also are
eligible for a reduction in their share of medical costs, such as
deductibles and copays, under the plan, referred to as reduced cost-
sharing. Eligibility for reduced cost-sharing is also determined as
part of the Exchange enrollment process. HHS is responsible for rules
relating to Exchanges and the eligibility determination process.
\1576\Under section 1312(f)(3) of the PPACA, 42 U.S.C. sec.
18032(f)(3), an individual may not enroll in a qualified health plan
through an Exchange if the individual is not a citizen or national of
the United States or an alien lawfully present in the United States.
Thus, such an individual is not eligible for the premium assistance
credit.
\1577\Under section 6103, returns and return information are
confidential and may not be disclosed, except as authorized by the
Code, by IRS employees, other Federal employees, State employees, and
certain others having access to such information. Under section
6103(l)(21), upon written request of the Secretary of HHS, the IRS is
permitted to disclose certain return information for use in determining
an individual's eligibility for advance premium assistance payments,
reduced cost-sharing, or certain other State health subsidy programs,
including a State Medicaid program under title XIX of the Social
Security Act, 42 U.S.C. secs. 1396w-1 through 1396w-5, a State's
Children's Health Insurance Program under title XXI of the Social
Security Act, 42 U.S.C. secs. 1397aa through 1397mm, and a Basic Health
Program under section 1331 of the PPACA, 42 U.S.C. sec. 18051.
---------------------------------------------------------------------------
An individual on whose behalf advance payments of the
premium assistance credit for a taxable year are made is
required to file an income tax return to reconcile the advance
payments with the premium assistance credit that the individual
is allowed for the taxable year.\1578\
---------------------------------------------------------------------------
\1578\Treas. Reg. sec. 1.6011-8. Under section 36B(f)(3), an
Exchange is required to report to the IRS and to the individual the
months during a year for which the individual was covered by a
qualified health plan purchased through the Exchange; the level of
coverage; the name, address, and Taxpayer Identification Number
(``TIN'') of the primary insured and each individual covered by the
policy; the total premiums paid by the individual; and, if applicable,
advance premium assistance payments made on behalf of the individual.
This information is reported on Form 1095-A.
---------------------------------------------------------------------------
If the advance payments of the premium assistance credit
exceed the amount of credit that the individual is allowed, the
excess (``excess advance payments'') is treated as an
additional tax liability on the individual's income tax return
for the taxable year (is ``recaptured''), subject to a limit on
the amount of additional liability in some cases.\1579\ For an
individual with household income below 400 percent of FPL,
recapture for a taxable year generally is limited to a specific
dollar amount (the ``applicable dollar amount'') as shown in
Table 5 below.
---------------------------------------------------------------------------
\1579\Sec. 36B(f)(2). For a taxable year beginning in 2020, ARP
temporarily removed the requirement that excess advance payments are
treated as an additional tax liability on the individual's income tax
return for the taxable year. Accordingly, for 2020, no excess advance
payment was subject to recapture. Sec. 36B(f)(2)(B)(iii).
\1580\Rev. Proc. 2024-40, 2024-45 I.R.B. 1100. The applicable
dollar amounts are indexed to reflect cost-of-living increases, with
the amount of any increase rounded down to the next lowest multiple of
$50.

TABLE 5.--RECAPTURE LIMITS1580
[for 2025]
----------------------------------------------------------------------------------------------------------------
Applicable Dollar Amount Applicable Dollar Amount
Household Income (expressed as a percent of FPL) (filing status of Single) (any other filing status)
----------------------------------------------------------------------------------------------------------------
Less than 200%...................................... $375 $750
At least 200% but less than 300%.................... 975 1,950
At least 300% but less than 400%.................... 1,625 3,250
----------------------------------------------------------------------------------------------------------------

If the advance payments of the premium assistance credit
for a taxable year are less than the amount of the credit that
the individual is allowed, the additional credit amount is
allowed as a refundable credit when the individual files an
income tax return for the year.
An individual may not enroll in a qualified health plan
through an Exchange if the individual is not a citizen or
national of the United States or an alien lawfully present in
the United States.\1581\ Thus, such an individual is not
eligible for the premium assistance credit. In addition, an
individual who is not lawfully present is not eligible for
cost-sharing reductions\1582\ or enrollment in a basic health
program.\1583\
---------------------------------------------------------------------------
\1581\Sec. 1312(f)(3) of the PPACA, 42 U.S.C. sec. 18032(f)(3).
\1582\Sec. 1402(e)(1) of the PPACA, 42 U.S.C. sec. 18071(e)(1).
\1583\Sec. 1331(e)(1) of the PPACA, 42. U.S.C. sec. 18051(e)(1).
---------------------------------------------------------------------------

REASONS FOR CHANGE

EXPLANATION OF PROVISION

The provision provides that a lawfully-present alien is
eligible for the premium assistance credit only if the
individual is, and is reasonably expected to be for the entire
period of enrollment for which the credit is claimed:
1. An alien who is lawfully admitted for permanent
residence under the Immigration and Nationality
Act.\1584\
---------------------------------------------------------------------------
\1584\8 U.S.C. sec. 1101 et seq.
---------------------------------------------------------------------------
2. An alien who is a citizen or national of the
Republic of Cuba who is a beneficiary of an approved
petition under section 203(a) of the Immigration and
Nationality Act and who meets all eligibility
requirements for an immigrant visa but for whom such a
visa is not immediately available.\1585\
---------------------------------------------------------------------------
\1585\The individual must also be physically present in the United
States pursuant to a grant of parole in furtherance of the commitment
of the United States to the minimum level of annual legal migration of
Cuban nationals to the United States specified in the U.S.-Cuba Joint
Communique on Migration, done at New York September 9, 1994, and
reaffirmed in the Cuba-United States: Joint Statement on Normalization
of Migration, Building on the Agreement of September 9, 1994, done at
New York May 2, 1995.
---------------------------------------------------------------------------
3. An individual who lawfully resides in the United
States in accordance with a Compact of Free
Association.\1586\
---------------------------------------------------------------------------
\1586\Referred to in section 402(b)(2)(G) of the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996, Pub. L.
No. 104-193, August 22, 1996.
---------------------------------------------------------------------------
In addition, the provision makes several conforming
amendments to the PPACA to extend the same treatment of the
categories of aliens listed above for purposes of the
verification of information as part of Exchange enrollment,
eligibility for cost-sharing reductions, and eligibility for a
basic health program.
The provision provides that the Secretary of the Treasury
and the Secretary of HHS may prescribe such rules and other
guidance as may be necessary or appropriate to carry out the
amendments made by this provision.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2026, and for plan years beginning on or
after January 1, 2027.

Certain Aliens Treated as Ineligible for Premium Tax Credit (sec.
112102 of the bill and sec. 36B of the Code)

PRESENT LAW

For a description of the premium tax credit, see Section A
of this Part.

REASONS FOR CHANGE

The Committee is of the view that premium tax credits are
intended to help American individuals and families afford the
cost of health care. This public assistance is not intended to
aid those who may have recently arrived in the United States
with the intent of using public benefits, or who may have
arrived under false pretenses.
To better protect taxpayer dollars, the Committee therefore
believes that at least prohibiting individuals from benefiting
from premium assistance if they are particularly likely to have
entered the United States with the intent of using public
benefits or under false pretenses better accords with the
underlying intent of offering premium assistance. The Committee
believes that individuals in the immigration categories listed
in this provision are among those most likely to have entered
the United States for the above-stated reasons, so that
preventing at least these individuals from accessing premium
tax credits will protect American taxpayers from fraud and
waste in the delivery of health benefits.

EXPLANATION OF PROVISION

The provision adds an additional subparagraph to section
36B(e)(2) that provides that, notwithstanding the previous
subparagraph (described in Section A of this Part), a lawfully-
present alien is eligible for the premium assistance credit
only if the individual is not, and is reasonably expected not
to be for the entire period of enrollment for which the credit
is claimed:
1. an alien granted or with a pending application for
asylum under the Immigration and Nationality Act;\1587\
---------------------------------------------------------------------------
\1587\Sec. 208 of the Immigration and Nationality Act, 8 U.S.C.
sec. 1158.
---------------------------------------------------------------------------
2. an alien granted parole under the Immigration and
Nationality Act;\1588\
---------------------------------------------------------------------------
\1588\Secs. 212(d)(5) or 236(a)(2)(B) of the Immigration and
Nationality Act, 8 U.S.C. secs. 1182(d)(5) or 1226(a)(2)(B).
---------------------------------------------------------------------------
3. an alien granted temporary protected status under
the Immigration and Nationality Act;\1589\
---------------------------------------------------------------------------
\1589\Sec. 244 of the Immigration and Nationality Act, 8 U.S.C.
sec. 1254A.
---------------------------------------------------------------------------
4. an alien granted deferred action or deferred
enforced departure; or
5. an alien granted withholding of removal under the
Immigration and Nationality Act.\1590\
---------------------------------------------------------------------------
\1590\Sec. 241(b)(3) of the Immigration and Nationality Act, 8
U.S.C. sec. 1231(b)(3).
---------------------------------------------------------------------------
The provision provides that the Secretary of the Treasury
and the Secretary of HHS may prescribe such rules and other
guidance as may be necessary or appropriate to carry out the
amendments made by this provision.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2026.

Disallowing Premium Tax Credit During Periods of Medicaid Ineligibility
Due to Alien Status (sec. 112103 of the bill and sec. 36B of the Code)

PRESENT LAW

For a general description of the premium tax credit and the
Exchanges, see Section A of this Part.
In order to be treated as an ``applicable taxpayer'' and
therefore eligible for the premium tax credit, a taxpayer's
household income generally must be between 100 percent and 400
percent of FPL for the applicable family size. However, under a
special rule, a lawfully-present alien with a household income
less than 100 percent of FPL who is ineligible for Medicaid
under title XIX of the Social Security Act by reason of such
alien status may be treated as an applicable taxpayer with a
household income equal to 100 percent of FPL (``special rule
for lawfully-present aliens'').\1591\
---------------------------------------------------------------------------
\1591\Sec. 36B(c)(1)(B).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee is of the view that premium tax credits are
intended to help American individuals and families afford the
cost of health care. This public assistance is not intended to
aid those who may have recently arrived in the United States
with the intent of using public benefits. In general, the
Committee believes that the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996\1592\ takes a sound
approach to the eligibility of aliens for public benefits, and
so wishes to bring eligibility for the premium tax credits more
in accord with that law.
---------------------------------------------------------------------------
\1592\Pub. L. No. 104-193, August 22, 1996.
---------------------------------------------------------------------------

EXPLANATION OF PROVISION

The provision repeals the special rule for lawfully-present
aliens, so that lawfully-present aliens with household incomes
less than 100 percent FPL who are ineligible for Medicaid by
reason of alien status are no longer eligible for premium tax
credits. In addition, the provision makes a conforming
amendment to the basic health program standards so that basic
health programs are not required to cover such individuals.
The provision provides that the Secretary of the Treasury
and the Secretary of HHS may prescribe such rules and other
guidance as may be necessary or appropriate to carry out the
amendments made by this provision.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Limiting Medicare Coverage of Certain Individuals (sec. 112104 of the
bill)

PRESENT LAW

Under current law, individuals who are ``lawfully present''
in the U.S. and meet Medicare's standard eligibility
requirements are generally allowed to enroll in Medicare.

REASONS FOR CHANGE

The Committee believes that recent years of open borders
and lax immigration enforcement under the Biden-Harris
Administration have threatened the integrity of the nation's
federal health programs, like Medicare. As a consequence of
President Biden's failed immigration policies, illegal aliens
may be eligible for federal benefit programs, including
Medicare.

EXPLANATION OF PROVISION

The provision eliminates Medicare eligibility for illegal
immigrants and preserves Medicare eligibility only for citizens
of the United States, certain Cuban individuals, and
individuals living in the United States pursuant to a compact
of free association.

EFFECTIVE DATE

The provision is effective upon the date of enactment.

Excise Tax on Remittance Transfers (sec. 112105 of the bill and sec.
6724 and new secs. 36C, 4475 and 6050BB of the Code)

PRESENT LAW

Remittance transactions generally involve a sender of
payments in one country, a recipient in a separate country,
financial intermediaries in both countries, and a payment
system used by such intermediaries. The laws applicable to
remittance transfers are generally found in Titles 12 and 15 of
the United States Code and the regulations thereunder. Under
such provisions, a ``remittance transfer'' is defined as the
electronic transfer of funds requested by a sender located in
any State, territory, or possession of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, or any
political subdivision of any of the foregoing\1593\ to a
designated recipient that is initiated by a remittance transfer
provider, whether or not the sender holds an account with the
remittance transfer provider and whether or not the remittance
transfer is also an electronic fund transfer.\1594\ Such term
does not include certain small-value transactions.\1595\ A
``remittance transfer provider'' means any person or financial
institution that provides remittance transfers for a consumer
in the normal course of its business, whether or not the
consumer holds an account with such person or financial
institution.\1596\ The term ``sender'' means a consumer who
requests a remittance provider to send a remittance transfer
for the consumer to a designated recipient.\1597\ Finally, a
``designated recipient'' means any person located in a foreign
country and identified by the sender as the authorized
recipient of a remittance transfer to be made by a remittance
transfer provider.\1598\
---------------------------------------------------------------------------
\1593\15 U.S.C. sec. 1693a(11).
\1594\15 U.S.C. sec. 1693o-1(g)(2)(A). In general, the term
``electronic fund transfer'' means any transfer of funds, other than a
transaction originated by check, draft, or similar paper instrument,
which is initiated through an electronic terminal, telephonic
instrument, or computer or magnetic tape so as to order, instruct, or
authorize a financial institution to debit or credit an account. 41
U.S.C. sec. 1693a(7).
\1595\15 U.S.C. sec. 1693o-1(g)(2)(B).
\1596\15 U.S.C. sec. 1693o-1(g)(3).
\1597\15 U.S.C. sec. 1693o-1(g)(4). The regulations further state
that a ``sender'' means a consumer in a State who primarily for
personal, family, or household purposes requests a remittance transfer
provider to send a remittance transfer to a designated recipient. 12
CFR sec. 1005.30(g).
\1598\15 U.S.C. sec. 1693o-1(g)(1).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that the ability of non-citizens and
non-nationals of the United States to send payments to
individuals in other countries through the system of remittance
transfers may encourage illegal immigration and lead to the
overreliance of some jurisdictions on the receipt of such
remittance flows.

EXPLANATION OF PROVISION

Under the provision, a five-percent excise tax is generally
imposed on any remittance transfer, to be paid by the sender
with respect to such transfer. If the sender does not make the
excise tax payment at the time of the remittance transfer, and
to the extent that such tax is not collected from the sender,
the tax is owed by the remittance transfer provider. The excise
tax is collected by the remittance transfer provider and
remitted to the Secretary of the Treasury (the ``Secretary'').
For purposes of the provision, the terms ``remittance
transfer,'' ``remittance transfer provider,'' ``designated
recipient,'' and ``sender'' have the same meanings as such
terms are used in section 1693o-1 of Title 15 of the United
States Code.
The provision provides an exception from the excise tax for
remittance transfers sent by citizens and nationals of the
United States. The excise tax on a remittance transfer does not
apply if a ``verified United States sender'' makes such
remittance transfer through a ``qualified remittance transfer
provider.'' A ``qualified remittance transfer provider'' is any
remittance transfer provider which enters into a written
agreement with the Secretary pursuant to which such provider
agrees to verify the status of a sender as a citizen or
national of the United States. A ``verified United States
sender'' is any sender who is verified by a qualified
remittance transfer provider as being a citizen or national of
the United States pursuant to such an agreement. The provision
applies the anti-conduit rules of section 7701(1) to remittance
transfers.\1599\
---------------------------------------------------------------------------
\1599\Section 7701(1) provides that the Secretary may prescribe
regulations recharacterizing any multiple-party financing transaction
as a transaction directly among any two or more of such parties where
the Secretary determines that such recharacterization is appropriate to
prevent avoidance of any tax imposed by Title 26. The provision states
that for purposes of section 7701(1) with respect to any multiple-party
arrangements involving the sender, a remittance transfer shall be
treated as a financing transaction.
---------------------------------------------------------------------------
For senders that incur and pay the excise tax (as a result
of, for instance, not sending a remittance transfer via a
qualified remittance transfer provider), the provision allows
for a refundable income tax credit in the amount of the
aggregate excise taxes paid by such sender on remittance
transfers during the taxable year. In order to claim such
credit, a taxpayer must include his or her Social Security
number on his or her tax return for the relevant taxable
year\1600\ and must demonstrate, to the satisfaction of the
Secretary, that the excise tax with respect to which the tax
credit is determined was paid by him or her and is with respect
to a remittance transfer for which he or she provided
certification and certain information to the remittance
transfer provider.
---------------------------------------------------------------------------
\1600\For purposes of the provision, the term ``Social Security
number'' has the same meaning as such term is given in section
24(h)(7), as amended. For a description of these requirements, see the
description of Section 110004, Extension of increased child tax credit
and temporary enhancement. For married individuals, rules similar to
the rules of section 32(d) shall apply.
---------------------------------------------------------------------------
The provision requires that each remittance transfer
provider submit a return (at such time as the Secretary may
provide) setting forth: (1) in the case of remittance transfers
sent by a verified United States sender via a qualified
remittance transfer provider, the aggregate number and value of
such remittance transfers; (2) in the case of senders who have
certified to the remittance transfer provider an intent to
claim the credit with respect to the excise tax on a remittance
transfer, (a) the name, address, and Social Security number of
the senders, (b) the amount of excise tax paid by such senders,
and (c) the amount of excise tax remitted by the remittance
transfer provider to the Secretary with respect to such
remittance transfers; and (3) with respect to all other
remittance transfers, (a) the aggregate amount of excise tax
paid with respect to such transfers, and (b) the aggregate
amount of tax remitted by the remittance transfer provider to
the Secretary with respect to such transfers. Such returns
shall be considered information returns.
Each person required to make a return shall furnish to each
person whose has certified an intent to claim the credit a
written statement with: (1) the name and address of the
information contact of the required reporting person; and (2)
the information provided to the Secretary with respect to such
claim. Such returns shall be considered payee statements.

EFFECTIVE DATE

The excise tax is effective for transfers made after
December 31, 2025. The tax credit available to senders applies
to taxable years ending after December 31, 2025.

Social Security Number Requirement for American Opportunity and
Lifetime Learning Credits (sec. 112106 of the bill and sec. 25A of the
Code)

PRESENT LAW

American Opportunity Tax Credit

The American Opportunity Tax Credit is a credit of up to
$2,500 per eligible student per year for qualified tuition and
related expenses paid for each of the first four years of the
student's post-secondary education in a degree or certificate
program. The amount of the credit is 100 percent of the first
$2,000 of qualified tuition and related expenses, and 25
percent of the next $2,000 of qualified tuition and related
expenses.
Qualified tuition and related expenses generally include
tuition, fees, and course materials required for enrollment or
attendance of the taxpayer, the taxpayer's spouse, or any
dependent of the taxpayer at an eligible institution. They do
not include student activity fees, other fees and expenses
unrelated to an individual's academic course of instruction, or
expenses with respect to a course of education involving
sports, games, or hobbies that is not part of the individual's
degree program. In addition, an eligible student must be
carrying at least half the normal work load for the course of
study being pursued.
The credit that a taxpayer may otherwise claim is phased
out ratably for taxpayers with modified adjusted gross income
(``modified AGI'') between $80,000 and $90,000 ($160,000 and
$180,000 for married taxpayers filing a joint return).\1601\
The credit may be claimed against a taxpayer's alternative
minimum tax liability.
---------------------------------------------------------------------------
\1601\Modified AGI for this purpose (and for the same purpose under
the Lifetime Learning Credit, described next) is AGI increased by any
amount excluded from gross income under section 911, 931, or 933. Sec.
25A(d)(2).
---------------------------------------------------------------------------
Forty percent of a taxpayer's otherwise allowable modified
credit is refundable.

Lifetime Learning Credit

The Lifetime Learning Credit is a nonrefundable tax credit
against Federal income tax equal to 20 percent of qualified
tuition and related expenses\1602\ paid by the taxpayer during
the taxable year for education furnished during any academic
period beginning in that year to the taxpayer, the taxpayer's
spouse, or any dependents.\1603\ Up to $10,000 of qualified
tuition and related expenses per taxpayer return may be taken
into account for the Lifetime Learning Credit (with the result
that the maximum credit that a taxpayer is allowed is $2,000).
---------------------------------------------------------------------------
\1602\Qualified tuition and related expenses for the lifetime
learning credit generally include tuition and fees required for
enrollment or attendance of the taxpayer, the taxpayer's spouse, or any
dependent of the taxpayer at an eligible institution. However, unlike
the American opportunity credit, they do not include course materials.
\1603\Sec. 25A. The Lifetime Learning credit may be claimed against
a taxpayer's AMT liability.
---------------------------------------------------------------------------
A taxpayer is allowed the Lifetime Learning credit for an
unlimited number of taxable years, and the $2,000 maximum
amount of the Lifetime Learning Credit allowable to a taxpayer
in a year does not vary based on the number of students in the
taxpayer's family. The Lifetime Learning Credit amount that is
otherwise allowed is phased out ratably for taxpayers with
modified AGI between $80,000 and $90,000 ($160,000 and $180,000
for married individuals filing a joint return).
A taxpayer is allowed the Lifetime Learning Credit with
respect to a student who is not the taxpayer or the taxpayer's
spouse (for example, in a situation in which the student is the
taxpayer's child) only if the taxpayer claims the student as a
dependent for the taxable year for which the credit is claimed.
If a student is claimed as a dependent by a parent or another
taxpayer, the student is not allowed the Lifetime Learning
Credit for that taxable year on the student's own tax return.
If a parent or another taxpayer claims a student as a
dependent, any qualified tuition and related expenses paid by
the student are treated as paid by the parent (or other
taxpayer) for purposes of the provision.
A taxpayer is allowed the Lifetime Learning Credit for a
taxable year with respect to one or more students even if the
taxpayer also is allowed the American Opportunity Tax Credit
for that same taxable year with respect to other students. If,
for a taxable year, a taxpayer claims an American Opportunity
Tax Credit with respect to a student, the Lifetime Learning
credit is not allowed with respect to that same student for
that year (although the Lifetime Learning Credit may be allowed
with respect to that same student for other taxable years).

Identification requirements

A taxpayer (for example, a parent) is allowed the American
Opportunity Tax Credit or Lifetime Learning Credit in a taxable
year in respect of qualified tuition and related expenses for
the education of an individual (for example, for the education
of a student who is a dependent child of the taxpayer parent)
only if (among other identification requirements) the taxpayer
includes on the taxpayer's tax return for that year the
taxpayer identification number (``TIN'') of that individual.
A taxpayer is allowed the American Opportunity Tax Credit
only if the taxpayer includes the employer identification
number (``EIN'') of any institution to which qualified tuition
and related expenses were paid.

REASONS FOR CHANGE

The Committee believes that requiring that taxpayers and
students provide Social Security numbers to claim the American
Opportunity Tax Credit and Lifetime Learning Credit is
important in ensuring that the credits go only to families who
are in full compliance with tax and immigration laws.

EXPLANATION OF PROVISION

The provision replaces the present law TIN requirement with
a rule that a taxpayer is allowed the American Opportunity Tax
Credit or Lifetime Learning Credit in a taxable year only if
the taxpayer includes on the tax return for that year (1) the
taxpayer's Social Security number, (2) in the case of a joint
return, the taxpayer's spouse's Social Security number, and (3)
in respect of qualified tuition and related expenses of an
individual other than the taxpayer or the taxpayer's spouse
(for example, a dependent child of a taxpayer parent), that
individual's name and Social Security number.
The provision clarifies that under the present law EIN
requirement, the taxpayer is allowed the American Opportunity
Tax Credit for a taxable year only if the taxpayer includes on
the taxpayer's tax return for that year the EIN of any
institution to which the taxpayer paid qualified tuition and
related expenses taken into account in computing the credit.
For purposes of this rule, the term ``Social Security
number'' means (under the definition of section 24(h)(7)) a
social security number that is issued by the Social Security
Administration, before the due date for the tax return, to a
citizen of the United States or pursuant to subclause (I) (or
that portion of subclause (III) that relates to subclause (I))
of section 205(c)(2)(B)(i) of the Social Security Act.
The provision provides that a taxpayer's omission of a
required correct Social Security number or EIN is a
mathematical or clerical error for purposes of section 6213.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

PART 3--PREVENTING FRAUD, WASTE, AND ABUSE

Requiring Exchange Verification of Eligibility for Health Plan (Sec.
112201 of the Bill and Sec. 36B of the Code)

PRESENT LAW

In general

A refundable tax credit (the ``premium assistance credit''
or ``premium tax credit'') is provided for eligible individuals
and families to subsidize the purchase of ``qualified health
plans,''\1604\ which are health insurance plans offered through
an American Health Benefit Exchange (``Exchange'') created by
the Patient Protection and Affordable Care Act
(``PPACA'').\1605\ In general, the Secretary makes advance
payments with respect to the premium assistance credit during
the year directly to the insurer, as discussed below.\1606\
However, eligible individuals may instead pay their total
health insurance premiums without advance payments and claim
the credit for the taxable year on a Federal income tax return.
---------------------------------------------------------------------------
\1604\Sec. 36B. Qualified health plans generally must meet certain
requirements. Secs. 1301 and 1302 of the Patient Protection and
Affordable Care Act, 42 U.S.C. secs. 18021 and 18022.
\1605\Pub. L. No. 111-148, March 23, 2010. The PPACA was modified
by the Health Care and Education Reconciliation Act of 2010
(``HCERA''), Pub. L. No. 111-152, Title I, sec. 1001, March 30, 2010.
PPACA and HCERA are referred to collectively as the PPACA.
\1606\Sec. 1412 of the PPACA, 42 U.S.C sec. 18082.
---------------------------------------------------------------------------
The premium assistance credit is generally available for
individuals (single or joint filers) with household incomes
between 100 percent and 400 percent of the Federal poverty
level (``FPL'') for the applicable family size.\1607\ Household
income is defined as the sum of (1) the individual's modified
adjusted gross income (``AGI''), plus (2) the aggregate
modified AGI of all other individuals taken into account in
determining the individual's family size (but only if the other
individuals are required to file tax returns for the taxable
year).\1608\ Modified AGI is defined as AGI increased by (1)
any amount excluded from gross income for citizens or residents
living abroad,\1609\ (2) any tax-exempt interest received or
accrued during the tax year, and (3) any portion of the
individual's Social Security benefits not included in gross
income.\1610\ To be eligible for the premium assistance credit,
individuals who are married generally must file a joint
return.\1611\ Individuals who are listed as dependents on a
return are not eligible for the premium assistance credit.
---------------------------------------------------------------------------
\1607\Sec. 36B(c)(1). Federal poverty level refers to the most
recently published poverty guidelines determined by the Secretary of
Health and Human Services. Levels for 2025 are available at https://
aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines.
Levels for previous years are available at https://aspe.hhs.gov/prior-
hhs-poverty-guidelines-and-federal-register-references.
Currently, under sec. 36B(c)(1)(B), a taxpayer with household
income less than 100 percent of FPL who is an alien lawfully present
but is ineligible for Medicaid under title XIX of the Social Security
Act by reason of such alien status may be treated as an applicable
taxpayer with a household income equal to 100 percent of FPL.
\1608\Sec. 36B(d)(2).
\1609\Sec. 911.
\1610\Under section 86, only a portion of an individual's Social
Security benefits is included in gross income.
\1611\Sec. 36B(c)(1)(C).
---------------------------------------------------------------------------
An individual who is eligible for minimum essential
coverage from a source other than the individual insurance
market generally is not eligible for the premium assistance
credit.\1612\ However, an individual who is offered minimum
essential coverage under an employer-sponsored health plan may
be eligible for the premium assistance credit if (1) the
coverage is either unaffordable or does not provide minimum
value, and (2) the individual declines the employer-offered
coverage.\1613\ Thus, an individual who enrolls in an employer-
sponsored health plan generally is ineligible for the premium
assistance credit even if the coverage is considered
unaffordable or does not provide minimum value. Coverage is
considered unaffordable if an employee's share of the premium
for self-only coverage under the plan exceeds 9.02 percent (for
2025)\1614\ of the employee's household income.\1615\ Coverage
is considered not to provide minimum value if the plan's share
of total allowed costs of plan benefits is less than 60 percent
of such costs.
---------------------------------------------------------------------------
\1612\Sec. 36B(c)(2). Minimum essential coverage is defined in
section 5000A(f).
\1613\Sec. 36B(c)(2)(C).
\1614\Rev. Proc. 2024-35, 2024-39 I.R.B. 638.
\1615\Employees and their family members who are provided a
qualified small employer health reimbursement arrangement (``QSEHRA'')
that constitutes affordable coverage are not eligible for the premium
assistance credit. Sec. 36B(c)(4)(C). The affordability determination
for QSEHRAs is similar to the affordability determination for an
employer-sponsored health plan. Specifically, a QSEHRA is treated as
constituting affordable coverage for a month if an employee's share of
the premium for self-only coverage under the second lowest cost silver
plan offered in the relevant individual health insurance market does
not exceed 9.02 percent (for 2025) of the employee's household income.
A QSEHRA is defined in section 9831(d)(2).
---------------------------------------------------------------------------
Beginning in 2023, Treasury regulations provide that
coverage affordability is determined separately for employees
and family members of employees. Affordability is determined
(1) for the employee, based on the employee's share of the
premium for self-only coverage, and (2) for the family members
of the employee, based on the employee's share of the premium
for covering the employee and those family members (i.e.,
family coverage).\1616\
---------------------------------------------------------------------------
\1616\T.D. 9968, 87 Fed. Reg. 61979, October 13, 2022.
---------------------------------------------------------------------------

Amount of credit

The premium assistance credit amount is generally the lower
of (1) the premium for the qualified health plan in which the
individual or family enrolls, and (2) the premium for the
second lowest cost silver plan in the rating area where the
individual resides,\1617\ reduced by the individual's or
family's share of premiums (the ``applicable contribution
percentage'').\1618\ The individual's or family's applicable
contribution percentage is indexed so that the individual's or
family's share of premiums rises if health coverage premium
increases are greater than increases in income across the
economy.\1619\
---------------------------------------------------------------------------
\1617\A ``silver plan'' refers to the level of coverage provided by
the health plan. Sec. 1302(d) of the PPACA, 42 U.S.C. sec. 18022. Most
health plans sold through an Exchange are required to meet actuarial
value (``AV'') standards, among other requirements. AV is a summary
measure of a plan's generosity, expressed as a percentage of medical
expenses estimated to be paid by the insurer for a standard population
and set of allowed charges. Silver-level plans are designed to provide
benefits that are actuarially equivalent to 70 percent of the full AV
of the benefits provided under the plan. The premium assistance credit
looks to the second lowest cost plan of all the silver plans available
in the relevant rating area.
An individual's ``rating area'' refers to the geographical unit
within the State where the individual resides. Insurers may vary
individual market premiums based on rating areas, among other factors.
See sec. 1201 of the PPACA, 42 U.S.C. sec. 300gg.
\1618\Sec. 36B(b). The amount of the premium assistance credit is
determined on a monthly basis, and the amount of the credit for a year
is the sum of the monthly amounts.
\1619\Sec. 36B(b)(3)(ii). In addition, beginning with calendar year
2019, this indexing incorporates an additional factor under which the
applicable contribution percentage is subject to an additional
adjustment to account for increases in premium growth over increases in
the consumer price index if the aggregate amount of premium tax credits
and cost-sharing reductions under section 1402 of the PPACA, 42 U.S.C
sec. 18071, for the preceding calendar year exceeds an amount equal to
0.504 percent of the gross domestic product for the preceding calendar
year. Sec. 36B(b)(3)(ii)(II)-(III).
---------------------------------------------------------------------------
Table 6 shows an individual's or family's unindexed share
of premiums applicable to taxable years prior to 2021.

TABLE 6.--HOUSEHOLD'S SHARE OF PREMIUMS1620
[Prior to 2021, unindexed]
------------------------------------------------------------------------
Initial Final
Household income (expressed as a percentage of percentage of
percent of FPL) household household
income* income
------------------------------------------------------------------------
Less than 133%........................ 2.0 2.0
133% up to 150%....................... 3.0 4.0
150% up to 200%....................... 4.0 6.3
200% up to 250%....................... 6.3 8.05
250% up to 300%....................... 8.05 9.5
300% up to 400%....................... 9.5 9.5
------------------------------------------------------------------------
*The initial percentage of household income corresponds to the bottom of
the corresponding FPL range, and the final percentage of household
income corresponds to the top of the corresponding FPL range.

For taxable year beginning in 2021 or 2022, Section 9661 of
the American Rescue Plan Act of 2021 (``ARP'')\1621\
temporarily reduced or eliminated an individual's or family's
share of premiums used in determining the amount of the premium
assistance credit and eliminated the indexing of these amounts.
The premium assistance credit was also made available to
taxpayers with incomes above the limitation of 400 percent of
FPL for the applicable family size. For taxable years beginning
after 2022, section 12001 of the Inflation Reduction Act of
2022 (``IRA'')\1622\ extends through 2025 the reduction or
elimination of an individual's or family's share of premiums
used in determining the amount of the premium assistance credit
and the elimination of indexing. The provision also extends
through 2025 the rule making the premium assistance credit
available to taxpayers with incomes above the limitation of 400
percent of FPL for the applicable family size.
---------------------------------------------------------------------------
\1620\Sec. 36B(b)(3)(A)(i).
\1621\Pub. L. No. 117-2, March 11, 2021.
\1622\Pub. L. No. 117-169, August 16, 2022.
---------------------------------------------------------------------------
Table 7 below shows an individual's or family's share of
premiums applicable for 2021 through 2025. The share of
premiums is a certain percentage of household income, ranging
from 0.0 percent of household income (up to 150 percent of FPL)
up to 8.5 percent of household income, determined on a sliding
scale in a linear manner.
---------------------------------------------------------------------------
\1623\Sec. 36B(b)(3)(A)(iii).

TABLE 7.--HOUSEHOLD'S SHARE OF PREMIUMS1623
[For 2021 through 2025]
------------------------------------------------------------------------
Initial Final
Household income (expressed as a percentage of percentage of
percent of FPL) household household
income* income
------------------------------------------------------------------------
Less than 150%........................ 0.0 0.0
150% up to 200%....................... 0.0 2.0
200% up to 250%....................... 2.0 4.0
250% up to 300%....................... 4.0 6.0
300% up to 400%....................... 6.0 8.5
400% and higher....................... 8.5 8.5
------------------------------------------------------------------------
*The initial percentage of household income corresponds to the bottom of
the corresponding FPL range, and the final percentage of household
income corresponds to the top of the corresponding FPL range.

Advance payments of the premium assistance credit

As part of the process of enrollment in a qualified health
plan through an Exchange, an individual may apply and be
approved for advance payments with respect to a premium
assistance credit (``advance payments'').\1624\ The individual
must provide information on income, family size, changes in
marital or family status or income, and citizenship or lawful
presence status.\1625\ Eligibility for advance payments is
generally based on the individual's income for the taxable year
ending two years prior to the enrollment period. The Exchange
process is administered by the Department of Health and Human
Services (``HHS'') through the Centers for Medicare and
Medicaid Services (``CMS'') and includes a system through which
information provided by the individual is verified using
information from the Internal Revenue Service (``IRS'') and
certain other sources.\1626\ If an individual is approved for
advance payments, the Secretary pays the advance amounts on a
monthly basis directly to the issuer of the health plan in
which the individual is enrolled. The individual then pays to
the issuer of the plan the difference between the advance
payment amount and the total premium charged for the plan.
---------------------------------------------------------------------------
\1624\Secs. 1411 and 1412 of the PPACA, 42 U.S.C. secs. 18081 and
18082. Under section 1402 of the PPACA, 42 U.S.C sec. 18071, certain
individuals eligible for advance premium assistance payments also are
eligible for a reduction in their share of medical costs, such as
deductibles and copays, under the plan, referred to as reduced cost-
sharing. Eligibility for reduced cost-sharing is also determined as
part of the Exchange enrollment process. HHS is responsible for rules
relating to Exchanges and the eligibility determination process.
\1625\Under section 1312(f)(3) of the PPACA, 42 U.S.C. sec.
18032(f)(3), an individual may not enroll in a qualified health plan
through an Exchange if the individual is not a citizen or national of
the United States or an alien lawfully present in the United States.
Thus, such an individual is not eligible for the premium assistance
credit.
\1626\Under section 6103, returns and return information are
confidential and may not be disclosed, except as authorized by the
Code, by IRS employees, other Federal employees, State employees, and
certain others having access to such information. Under section
6103(l)(21), upon written request of the Secretary of HHS, the IRS is
permitted to disclose certain return information for use in determining
an individual's eligibility for advance premium assistance payments,
reduced cost-sharing, or certain other State health subsidy programs,
including a State Medicaid program under title XIX of the Social
Security Act, 42 U.S.C. secs. 1396w-1 through 1396w-5, a State's
Children's Health Insurance Program under title XXI of the Social
Security Act, 42 U.S.C. secs. 1397aa through 1397mm, and a Basic Health
Program under section 1331 of the PPACA, 42 U.S.C. sec. 18051.
---------------------------------------------------------------------------
An individual on whose behalf advance payments of the
premium assistance credit for a taxable year are made is
required to file an income tax return to reconcile the advance
payments with the premium assistance credit that the individual
is allowed for the taxable year.\1627\
---------------------------------------------------------------------------
\1627\Treas. Reg. sec. 1.6011-8. Under section 36B(f)(3), an
Exchange is required to report to the IRS and to the individual the
months during a year for which the individual was covered by a
qualified health plan purchased through the Exchange; the level of
coverage; the name, address, and TIN of the primary insured and each
individual covered by the policy; the total premiums paid by the
individual; and, if applicable, advance premium assistance payments
made on behalf of the individual. This information is reported on Form
1095-A.
---------------------------------------------------------------------------
If the advance payments of the premium assistance credit
exceed the amount of credit that the individual is allowed, the
excess (``excess advance payments'') is treated as an
additional tax liability on the individual's income tax return
for the taxable year (is ``recaptured''), subject to a limit on
the amount of additional liability in some cases.\1628\ For an
individual with household income below 400 percent of FPL,
recapture for a taxable year generally is limited to a specific
dollar amount (the ``applicable dollar amount'') as shown in
Table 8 below.
---------------------------------------------------------------------------
\1628\Sec. 36B(f)(2). For a taxable year beginning in 2020, ARP
temporarily removed the requirement that excess advance payments are
treated as an additional tax liability on the individual's income tax
return for the taxable year. Accordingly, for 2020, no excess advance
payment was subject to recapture. Sec. 36B(f)(2)(B)(iii).

TABLE 8.--RECAPTURE LIMITS1629
[For 2025]
----------------------------------------------------------------------------------------------------------------
Applicable dollar amount Applicable dollar amount
Household Income (expressed as a percent of FPL) (filing status of Single) (any other filing status)
----------------------------------------------------------------------------------------------------------------
Less than 200%...................................... $375 $750
At least 200% but less than 300%.................... 975 1,950
At least 300% but less than 400%.................... 1,625 3,250
----------------------------------------------------------------------------------------------------------------

If the advance payments of the premium assistance credit
for a taxable year are less than the amount of the credit that
the individual is allowed, the additional credit amount is
allowed as a refundable credit when the individual files an
income tax return for the year.
---------------------------------------------------------------------------
\1629\Rev. Proc. 2024-40, 2024-45 I.R.B. 1100. The applicable
dollar amounts are indexed to reflect cost-of-living increases, with
the amount of any increase rounded down to the next lowest multiple of
$50.
---------------------------------------------------------------------------

Enrolling in a qualified health plan on an Exchange

An individual may not enroll in a qualified health plan
through an Exchange if the individual is not a citizen or
national of the United States or an alien lawfully present in
the United States, or is incarcerated.\1630\ As part of the
process of enrollment in a qualified health plan through an
Exchange, an individual may apply and be approved for advance
payments of the premium assistance credit.\1631\ Eligibility
for advance payments of the premium assistance credit is
generally based on the individual's income for the taxable year
ending two years prior to the enrollment period.
---------------------------------------------------------------------------
\1630\Sec. 1312(f)(1) and (3) of the PPACA, 42 U.S.C. sec.
18032(f)(1) and (3).
\1631\Secs. 1411 and 1412 of the PPACA, 42 U.S.C. secs. 18081 and
18082. Under section 1402 of the PPACA, 42 U.S.C sec. 18071, certain
individuals eligible for advance premium assistance payments also are
eligible for a reduction in their share of medical costs, such as
deductibles and copays, under the plan, referred to as reduced cost-
sharing or cost-sharing reductions. HHS is responsible for rules
relating to eligibility for this assistance, and eligibility for
reduced cost-sharing is also determined as part of the Exchange
enrollment process.
---------------------------------------------------------------------------
HHS administers the Exchange process and facilitates a
system through which information provided by the individual is
verified using information from the IRS and other sources. The
individual must provide information on income, residence,
family size, changes in marital or family status or income, and
citizenship or lawful presence status. The Exchange also seeks
to determine whether an individual has minimum essential
coverage from another source and whether an individual who has
previously claimed advance payment of the premium tax credit
has failed to file a tax return and reconcile advance payments
with premium tax credits for that year.\1632\ Exchanges are
generally required to provide applicants 90 days to address
discrepancies,\1633\ during which time applicants are eligible
to enroll in qualified health plans and benefit from advance
payment of the premium tax credit. Under certain circumstances,
Exchanges may re-enroll current enrollees in qualified health
plans without any action being taken by the enrollee (``passive
reenrollment'').\1634\
---------------------------------------------------------------------------
\1632\45 C.F.R. sec. 155.305(f)(4).
\1633\Sec. 1411(e)(3), (4) of the PPACA.
\1634\See CMS, Guidance on Annual Redetermination and Re-enrollment
for Marketplace Coverage for 2024 and Later Years, August 14, 2023,
available at https://www.cms.gov/files/document/guidance-annual-
redetermination-and-re-enrollment-marketplace-coverage-2024-and-later-
years.pdf.
---------------------------------------------------------------------------
Finally, Exchanges also verify eligibility for special
enrollment periods.\1635\ HHS has applied different standards
for pre-enrollment verification for special enrollment periods
over time.\1636\ Currently, the Federal Exchange operated by
HHS conducts pre-enrollment verification related to only the
special enrollment period related to the loss of health
coverage.\1637\
---------------------------------------------------------------------------
\1635\See 45 C.F.R. sec 155.420(g).
\1636\See Patient Protection and Affordable Care Act; Market
Stabilization, Final Rule, 82 Fed. Reg. 18346, April 18, 2017; Patient
Protection and Affordable Care Act; HHS Notice of Benefit and Payment
Parameters for 2023, Final Rule, 87 Fed. Reg. 27208, May 6, 2022;
Patient Protection and Affordable Care Act; Marketplace Integrity and
Affordability, Proposed Rule, 90 Fed. Reg. 12942, March 19, 2025.
\1637\45 C.F.R. sec. 155.420(g).
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee believes that fraud in applications for
advance payment of the premium tax credit is a serious problem,
and also believes that Executive Branch policies that have
allowed individuals to benefit from advance payment of the
premium tax credit even before their eligibility has been
verified have exacerbated this problem. The Committee therefore
believes it is appropriate to protect taxpayers by requiring
Exchanges to fully verify individuals' eligibility for
enrollment and advance payment of the premium tax credit before
Federal funds are released.
Because this policy may make it more difficult for
applicants to benefit from advance payments of the premium tax
credit immediately upon applying to enroll in coverage, the
Committee also believes that a taxpayer should be permitted to
benefit from the premium tax credit if his or her eligibility,
related back to the date of intended enrollment, is verified
after the start date of his or her coverage. Finally, because
the Committee believes that taxpayers may need more time to
establish eligibility, the Committee is requiring Exchanges to
allow potential applicants to verify their eligibility in
advance of annual open enrollment as a condition of releasing
the premium tax credit.

EXPLANATION OF PROVISION

The provision provides that the premium assistance credit
(and thus advance payment) is unavailable for months of
coverage under a qualified health plan for which an
individual's (1) eligibility for enrollment (including new open
enrollments, each annual re-enrollment, and enrollment through
a special enrollment period), (2) any advance payment of the
premium tax credit (if the individual has applied for advance
payment),\1638\ or (3) any cost-sharing reductions has not been
verified by the Exchange, including during the required 90-day
period during which an applicant may address any discrepancies
in his or her application. Therefore, the provision prohibits
passive reenrollment.
---------------------------------------------------------------------------
\1638\If the individual has not applied for or been determined
eligible for advance payment, the individual remains eligible to file a
claim for the premium tax credit at the time the individual files an
income tax return for the relevant year. Assuming an individual's
eligibility is otherwise verified, a month of coverage fails to be a
coverage month for purposes of the premium tax credit only if the
individual benefits from advance payment before eligibility for advance
payment is verified by the Exchange.
---------------------------------------------------------------------------
In order to accomplish this verification, the Exchange must
use applicable enrollment information that is provided or
verified by the applicant. The Exchange is not permitted to
rely on information provided entirely by other sources. For
purposes of this provision, applicable enrollment information
must at least include an affirmation from the applicant, to the
extent relevant to the individual's application, regarding: (1)
income; (3) any immigration status; (4) any health coverage
status; (5) place of residence; (6) family size; and (7) any
other information the Secretary (in consultation with the
Secretary of HHS) determines as necessary to verify the
individual's eligibility.
The provision also provides, that, in the case of a month
of coverage that begins before verification has been completed,
such month is treated as a coverage month for purposes of the
premium tax credit (and therefore for advance payment of the
premium tax credit, if advance payment is made available), if
the Exchange later completes verification for that month using
applicable enrollment information provided by the
applicant.\1639\
---------------------------------------------------------------------------
\1639\HHS has provided for enrollment to be ``pended'' for periods
during which eligibility remains unverified. See 82 Fed. Reg. 18346;
CMS, Special Enrollment Period Pre-Enrollment Verification (SEPV):
Review (December 2017), available at https://www.cms.gov/marketplace/
technical-assistance-resources/sepv-review.pdf.
---------------------------------------------------------------------------
Additionally, the provision provides that no month of
coverage qualifies as a coverage month for purposes of the
premium tax credit if the Exchange is not verifying that
applicants have reconciled advance payments of the premium tax
credit with the premium assistance credit that the same
individual was allowed for a taxable year, if applicable,
pursuant to regulations proposed by CMS in 2025,\1640\
effectively codifying these proposed regulations for purposes
of premium tax credit eligibility.
---------------------------------------------------------------------------
\1640\Patient Protection and Affordable Care Act; Marketplace
Integrity and Affordability, Proposed Rule, 90 Fed. Reg. 12942,
amending 45 C.F.R. sec. 155.305(f)(4).
---------------------------------------------------------------------------
Finally, in order for individuals to be eligible for the
premium assistance credit, the provision requires Exchanges to
establish a pre-enrollment verification process for individuals
enrolled through the Exchange. The pre-enrollment verification
process must allow individuals to verify with the Exchange
their eligibility for enrollment, advance payment, or reduced
cost-sharing for the subsequent plan year starting on August 1
of the immediately preceding year.
The provision provides that the Secretary of the Treasury
and the Secretary of HHS may prescribe such rules and other
guidance as may be necessary or appropriate to carry out the
amendments made by this provision.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2027.

Disallowing Premium Tax Credit in Case of Certain Coverage Enrolled in
During Special Enrollment Period (sec. 112202 of the bill and sec. 36B
of the Code)

PRESENT LAW

Enrollment in a qualified health plan and special enrollment periods

For a general description of the premium tax credit and the
Exchanges, see Section A of this Part.
Generally, an individual may enroll in a qualified health
plan through an Exchange during the annual open enrollment
period.\1641\ An Exchange also must provide for special
enrollment periods during which an individual may enroll in a
qualified health plan or change enrollment in a qualified
health plan if the individual experiences certain life events,
including losing health coverage, getting married, or having a
baby.\1642\
---------------------------------------------------------------------------
\1641\Sec. 1311 of the PPACA, 42 U.S.C. 13031.
\1642\45 C.F.R. sec. 155.420.
---------------------------------------------------------------------------
In 2021, HHS announced the creation of a monthly special
enrollment period for individuals with projected annual
household income no greater than 150 percent of FPL.\1643\ The
special enrollment period is available at the option of the
Exchange. Because of the temporary reduction or elimination of
an individual's or family's share of premiums through 2025, all
individuals eligible for this special enrollment period
currently are able to enroll in plans for which their share of
the monthly premium is zero.\1644\
---------------------------------------------------------------------------
\1643\Patient Protection and Affordable Care Act; Updating Payment
Parameters, Section 1332 Waiver Implementing Regulations, and Improving
Health Insurance Markets for 2022 and Beyond, Final Rule, 86 Fed. Reg.
53412, September 27, 2021; 45 C.F.R. 155.420(d)(16).
\1644\Originally, the special enrollment period was available only
during periods when the individual's applicable percentage for purposes
of calculating the premium assistance amount, as defined in section
36B(b)(3)(A), was set at zero, but HHS amended the regulation in 2024
to eliminate this requirement. Patient Protection and Affordable Care
Act, HHS Notice of Benefit and Payment Parameters for 2025; Updating
Section 1332 Waiver Public Notice Procedures; Medicaid; Consumer
Operated and Oriented Plan (CO-OP) Program; and Basic Health Program,
Final Rule, 89 Fed. Reg. 26218, April 15, 2024.
---------------------------------------------------------------------------

REASONS FOR CHANGE

The Committee is of the view that the monthly special
enrollment period created by HHS in 2021 has encouraged fraud
and adverse selection on the Exchanges. The Committee therefore
wishes to make the removal of this SEP a condition of releasing
the premium tax credit and intends for HHS to implement this
policy change as of the earliest administratively feasible
date.

EXPLANATION OF PROVISION

The provision provides that any plan for which an
individual enrolled through a special enrollment period
provided on the basis of (1) expected income as a percentage of
the poverty line (or such other amount) as specified by the
Secretary of HHS; and (2) not provided in connection with the
occurrence of an event or change in circumstances specified by
the Secretary of HHS, is not plan for which premium assistance
is available.
Thus, the provision makes the premium assistance credit
(and advance payment of the premium assistance credit)
unavailable related to the specific plan through which an
individual has enrolled using the monthly special enrollment
period available for individuals with projected annual
household income no greater than 150 percent of FPL.\1645\ The
provision affects no other special enrollment periods currently
specified in HHS regulations.
---------------------------------------------------------------------------
\1645\The provision does not affect other individuals who enroll in
any particular plan through an Exchange, only those individuals that
enroll through the specified special enrollment period.
---------------------------------------------------------------------------
The provision provides that the Secretaries of the Treasury
and HHS may may each prescribe such rules and other guidance as
may be necessary or appropriate to carry out this provision,
including by proceeding through interim final or temporary
regulations.

EFFECTIVE DATE

The provision is effective for plans enrolled in during
calendar months beginning after the third calendar month ending
after the date of enactment. The provision does not affect
plans enrolled in before that date.

Eliminating Limitation on Recapture of Advance Payment of Premium Tax
Credit (sec. 112203 of the bill and sec. 36B of the Code)

PRESENT LAW

For a general description of the premium tax credit and the
Exchanges, see Section A of this Part.
If an individual's advance payments of the premium
assistance credit exceed the amount of credit that the
individual is allowed, the excess advance payments is treated
as an additional tax liability on the individual's income tax
return for the taxable year (is ``recaptured''), subject to a
limit on the amount of additional liability in some
cases.\1646\ For an individual with household income below 400
percent of FPL, recapture for a taxable year generally is
limited to a specific dollar amount (the ``applicable dollar
amount'') as shown in Table 9 below.
---------------------------------------------------------------------------
\1646\Sec. 36B(f)(2). For a taxable year beginning in 2020, ARP
temporarily removed the requirement that excess advance payments are
treated as an additional tax liability on the individual's income tax
return for the taxable year. Accordingly, for 2020, no excess advance
payment was subject to recapture. Sec. 36B(f)(2)(B)(iii).

TABLE 9.--RECAPTURE LIMITS1647
[For 2025]
----------------------------------------------------------------------------------------------------------------
Applicable dollar amount Applicable dollar amount
Household income (expressed as a percent of FPL) (filing status of single) (any other filing status)
----------------------------------------------------------------------------------------------------------------
Less than 200%...................................... $375 $750
At least 200% but less than 300%.................... 975 1,950
At least 300% but less than 400%.................... 1,625 3,250
----------------------------------------------------------------------------------------------------------------

REASONS FOR CHANGE
---------------------------------------------------------------------------

\1647\Rev. Proc. 2024-40, 2024-45 I.R.B. 1100. The applicable
dollar amounts are indexed to reflect cost-of-living increases, with
the amount of any increase rounded down to the next lowest multiple of
$50.
---------------------------------------------------------------------------
Currently, enrollees who significantly misestimate their
annual income in applying for advance payment of the premium
tax credit may be required to pay back only a small portion of
what was overpaid over the course of the year. The Committee is
of the view that this policy encourages fraud and negligence in
estimates of annual income and fails to protect law-abiding
taxpayers. The Committee therefore believes it is reasonable to
require enrollees who misestimated their annual income to pay
back the full amount of what was overpaid by the Federal
government.

EXPLANATION OF PROVISION

The provision provides that, for an individual with
household income below 400 percent of FPL, liability for the
excess advance payments is no longer limited, so that all
excess advance payments are subject to recapture.
The provision provides that the Secretary of the Treasury
and the Secretary of HHS may prescribe such rules and other
guidance as may be necessary or appropriate to carry out the
amendments made by this provision.

EFFECTIVE DATE

The provision is effective for taxable years beginning
after December 31, 2025.

Implementing Artificial Intelligence Tools for Purposes of Reducing and
Recouping Improper Payments Under Medicare (sec. 112204 of the bill)

PRESENT LAW

Not applicable.

REASONS FOR CHANGE

Identified Medicare improper payments comprise roughly $50
billion every year. New technologies such as artificial
intelligence (AI) can assist in identifying and reducing
Medicare improper payments and improve programmatic integrity.

EXPLANATION OF PROVISION

The provision provides $25 million for the Secretary of
Health and Human Services to contract with AI contractors and
data scientists to identify Medicare improper payments and
recoup overpayments. Additionally, the Secretary is required to
report to Congress on progress on decreasing the number of
Medicare improper payments.

EFFECTIVE DATE

The provision is effective upon the date of enactment.

Enforcement Provisions with Respect to COVID-related Employee Retention
Credits (sec. 112205 of the bill, sec. 2301 of the CARES Act,\1648\ and
secs. 3134, 6501, 6695, and 6701 of the Code)

---------------------------------------------------------------------------
\1648\Coronavirus Aid, Relief, and Economic Security (CARES) Act
sec. 2301 (Pub. L. No. 116-136).
---------------------------------------------------------------------------

PRESENT LAW

An eligible employer was entitled to claim a refundable
employee retention tax credit (``ERTC'') against applicable
employment taxes for the second, third and fourth calendar
quarters in 2020 and the first, second and third quarters of
2021 in an amount equal to a percentage of the qualified wages
with respect to each employee of such employer for such
calendar quarter. The percentage is 50 percent of qualified
wages paid after March 12, 2020, and before January 1, 2021,
and 70 percent of qualified wages for calendar quarters
beginning after December 31, 2020, and before October 1, 2022,
subject to a maximum amount of wages per employee. Although
originally enacted in 2020, the credit was further modified by
subsequent legislation enacted in 2020, 2021, and 2022,
including the retroactive termination of the credit for wages
paid on or after October 1, 2021, other than in the case of a
recovery startup business.\1649\
---------------------------------------------------------------------------
\1649\The amount of qualified wages per employee that may be taken
into account in calculating the credit is increased from $10,000 per
employee for all calendar quarters beginning in 2020 to $10,000 per
employee per calendar quarter for calendar quarters beginning after
December 31, 2020. See Coronavirus Aid, Relief, and Economic Security
(CARES) Act, Pub. L. No. 116-136, sec. 2301; Taxpayer Certainty and
Disaster Relief Act of 2020, Pub. L. No. 116-260, secs. 206 and 207;
American Rescue Plan Act (``ARPA''), Pub. L. No. 117-2, secs. 9651
(codifying the credit in Code sec. 3134) and 80604; and Infrastructure
and Jobs Act, Pub. L. No. 117-58. sec. 80604 (retroactively terminating
the credit for the fourth quarter of 2021 except in the case of
recovery start-up businesses).
---------------------------------------------------------------------------
If for any calendar quarter the amount of the credit
exceeds the applicable employment taxes imposed on the eligible
employer, reduced by certain other credits, the excess is
treated as a refundable overpayment. Claiming the ERTC on an
employment tax return as originally filed can either reduce the
eligible employer's employment tax due, or if it exceeds the
amount of such tax, give rise to a refund. An eligible employer
may claim the employee retention credit on an amended
employment tax return (Form 941-X) if the employer did not
claim (or seeks to correct) the credit on its original
employment tax return.
An employment tax return filed by April 15 for any quarter
ending within a calendar year preceding April 15 is considered
filed as of April 15, regardless of the quarter to which the
return relates.\1650\ To claim a refund with respect to a
quarter within tax year 2020, an amended employment tax return
was due by April 15, 2024; for tax year 2021, an amended return
was due by April 15, 2025. Under the American Rescue Plan Act
(``ARPA''), the statute of limitations for assessment of any
amount attributable to an ERTC is extended from three years to
five years for calendar quarters beginning after June 30, 2021,
and before January 1, 2022.\1651\
---------------------------------------------------------------------------
\1650\Sec. 6501(b)(2).
\1651\See sec 3134(l), which provides that, notwithstanding section
6501, the limitation on the time period for the assessment of any
amount attributable to the ERTC shall not expire before the date that
is 5 years after the later of--``(1) the date on which the original
return which includes the calendar quarter with respect to which such
credit is determined is filed, or ``(2) the date on which such return
is treated as filed under section 6501(b)(2).'' A similar waiver of the
limitations period is provided for the paid sick leave credit. Sec.
3131(f)(6).
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Since observing a significant increase in the numbers and
amounts of ERTC claims in mid-2023, the IRS has taken steps to
closely review such claims, published guidance for determining
one's eligibility and how to amend or withdraw claims.\1652\
Those measures included a voluntary disclosure program for
ineligible taxpayers that had claimed and received the credit
and seek to pay back the credit, under which a taxpayer would
be required to pay 80 percent of the credit received and
disclose information about the advisers that led the taxpayer
to make the original claim, which has since ended.\1653\
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\1652\See, https://www.irs.gov/coronavirus/employee-retention-
credit.
\1653\See IRS Announcement 2024-3, https://www.irs.gov/pub/irs-
drop/a-24-03.pdf.
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Potential penalties

Present law includes obligatory disclosure by certain
promoters of tax shelters or abusive transactions and imposes
assessable penalties on persons who fail to comply with such
due diligence and disclosure requirements.\1654\ One such
penalty is based on aiding and abetting the understatement of
tax liability, if the person knows that an understatement of
the tax liability of another person would result.\1655\ Other
promoter penalties are related to failure to disclose
particular information with respect to a reportable transaction
(generally, a transaction that the Treasury Secretary
determines has the potential for tax avoidance or evasion), and
require material advisors of reportable transactions to keep
lists of advisees, subject to a penalty for failure.\1656\
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\1654\See sections 6111 and 6112 and the regulations thereunder
with respect to reporting requirements.
\1655\Sec. 6701. See also IRM, 20.1.6.14.1 (10-13-2021), Activities
Subject to the Penalty, October 13, 2021. ``A tax advisor would not be
subject to this penalty for suggesting to a client an aggressive but
supportable filing position even though that position was later
rejected by the courts and even though the client was subjected to the
substantial understatement penalty. However, if the advisor suggested a
position which the advisor knew could not be supported on any
reasonable basis under the law, the penalty would apply.''
\1656\See secs. 6700 through 6708 for promoter penalties for
failure to comply with the reporting obligations. Sec. 6671 provides
rules for application of assessable penalties, including that
assessable penalties are payable on notice and demand (sec. 6671(a)).
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To deter taxpayers who may take aggressive positions on
refund claims, a separate penalty is imposed equal to 20
percent of the amount by which the claimed income tax refund
exceeds the amount due under the Code. This penalty is not
applicable to excessive refund claims for employment taxes. The
penalty may apply to excessive income tax refund claims if a
taxpayer presents an entirely new theory late in the audit, or
as a result of a marketed tax strategy such as the abusive
transactions that lead to the shelter penalties, even if the
refund claim is denied. Although reasonable cause may result in
a waiver of the penalty, any transaction that lacks economic
substance is deemed to be without reasonable cause.\1657\ There
is an anti-stacking rule, i.e., if a portion of the excessive
refund is subject to another penalty or addition to tax, only
one of the two penalties may apply to that amount.
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\1657\Sec. 6676.
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Paid tax return preparers are currently subject to a
penalty of $500 for each failure to comply with due diligence
requirements relating to the filing status and amount of
certain credits with respect to a taxpayer's return or claim
for refund.\1658\
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\1658\Sec. 6695(g). This is treated as an assessable penalty.
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REASONS FOR CHANGE

A significant increase in ERTC claims has raised concerns
about fraud and about wasteful governmental payments or
credits, as well as concerns that claimants are being misled by
promoters. Not only can taxpayers become victims of promoters,
and face unjust tax penalties in some cases, but the IRS has
become so overburdened with thousands of such claims and has
struggled to process valid claims. The cost of improperly and
erroneously claimed ERTC refunds or credits is a burden to the
fisc and other taxpayers with valid claims. Determining whether
each claimed refund or credit is erroneously or fraudulently
claimed and recovering any erroneously paid refunds or
erroneously allowed tax credits has proved to be a costly and
lengthy process.
Allowing erroneous ERTC refunds or credits claimed, paid,
or allowed to increase unchecked would be wasteful and
inefficient. The Committee believes that barring payments for
ERTC refunds claimed after January 31, 2024, serves to limit
waste, fraud, and abuse in the tax system. In addition, the
Committee believes that an increased penalty on promoters for
aiding and abetting understatements of tax liability, a new
penalty on promoters for failure to comply with due diligence
requirements, and a penalty on promoters for failure to
disclose information and maintain client lists are warranted.
Finally, the Committee believes extending the statute of
limitations for resolving such cases is necessary to ensure
adequate time to address potentially erroneous and fraudulent
claims.

EXPLANATION OF PROVISION

The provision adds a concept of ERTC promoter to expand the
scope of existing penalties to address conduct taking place
since enactment of ERTC to the present, as well as prospective
conduct. The provision bars allowance of refunds claimed after
January 31, 2024. It also coordinates and extends limitations
periods for certain corrective action by the IRS. In addition,
regulatory authority is provided.

Definition of ERTC promoter and related penalties

An ERTC promoter is any person that provides aid,
assistance, or advice with respect to an affidavit, refund,
claim or other document relating to an ERTC\1659\ or to
eligibility or to the calculation of the amount of the credit,
if the person meets certain materiality or gross receipts
tests. For purposes of present-law disclosure and other
requirements as well as penalties relating to reportable and
listed transactions,\1660\ an employee retention tax credit
(whether or not the taxpayer claims the credit) is treated as a
listed transaction as well as a reportable transaction with
respect to an ERTC promoter that provides any aid, assistance
or advice with respect to the credit, and the ERTC promoter is
treated as a material advisor. As a result, ERTC promoters are
subject to certain assessable promoter penalties, including
enhanced penalties in certain cases.\1661\
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\1659\References in the provision to the ERTC include the ERTC
(under both section 3134 of the Code and section 2301 of the CARES
Act).
\1660\Secs. 6111, 6112, 6707, and 6708.
\1661\E.g., the penalty for aiding or abetting an understatement of
tax liability in section 6701. Assessable penalties are payable on
notice and demand, and not subject to the restrictions on assessment
found in section 6213(a). Sec. 6671(a).
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ERTC promoter tests
Under the materiality standard, a person is treated as an
ERTC promoter if the person charges or receives a fee which is
based on the amount of the refund or credit only if the
aggregate gross receipts of such person for aid, assistance,
and advice with respect to the person's taxable year in which
the person provided the assistance or the preceding taxable
year with respect to all ERTC documents\1662\ exceeds 20
percent of such person's gross receipts for such taxable year.
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\1662\An ERTC document is any return, affidavit, claim, or other
document related to the ERTC, including any document related to
eligibility for, or the calculation or determination of any amount
directly related to the ERTC.
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The gross receipts test is met if either (1) the aggregate
gross receipts for the relevant year from such aid, assistance,
and advice exceeds half of the person's gross receipts for the
relevant year, or (2) both (i) the aggregate gross receipts for
the relevant year from such aid exceeds 20 percent of the
person's gross receipts for the relevant year and (ii) the
person's aggregate gross receipts\1663\ from such aid exceeds
$500,000. An ERTC promoter does not include a certified
professional employer organization (PEO).
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\1663\For purposes of determining aggregate gross receipts, an
aggregation rule provides that all persons treated as a single employer
under section 52(a) or (b) are treated as one person. A rule for short
taxable years applies.
---------------------------------------------------------------------------
Promoter penalties applicable to an ERTC promoter
In addition to adding a definition of ERTC promoter, the
provision increases the potential penalty under section 6701 to
the greater of $200,000 ($10,000 in the case of an ERTC
promoter that is a natural person) or 75 percent of the gross
income of the ERTC promoter from providing aid, assistance, or
advice with respect to a return or claim for ERTC refund or a
document relating to the return or claim. The expanded penalty
under section 6701 is retroactive to apply to actions taken
since the ERTC was enacted.
The provision also specifies that an ERTC promoter must
comply with due diligence requirements\1664\ with respect to a
taxpayer's eligibility for (or the amount of) an employee
retention tax credit and imposes a $1,000 penalty for each
failure to comply. This amount is treated as an assessable
penalty. In addition, if the ERTC promoter does not comply with
these due diligence requirements, the provision treats the
``knows or has reason to know'' standard as satisfied for
purposes of imposing the penalty for aiding and abetting
understatement of a tax liability after the date of enactment.
---------------------------------------------------------------------------
\1664\The due diligence requirements for ERTC promoters are
required to be similar to the due diligence requirements of section
6695(g), and apply with respect to documents that constitute, or relate
to, a return or claim for refund.
---------------------------------------------------------------------------
The standards for determining applicability of the promoter
penalties are not to be construed to create any inference with
respect to any aid, assistance, or advice provided by any ERTC
promoter on or before the date of the enactment of the Act (or
with respect to any other aid, assistance, or advice to which
the provision does not apply). Similarly, the requirement to
file disclosures or maintain such lists shall not be construed
to create any inference with respect to whether an ERTC is
(absent the rule of this provision that treats it as such)
treated as a reportable or listed transaction with respect to
an ERTC promoter.
Under a transition rule, the requirement for an ERTC
promoter to file disclosures or maintain lists with respect to
aid, assistance, or advice provided before the date of
enactment does not require filing before 90 days after the date
of enactment. However, if a party would be required to maintain
such lists and reporting without regard to this provision, the
return or list is not treated as required (with respect to such
aid, assistance, or advice) by reason of this provision.

Denial of refund claims not filed on or before January 31, 2024

No credit or refund of the ERTC is allowed after date of
enactment unless such claim for such refund or credit was filed
on or before January 31, 2024. To the extent that such claims
were later amended to reduce otherwise excessive claims, or
otherwise perfected, the amended claim is considered to be part
of the timely submitted original claim.

Statute of limitations extension

The provision extends the statute of limitations on
assessment for the ERTC to six years after the latest of: (1)
the date on which the original return for the relevant calendar
quarter is filed, (2) the date on which the return is treated
as filed under present-law statute of limitations rules,\1665\
or (3) the date on which the claim for credit or refund with
respect to the ERTC is made.
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\1665\Sec. 6501.
---------------------------------------------------------------------------

EFFECTIVE DATE

The provisions described above are generally effective as
of date of enactment, except as follows:
The proposed penalty changes are generally effective for
aid, assistance, or advice provided after March 12, 2020.
The provision requiring verification and due diligence is
effective for aid, assistance, or advice provided after the
date of enactment.
No credit or refund of the ERTC is permitted after date of
enactment except with respect to claims for such credit
submitted on or before January 31, 2024.
The extension of the statute of limitations on assessment
is effective for assessments made after the date of enactment.

Earned Income Tax Credit Reforms (sec. 112206 of the bill and secs. 32
and new secs. 6720D and 7531 of the Code)

PRESENT LAW

Earned income tax credit

Low- and moderate-income workers may be eligible for the
refundable earned income tax credit (``EITC''). The amount of
the EITC is based on the presence and number of qualifying
children in the worker's family, filing status, AGI, and earned
income.\1666\
---------------------------------------------------------------------------
\1666\Sec. 32.
---------------------------------------------------------------------------
The EITC generally equals a specified percentage of earned
income.\1667\ Earned income for this purpose cannot exceed a
maximum dollar amount, known as the earned income amount. The
maximum EITC amount applies over a certain income range and
then diminishes to zero over a specified phaseout range. For a
taxpayer with earned income (or AGI, if greater) in excess of
the beginning of the phaseout range, the maximum EITC amount is
reduced by the phaseout percentage multiplied by the amount of
earned income (or AGI, if greater) in excess of the beginning
of the phaseout range. For a taxpayer with earned income (or
AGI, if greater) in excess of the end of the phaseout range, no
credit is allowed. The specified percentage, maximum dollar
amount, and phaseout percentage and range vary with filing
status and number of children. Four separate percentage
schedules apply: one for taxpayers with no qualifying children,
one for taxpayers with one qualifying child, one for taxpayers
with two qualifying children, and one for taxpayers with three
or more qualifying children.\1668\
---------------------------------------------------------------------------
\1667\Sec. 32(a), (b). Earned income is generally the sum of wages,
salaries, tips, and other taxable employee compensation plus net self-
employment earnings. Sec. 32(c)(2).
\1668\Sec. 32(b). All income thresholds are indexed for inflation
annually.
---------------------------------------------------------------------------
Table 10 below shows amounts of the EITC and determinants
of those amounts by number of qualifying children for joint
filers and other individuals for 2025.

Table 10.--2025 EITC Schedule\1669\
----------------------------------------------------------------------------------------------------------------
Earned Phaseout range
Credit income Maximum (single, head of Phaseout range Phaseout
percentage amount credit household) (joint filers) percentage
----------------------------------------------------------------------------------------------------------------
No qualifying children....... 7.65 $8,490 $649 $10,620-$19,104 $17,730-$26,214 7.65
1 qualifying child........... 34.0 12,730 4,328 $23,350-$50,434 $30,470-$57,554 15.98
2 qualifying children........ 40.0 17,880 7,152 $23,350-$57,310 $30,470-$64,430 21.06
3 or more qualifying children 45.0 17,880 8,046 $23,350-$61,555 $30,470-$68,675 21.06
----------------------------------------------------------------------------------------------------------------

For an individual to be a qualifying child for purposes of
the EITC, generally that individual must meet the relationship,
age, and residency tests under section 152.\1670\
---------------------------------------------------------------------------
\1669\Rev. Proc. 2024-40, 2024-45 I.R.B. 1100, November 4, 2024.
\1670\Sec. 32(c)(3)(A). See section 152(c)(1) for the definition of
qualifying child. For purposes of the EITC the support test in section
152(c)(1)(D) is disregarded. The residency test in section 152(c)(1)(B)
is satisfied only if the principal place of abode is in the United
States.
---------------------------------------------------------------------------
No credit is allowed for a taxpayer with an aggregate
amount of certain investment income that exceeds a threshold
amount (this amount is $11,950 for 2025).\1671\
---------------------------------------------------------------------------
\1671\Sec. 32(i).
---------------------------------------------------------------------------
The EITC may be claimed by a taxpayer if the taxpayer is a
U.S. citizen or a resident alien.\1672\ An individual who is a
nonresident alien for any portion of the taxable year is not
eligible to claim the EITC unless an election is in effect for
the year under section 6013(g) or (h) (relating to an
individual who is married to a citizen or resident of the
United States at the end of the year). In addition, individuals
who claim the benefits of section 911 (relating to the income
exclusion election available to U.S. citizens or resident
aliens living abroad) are not eligible to claim the EITC.\1673\
---------------------------------------------------------------------------
\1672\Sec. 32(c)(1)(D).
\1673\Sec. 32(c)(1)(C).
---------------------------------------------------------------------------
To claim the EITC, the taxpayer must include the taxpayer's
valid Social Security number (``SSN'') and valid SSN for the
qualifying child (and, if married, the spouse's valid SSN) on
their tax return.\1674\ For these purposes, a valid SSN is an
SSN issued to an individual, other than an SSN issued to an
individual solely for the purpose of applying for or receiving
Federally funded benefits, on or before the due date for filing
the return for the year.\1675\
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\1674\Sec. 32(c)(1)(E), (c)(3)(D), (m).
\1675\Sec. 205(c)(2)(B)(i)(II) (and that portion of sec.
205(c)(2)(B)(i)(III) relating to it) of the Social Security Act.
---------------------------------------------------------------------------
An individual with no qualifying children is allowed the
EITC if the individual is aged 25 or older and below age 65,
has a principal place of abode in the United States for more
than half of the taxable year, and cannot be claimed as a
dependent on anyone else's tax return.\1676\ For purposes of
the principal place of abode requirement, a member of the Armed
Forces of the United States stationed outside the United States
while serving on extended active duty is treated as having a
principal place of abode in the United States.\1677\
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\1676\Sec. 32(c)(1)(A)(ii).
\1677\Sec. 32(c)(4).
---------------------------------------------------------------------------

General rules regarding assessment and deficiency procedures

The Federal income tax system relies upon self-reporting
and assessment. A taxpayer is expected to prepare a report of
his or her liability\1678\ and submit it to the Internal
Revenue Service (``IRS'') with any payment due. The Code
provides general authority for the IRS to assess all taxes
shown on returns, including assessment of tax computed by the
taxpayer,\1679\ other than certain Federal unemployment tax and
estimated income taxes.\1680\ The assessment is required to be
made by recording the liability in the ``office of the
Secretary'' in a manner determined under regulations.\1681\ In
addition, the IRS may make supplemental assessments within the
limitations period whenever it determines that an assessment
was imperfect or incomplete.\1682\
---------------------------------------------------------------------------
\1678\Secs. 6011 and 6012.
\1679\Sec. 6201.
\1680\Sec. 6201(b).
\1681\Sec. 6203.
\1682\Sec. 6204.
---------------------------------------------------------------------------
The authority of the IRS to assess additional tax is
generally subject to certain restrictions on assessment known
as deficiency procedures.\1683\ These deficiency procedures
generally ensure a taxpayer access to administrative review and
a pre-payment judicial forum (i.e., the United States Tax
Court) for reviewing disputed adjustments proposed by the IRS.
A deficiency of tax is the amount by which the liability
determined under the Code exceeds the sum of certain
taxes\1684\ assessed for a period (including amounts shown on a
return), after reduction for any rebates of tax.
---------------------------------------------------------------------------
\1683\Secs. 6211 through 6215.
\1684\ The taxes to which deficiency procedures apply are income,
estate and gift and excise taxes arising under chapters 41, 42, or 44.
Secs. 6211 and 6213.
---------------------------------------------------------------------------

Math error exception to restrictions on assessments

There are several exceptions to the restrictions on
assessment of tax.\1685\ One of the principal exceptions is the
IRS's authority to make a summary assessment of tax without
issuance of a notice of deficiency if the error is a result of
a mathematical or clerical error, generally referred to as math
error authority. Purely mathematical or clerical issues are
often identified early in the processing of a return, prior to
issuance of any refund rather than as a result of an
examination of a return. Other grounds for math error authority
may be identified after initial processing, including in the
course of an examination of other issues subject to the general
restrictions on assessment.
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\1685\Section 6213 provides that a taxpayer may waive the
restrictions on assessment, permits immediate assessment to reflect
payments of tax remitted to the IRS and to correct amounts credited or
applied as a result of claims for carrybacks under section 1341(b), and
requires assessment of amounts ordered as criminal restitution.
Assessment is also permitted in certain circumstances in which
collection of the tax would be in jeopardy. Secs. 6851, 6852, and 6861.
---------------------------------------------------------------------------
Definition of math error
The definition of mathematical or clerical errors is not
limited to math, clerical, or transcription errors. It
addresses over 20 categories of errors,\1686\ many of which
relate to rules regarding refundable credits, including the
earned income tax credit.\1687\ Since 2015, the math error
authority covers situations for which a taxpayer claiming
certain refundable credits either is subject to a multi-year
ban against claiming such credits as a consequence of having
made a prior fraudulent or reckless claim or, in the case of
taxpayer who has made prior improper claims, omits information
required by the Secretary to demonstrate eligibility for the
credit.\1688\ In 2020 and 2021, math error authority was
expanded to cover certain errors related to valid taxpayer
identification numbers and reconciliation of advance payments
with respect to the 2020 recovery rebate credit, 2020
additional recovery rebate credit, and 2021 recovery rebate
credit.\1689\ In 2022, math error authority was again expanded
to apply to errors in documenting energy related credits,
including omission of product or vehicle identification
numbers.\1690\
---------------------------------------------------------------------------
\1686\Sec. 6213(g)(2)(A) through (V).
\1687\Math error authority currently applies to certain errors
related to the earned income tax credit, the child tax credit, the
American opportunity tax credit, recovery rebate credits, and various
energy-related credits.
\1688\Sec. 6213(g)(2)(K), (P), and (Q). Pub. L. No. 114-113, Div.
Q, sec. 208.
\1689\Pub. L. No. 116-136, sec. 2201; Pub. L. No. 116-260, Div. N,
sec. 272; Pub. L. No. 117-2, title IX, sec. 9601. See also secs.
6213(g)(2)(L); 6428(e)(1), (g)(4); 6428A(e)(1), (g)(7); 6428B(e)(2)(G),
(f)(1).
\1690\Secs. 6213(g)(2)(R), (S), (T), (U), and (V). Pub. L. No. 117-
169, secs. 13301(g)(2), 13401(i)(4), 13402(c), and 13403(b)(2).
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Notice of math error assessment and request for abatement
If a mistake on the return is of a type that is within the
meaning of mathematical or clerical error, the IRS immediately
assesses the additional tax due as a result of correcting the
mistake and sends notice to the taxpayer informing the taxpayer
of the assessment. The statute is silent as to the level of
detail required in the notice. Math error authority may be used
to deny an improperly claimed credit, either during initial
processing of a return on which the credit is claimed or in an
examination of the return after the refund has been issued, and
to assess immediately any additional tax due as a result
without issuing a notice of deficiency. The issuance of a
notice of math error begins a 60-day period within which the
taxpayer may submit a request for abatement of the math error
adjustment. If a taxpayer timely submits a request, the statute
directs the IRS to abate the assessment and refer the
unresolved issue for examination under the deficiency
procedures.\1691\
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\1691\Sec. 6213(b)(2)(A).
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REASONS FOR CHANGE

The Committee believes there is excessive noncompliance
with claims of the earned income tax credit, in particular with
duplicate claims of qualifying children. In fiscal year 2023
alone, the IRS paid out 150,000 duplicative claims. The
Committee believes establishing a certification program will
ensure duplicate claims are denied, thereby ensuring the credit
is paid only to taxpayers who fully comply with the credit
requirements. The Committee believes that an appropriately
funded task force can make critical recommendations to improve
administration and integrity of the earned income tax credit.
The Committee also wishes to provide additional relief to
certain Purple Heart recipients to ensure that they do not have
to endure financial hardship while transitioning into gainful
employment.

EXPLANATION OF PROVISION

Earned income tax credit certification program
The provision creates a new earned income tax credit
certification program for taxable years after 2027, with
transition rules for taxable years beginning in 2025, 2026, and
2027. The provision requires the Secretary to establish a
program under which, on the taxpayer's application with respect
to the child, the Secretary is required to issue an EITC
certificate to establish, for purposes of section 32, a child's
status as a qualifying child only of the taxpayer for a taxable
year.
The provision details the application requirements,
including the time and manner of application, and how to
resolve competing claims. Under the provision, the Secretary is
not permitted to issue an EITC certificate unless the taxpayer
applies under the program and provides such information and
supporting documentation as the Secretary by regulation
requires to establish such child as a qualifying child only of
the taxpayer for the taxable year. The application and
supporting documentation is required in a manner as may be
provided by the Secretary (including establishing an on-line
portal) and not later than the due date for the tax return for
the taxable year or (if later) when the return is filed. In the
case of more than one taxpayer making an application with
respect to a child under the program for a taxable year
beginning during a calendar year, the Secretary is prohibited
from issuing an EITC certification to any such taxpayer with
respect to the child for such a taxable year unless the
Secretary can establish such child, based on information and
supporting documentation provided, as the qualifying child only
of one such taxpayer for such a taxable year.
For taxable years beginning after 2027, in the case of a
taxpayer who takes into account as a qualifying child under
section 32 a child for whom an EITC certificate has not been
issued for the taxable year to the taxpayer, the Secretary is
not permitted to credit the portion of any overpayment for such
taxable year that is attributable to the taxpayer taking into
account the child as a qualifying child, unless the taxpayer
obtains, not later than the due date for the return for the
taxable year, an EITC certificate with respect to such child
for such taxable year, and if the taxpayer fails to obtain an
EITC certificate, the failure is treated: (i) as an omission of
information required by section 32 with respect to the child,
and (ii) as arising out of a mathematical or clerical error and
assessed according to section 6213(b)(1). Under the provision,
a termination of an EITC certificate is treated in the same
manner as a failure to obtain an EITC certificate.
The provision provides for transition rules for taxable
years beginning before 2028. For any taxable year beginning
after December 31, 2023, and before January 1, 2027, if more
than one taxpayer makes a claim for the earned income credit
under section 32 taking into account the same child as a
qualifying child, the Secretary is required to send notice to
each taxpayer (by certified or registered mail to the last
known address of the taxpayer) detailing the resultant
treatment provided under the provision of such taxpayers with
respect to the child for subsequent taxable years beginning
before 2028.
For taxpayers that make a claim for the earned income
credit taking into account the same child as another taxpayer
in any taxable year beginning after December 31, 2023, and
before January 1, 2027, in subsequent taxable years beginning
before January 1, 2028, the Secretary may not credit the
portion of any overpayment for the taxable year that is
attributable to a taxpayer taking into account the child as a
qualifying child under section 32 until the 15th day of October
following the end of the taxable year, and if more than one
taxpayer makes a claim for such credit for the taxable year
taking into account the same child as a qualifying child,
taking the same child into account is to be treated (i) as an
omission of information required by section 32 with respect to
the child, and (ii) as arising out of a mathematical or
clerical error and assessed according to section 6213(b)(1).
Qualifying child has the meaning given the term under section
32(c)(3).
The treatment in the provision as an omission and as
arising out of a mathematical or clerical error may be rebutted
by providing information and supporting documentation that
satisfactorily demonstrates the child is a qualifying child of
the taxpayer for the taxable year.
Under the provision, a taxpayer cannot apply for an EITC
certificate under the program for any taxable year in the
disallowance period. The disallowance period is (i) the period
of 10 taxable years after the most recent taxable year for
which there was a penalty imposed under new section 6720D on
the taxpayer (but only if such penalty has been imposed on the
taxpayer more than once, at least one instance of which was due
to fraud under section 6720D(b)), and (ii) the period of 2
taxable years after the most recent taxable year for which
there was a penalty imposed under new section 6720D on the
taxpayer (but only if such penalty has been imposed on the
taxpayer more than once due to reckless or intentional
disregard of rules and regulations (but not imposed due to
fraud)), and (iii) any disallowance period with respect to the
taxpayer under section 32(k)(1).
The provision provides that the Secretary is required to
prescribe rules as may be necessary or appropriate to carry out
the program, including (1) a process for establishing
alternating taxable year treatment of a child as a qualifying
child under a custodial arrangement, (2) a process,
notwithstanding the rules applicable for taxable years
beginning in 2026 and 2027, for establishing a child as a
qualifying child and issuing the full credit to a taxpayer who
has established a child as a qualifying child for taxable years
to which such rules apply, (3) a simplified process for re-
certifying a child as a qualifying child only of the taxpayer
for a taxable year, and (4) a process for terminating EITC
certificates in the case of competing claims with respect to a
child or in cases in which issuance of the certificate is
determined by the Secretary to be erroneous.
The provision provides for penalties for improper use of
the EITC certificate program. If any person makes a material
misstatement or inaccurate representation in an application for
an EITC certificate, and such misstatement or representation
was due to reckless or intentional disregard of rules and
regulations (but not due to fraud), the person is required to
pay a penalty of $100 for each EITC certificate with respect to
which such misstatement or representation was made. If a
misstatement or representation is due to fraud on the part of
the person making such misstatement or representation, in
addition to any criminal penalty, the person is required to pay
a penalty of $500 for each EITC certificate with respect to
which such a misstatement or representation was made.
Task force to design a private data bouncing system for
improvements to the earned income tax credit
The provision creates a task force to provide the Secretary
a report on various items with respect to the administration of
the earned income credit. To create this task force, the
provision provides for an appropriation of $10,000,000 out of
any money not otherwise appropriated for the fiscal year ending
on September 30, 2026. The report is required to include: (i)
recommendations for improvement of the integrity of the
administration of the earned income tax credit, (ii) the
potential use of third-party payroll and consumption datasets
to verify income, and (iii) the integration of automated
databases to allow horizontal verification to reduce improper
payments, fraud, and abuse.
Increased earned income tax credit for certain purple heart
recipients
The provision increases the credit amount for specified
Purple Heart recipients. The credit amount is increased by the
sum of Social Security disability insurance (``SSDI'') benefit
substitution amounts with respect to qualified benefit
termination months during the year.
A specified Purple Heart recipient is an individual who
received the Purple Heart and disability insurance benefit
payments under section 223(a) of the Social Security Act and
whose disability insurance payments ceased to be payable by
reason of section 223(e)(1) of such Act.
A qualified benefit termination month is each month during
the 12-month period that begins with the first month with
respect to which insurance disability payments under section
223(a) of the Social Security Act ceased to be payable by
reason of section 223(e)(1) of such Act (the ``eligibility
period''). A qualified benefit termination month does not
include any month that the specified Purple Heart recipient
receives any benefit payment under section 223(a) of the Social
Security Act with respect to such month.
The SSDI benefit substitution amount is an amount equal to
the disability insurance benefit payment received by such
recipient under section 223(a) of the Social Security Act for
the month immediately preceding the eligibility period.
In general, the requirements for the earned income tax
credit including being an eligible individual, the general
limit on the credit amount, the calculation of credit amount
based on earned income, the joint filing requirement for
married taxpayers, and the disallowance of the credit for
excessive investment income do not apply for the increased
credit amount for specified Purple Heart recipients\1692\ In
other words, the earned income tax credit amount is increased
by the appropriate sum of SSDI benefit substitution amounts for
specified Purple Heart recipients regardless of whether such
taxpayer would qualify for the earned income tax credit under
present law.
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\1692\A specified Purple Heart recipient is eligible even if the
recipient is not an eligible individual for purposes of section
32(c)(1). Sections 32(a)(2), (d). (e), (f), and (i) also do not apply
in regard to the amount of the increase in the earned income tax credit
for specified Purple Heart recipients.
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EFFECTIVE DATES

The provision creating the earned income tax credit
certification program, including attendant penalties applies to
taxable years beginning after December 31, 2024.
The provision creating the task force to design
improvements to the earned income credit is effective on the
date of enactment.
The provision creating an increased earned income credit
for certain Purple Heart recipients applies to taxable years
ending after the date of enactment.

Task Force on the Termination of Direct File (sec. 112207 of the bill)

PRESENT LAW

Under The Inflation Reduction Act of 2022 (``IRA'')\1693\
amounts were appropriated for necessary expenses of the
Internal Revenue Service (``IRS'') to deliver to Congress--
within nine months following the date of enactment of the Act--
a report on the cost of developing and running a free direct e-
file tax return system; taxpayer opinions, expectations and
level of trust for such a system; and the opinions of an
independent third-party on the overall feasibility approach,
schedule, cost, organizational design and IRS capacity to
deliver such a system.
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\1693\Inflation Reduction Act of 2022, Pub. L. No. 117-169, sec.
10301, August 16, 2022.
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The IRS developed a phased approach to the Direct E-File
Pilot during the 2024 tax filing season and subsequently
announced that Direct E-File would be a permanent option for
filing tax returns beginning with the 2025 tax filing
season.\1694\
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\1694\Inspector General for Tax Administration, Department of the
Treasury, Inflation Reduction Act: Results of the Direct File Pilot
(TIGTA 2025-408-015), March 20, 2025.
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REASONS FOR CHANGE

The Committee believes the current implementation of the
Direct File program is too costly and inefficient. Furthermore,
taxpayers already have numerous options for filing their taxes.
Instead, the Committee believes it would be useful to explore
the feasibility of a new approach such as a public-private
partnership to provide for free tax filing for up to 70 percent
of taxpayers, replacing both the Direct File and the existing
Free File programs.

EXPLANATION OF PROVISION

The provision directs the Secretary of the Treasury to
terminate the IRS Direct File program as soon as practicable,
but no later than 30 days after date of enactment.
Out of any money in the Treasury not otherwise
appropriated, the provision provides for appropriations for the
fiscal year ending September 30, 2026, for necessary expenses
of the Department of Treasury to deliver to Congress, within 90
days following the date of enactment, a report on 1) the cost
of a new public-private partnership to provide for free tax
filing for up to 70 percent of all taxpayers calculated by
adjusted gross income to replace free file and any IRS-run
direct file programs; 2) taxpayer opinions and preferences
regarding a taxpayer-funded, government-run service or a free
service provided by the private sector; and 3) assessment of
the feasibility of a new approach, how to make the options
consistent and simple for taxpayers across all participating
providers, how to provide features to address taxpayer needs,
and how much money should be appropriated to advertise the new
option, $15 million, to remain available until September 30,
2026, in order to carry out the termination of the IRS Direct
File, as well as the task force.

EFFECTIVE DATE

The provision is effective on the date of enactment.

Postponement of Tax Deadlines for Hostages and Individuals Wrongfully
Detained Abroad (sec. 112208 of the bill and sec. 6511 of the Code and
new sec. 7511 of the Code)

PRESENT LAW

General rules establishing Code deadlines

The United States tax system generally relies upon self-
reporting and assessment. For most individuals, that self-
reporting is in the form of an income tax return. Persons
required to file income tax returns\1695\ must file such
returns in the manner prescribed by the Secretary, with any
payment due, in compliance with due dates established in the
Code, if any, or by regulations. The Code includes a general
rule that requires income tax returns of individuals to be
filed on or before the 15th day of the fourth month following
the end of the taxable year, but certain exceptions are
provided both in the Code and in regulations.\1696\
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\1695\Section 6012 provides general rules identifying who must file
an income tax return.
\1696\Secs. 6072 (prescribing deadlines for filing income tax
returns) and 6081 (authorization of extensions of time to file,
provided tax estimated to be due is paid with the application for
extension).
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The Code also establishes the limitation periods within
which the Internal Revenue Service (``IRS'') must perform its
various administrative duties, such as assessment of taxes,
interest, and any additions to tax or penalties related to the
taxes and collection of such taxes, interest, and additions to
tax. Taxes are generally required to be assessed within three
years after a taxpayer's return is filed, regardless of whether
it was timely filed.\1697\ Several exceptions may prevent the
three-year limitation period from beginning, including failure
to file a return or filing a false or fraudulent return with
the intent to evade tax. In those cases, the tax may be
assessed, or a proceeding in court for collection of such tax
may commence without assessment, at any time.\1698\ After the
taxes are finally determined, whether it is through alternative
payment methods, or enforced collection activity, the IRS must
collect within 10 years from the date of assessment of
tax.\1699\ A refund or credit is authorized for a taxable year
only if an overpayment exists, that is, if the amounts paid or
deemed paid exceed the tax liability for that year and a claim
for such amount is timely made.\1700\
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\1697\Sec. 6501(a). Returns that are filed before the date they are
due are deemed filed on the due date. See sec. 6501(b)(1) and (2).
\1698\Sec. 6501(c)(1), (2), and (3).
\1699\Sec. 6502.
\1700\Secs. 6402 (authority for refunding an overpayment) and 6511
(limitations period for filing a claim, including both a timely filing
requirement and a lookback period to determine amounts eligible to be
refunded).
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Special rules authorizing extensions of time for required events in the
Code

In computing the time within which they must complete an
action required or prescribed by the Code, persons who serve in
the United States Armed Forces or in support of the Armed
Forces are entitled to disregard their period of service while
in designated combat zones\1701\ or serving overseas in a
contingency operation designated as such by the Secretary of
Defense,\1702\ and the 180 days succeeding such period. For
this purpose, periods of hospitalization that result from such
service are included in the time that may be disregarded. The
period that may be disregarded by the taxpayer is also
disregarded in determinations by the IRS of the amount of any
underpayment interest, penalty, additional amount, or addition
to tax, and the amount of any credit or refund. Special rules
apply for the period a person is in missing status,\1703\ for
certain limitations on refunds or collection actions,\1704\ as
well as application of these rules to the spouse of the
taxpayer.\1705\
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\1701\Sec. 112.
\1702\Sec. 7508.
\1703\Sec. 7508(d).
\1704\Sec. 7508(b) and (e).
\1705\Sec. 7508(c).
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The Code specifies a number of actions for which the
specified periods of time may generally be disregarded by
persons who serve in the United States Armed Forces or in
support of the Armed Forces described above. These actions
include those required of taxpayers as well as those performed
by the IRS. The former includes actions such as the filing any
return of income, estate, gift, employment, or excise tax;
filing a petition with the Tax Court for redetermination of a
deficiency or for review of a decision rendered by the Tax
Court; and actions related to refunds, such as filing a claim
or bringing suit upon such claim. Actions by the IRS for which
a deadline is extended include the assessment of any tax and
related notices, such as notice and demand for payment or
collection of the tax; the allowance of a refund; and bringing
suit by the United States in respect of any liability in
respect of any tax. In addition, the statute includes a
residuary clause that permits the Secretary to designate any
other act required or permitted under the internal revenue laws
as within the scope of section 7508(a).\1706\ Finally, special
rules ensure that a taxpayer to whom the extension is available
remains entitled to overpayment interest rates.\1707\
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\1706\Sec. 7508(a)(1). In addition, Revenue Procedure 2018-58
supplements the list of postponed acts in section 7508(a)(1) and
Treasury Regulation section 301.7508A-1(c)(1) with an additional list
of time-sensitive acts.
\1707\Sec. 7508(b).
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Another provision of the Code, relating to disasters,
mandates a 60-day extension and authorizes the Secretary to
specify a period of up to one year that may be disregarded for
performing various acts under the Code, such as filing tax
returns, paying taxes, or filing a claim for credit or refund
of tax, for eligible taxpayers. The limited relief from
deadlines under this disaster extension applies to the same
list of actions for which the specified time is disregarded for
persons in combat zones. The provision adopts by cross
reference to section 7508(b) the special rules regarding
overpayment interest for affected taxpayers. To qualify for
this extension, an eligible taxpayer must be affected by a
Federally declared disaster, a significant fire, or a
terroristic or military action.\1708\
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\1708\Sec. 7508A.
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Persons held hostage or wrongfully detained

Neither the provision on service in a combat zone nor the
rules on disaster relief address persons who fail to meet a tax
filing or payment deadline that arises while they are
unlawfully or wrongfully detained abroad. Federal law provides
a set of criteria for determining whether a United States
national\1709\ is a wrongfully detained person. Such
determination requires the involvement of the Hostage Recovery
Fusion Cell, a multi-agency entity that addresses coordination
of efforts to identify and recover those held hostage or
wrongfully detained. Generally, if the person detained is held
by a sovereign entity, determination of whether such person is
wrongfully detained rests with the Secretary of State using
prescribed criteria. Hostage status is determined by the
Hostage Recovery Fusion Cell, under the leadership of the
Federal Bureau of Investigation.\1710\
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\1709\22 U.S.C. 1741e defines ``United States national'' to mean
citizens and certain noncitizens within the scope of 8 U.S.C. secs.
1102(a)(22) and 1408 and lawful permanent residents with significant
ties to the United States.
\1710\Sections 302 and 304 of the Robert Levinson Hostage Recovery
and Hostage-Taking Accountability Act, Pub. L. 116-260, div. FF, title
III, sec. 301, Dec. 27, 2020, codified at 22 U.S.C. sec. 1741 through
1741f.
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In recent years, the incidence of United States citizens or
residents abroad being wrongfully detained or held hostage has
been increasingly frequent. When they are released from
detention, they face many challenges in adjusting to a return
to their normal, daily life. That adjustment upon a return home
is made more difficult when they must face notices that they
were subject to tax inquiries, penalties or interest based on
delinquencies accruing in their absence they were unable to
avoid. While the IRS may work with the released hostage or
detainee to abate or reverse some of those notices, the
authority of the IRS may be limited to do so, especially in
cases in which the period of detention was lengthy. Most
penalties based on delinquency can be abated based upon
reasonable cause, for example, unless the limitations period
for making corrections to a year has lapsed. However, the Code
narrowly restricts IRS authority to abate any interest that may
have accrued for failure to pay income tax timely.

REASONS FOR CHANGE

In recent years, the incidence of United States citizens or
residents abroad being wrongfully detained or held hostage has
been increasingly frequent. hen they are released from
detention, they face many challenges in adjusting to a return
to their normal, daily life. That adjustment upon a return home
is made more difficult when they must face notices that they
were subject to tax inquiries, penalties or interest based on
delinquencies accruing in their absence they were unable to
avoid. The Committee has learned that, while the IRS may work
with the released hostage or detainee to abate or reverse some
of those notices, the authority of the IRS may be limited to do
so, especially in cases in which the period of detention was
lengthy. Most penalties based on delinquency can be abated
based upon reasonable cause, for example, unless the
limitations period for making corrections to a year has lapsed.
Even if the limitations period is open, the Code narrowly
restricts IRS authority to abate any interest that may have
accrued for failure to pay income tax timely. In response, the
Committee supports enactment of this bill to provide relief
similar in scope and type to those deployed to combat zones or
affected by a Federally declared disaster. It will require
reporting by agencies involved in monitoring status of U.S.
citizens or residents held abroad to the IRS to enable the IRS
to avoid sending notices during the period of detention, and to
correct any missteps in that regard with a minimum

EXPLANATION OF PROVISION

The provision adds a new Code section that extends due
dates for certain Federal tax matters for hostages and persons
wrongfully detained by providing that the period of detention
is disregarded in determining deadlines, interest, and
penalties for the person, comparable to the rules applicable to
a person deployed in a combat zone. Similar to those rules, it
extends such relief to the spouse of the hostage or detainee
and adopts special rules with respect to overpayment interest.
The class of applicable persons is defined by reference to
provisions of Title 22 on wrongfully detained persons or
hostages.
Under the provision, the period that may be disregarded in
redetermining time limits is the entire period during which the
person was held hostage or wrongfully detained during any
taxable year ending after date of enactment. The list in
present-law section 7508 identifying events for which a
deadline is extended is used for the new provision.
The provision uses the term ``applicable individual'' to
describe a person entitled to the extension. A person is an
applicable individual if that person is either determined to be
wrongfully detained under section 302 of the Robert Levinson
Hostage Recovery and Hostage-Taking Accountability Act or is
determined to be a hostage under findings of the Hostage
Recovery Fusion Cell. The class of applicable individuals
consists of persons who are identified on reports provided to
the Secretary. The provision requires the Secretary of State to
provide a list of persons wrongfully detained, together with
any identifying information available. The Attorney General,
through the Hostage Recovery Fusion Cell, is required to
provide a comparable list of persons believed to be hostages.
The initial report is due no later than January 1, 2026, with
further reports due annually.
The provision also extends relief to persons who were
assessed interest, penalties or additional amounts with respect
to a tax liability for a failure to meet a deadline that arose
during the period of detention for which extension is
authorized. If the interest, penalties or fines were assessed
before the person was identified as an applicable individual,
the Secretary is directed to abate and refund any such amounts
as overpayments in the same manner as would apply under section
6402.
In addition to the prospective relief described above, the
provision directs the Secretary, in consultation with Secretary
of State and the Hostage Recovery Fusion Cell, to initiate a
program under which persons who were detained during an
applicable period beginning January 1, 2021, and ending before
date of enactment may seek refund of interest and penalties
assessed with respect to tax years ending during the applicable
period. This program is to be available to eligible individuals
(persons who would have been applicable individuals but for the
taxable years involved and their dependent or spouse), to be
identified by the Secretary of State and Attorney General in
reports similar to those required with respect to applicable
individuals. A person may be both an applicable individual with
respect to a taxable year ending after date of enactment and an
eligible individual with respect to an earlier taxable year
within the applicable period. Once such persons are identified,
they are entitled to notice of the potential relief within 90
days from their release from captivity, or, if released prior
to date of enactment, within 90 days after enactment.
After receiving notice of the program, eligible individuals
are permitted to seek abatement or claim a refund for additions
to tax and interest assessed or collected in respect of a tax
liability attributable to the applicable period. The
limitations period for filing a claim for refund or seeking
abatement is extended, so that it expires no earlier than one
year from the notice issued to the eligible individual.
Furthermore, the look-back period for determining payments that
may be within the scope of a refund claim is not applicable.
The provision also requires the Secretary to make necessary
updates to databases and information systems to ensure that
expiration dates, interest and penalty accrual, and collection
activities are suspended consistent with this provision.

EFFECTIVE DATE

The provision is generally effective for applicable
individuals for taxable years ending after the date of
enactment. The special program for notifications, refunds or
abatements to eligible individuals for the applicable period
from January 1, 2021, through date of enactment, is effective
only for taxable years ending before the date of enactment.

Termination of Tax-Exempt Status of Terrorist Supporting Organizations
(sec. 112209 of the bill and sec. 501(p) of the Code)

PRESENT LAW

Revocation of tax-exempt status, in general

Under present law, the IRS generally issues a letter
revoking recognition of an organization's tax-exempt status
only after (1) conducting an examination of the organization,
(2) issuing a letter to the organization proposing revocation,
and (3) allowing the organization to exhaust the administrative
appeal rights that follow the issuance of the proposed
revocation letter. In the case of an organization described in
section 501(c) or (d), the revocation letter immediately is
subject to judicial review under the declaratory judgment
procedures of section 7428. To sustain a revocation of tax-
exempt status under section 7428, the IRS must demonstrate that
the organization is no longer entitled to exemption.

Suspension of tax-exempt status of terrorist organizations (section
501(p))

To combat terrorism, the Federal government has designated
a number of organizations as terrorist organizations or
supporters of terrorism under the Immigration and Nationality
Act, the International Emergency Economic Powers Act, and the
United Nations Participation Act of 1945.
The tax-exempt status of an organization that is exempt
from tax under section 501(a) is suspended for the period
during which the organization is designated or identified by
Federal authorities as a terrorist organization or supporter of
terrorism. An organization so designated or identified is also
ineligible to apply for tax-exempt status under section
501(a).\1711\ The period of suspension begins on the later of
(1) the date the organization is first designated or identified
or (2) November 11, 2003,\1712\ and ends on the date when all
designations or identifications with respect to the
organization have been rescinded pursuant to the law or
Executive Order under which the designation or identification
was made.\1713\
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\1711\Sec. 501(p)(1).
\1712\The date of enactment of section 501(p). Pub. L. No. 108-121.
\1713\Sec. 501(p)(3).
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For this purpose, a terrorist organization is an
organization that has been designated or otherwise individually
identified (1) as a terrorist organization or foreign terrorist
organization under the authority of section
212(a)(3)(B)(vi)(II) or section 219 of the Immigration and
Nationality Act; (2) in or pursuant to an Executive Order that
is related to terrorism and issued under the authority of the
International Emergency Economic Powers Act or section 5 of the
United Nations Participation Act for the purpose of imposing on
such organization an economic or other sanction; or (3) in or
pursuant to an Executive Order that refers to the provision and
is issued under the authority of any Federal law if the
organization is designated or otherwise individually identified
in or pursuant to such Executive Order as supporting or
engaging in terrorist activity (as defined in section
212(a)(3)(B) of the Immigration and Nationality Act) or
supporting terrorism (as defined in section 140(d)(2) of the
Foreign Relations Authorization Act, Fiscal Years 1988 and
1989).\1714\ During the period of suspension, no deduction for
any contribution to a terrorist organization is allowed under
the Code, including under section 170, 545(b)(2), 556(b)(2),
642(c), 2055, 2106(a)(2), or 2522.\1715\
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\1714\Sec. 501(p)(2).
\1715\Sec. 501(p)(4).
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No organization or other person may challenge, under
section 7428 or any other provision of law, in any
administrative or judicial proceeding relating to the Federal
tax liability of such organization or other person, the
following: the suspension of tax-exempt status, the
ineligibility to apply for tax-exempt status, a designation or
identification (described above), the timing of the period of
suspension, or a denial of deduction (described above).\1716\
The suspended organization may maintain other suits or
administrative actions against the agency or agencies that
designated or identified the organization, for the purpose of
challenging such designation or identification (but not the
suspension of tax-exempt status under this provision).
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\1716\Sec. 501(p)(5).
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If the tax exemption of an organization is suspended and
each designation and identification that has been made with
respect to the organization is determined to be erroneous
pursuant to the law or Executive Order making the designation
or identification, and such erroneous designation results in an
overpayment of income tax for any taxable year with respect to
such organization, a credit or refund (with interest) with
respect to such overpayment shall be made. If the operation of
any law or rule of law (including res judicata) prevents the
credit or refund at any time, the credit or refund may
nevertheless be allowed or made if the claim for such credit or
refund is filed before the close of the one-year period
beginning on the date that the last remaining designation or
identification with respect to the organization is determined
to be erroneous.\1717\
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\1717\Sec. 501(p)(6).
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The IRS is directed to update the listings of tax-exempt
organizations to take account of an organization that has had
its tax-exempt status suspended and to publish appropriate
notice to taxpayers of the suspension of such organization's
tax-exempt status and the fact that contributions to such
organization are not deductible during the period of
suspension.\1718\
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\1718\Sec. 501(p)(7).
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As of this writing, there are nine organizations on the
IRS's list of organizations suspended under section
501(p).\1719\
---------------------------------------------------------------------------
\1719\See https://www.irs.gov/charities-non-profits/charitable-
organizations/suspensions-pursuant-to-code-section-
501p#::text=Under%20section%20501(p)%20of,under%20section%20501(p)
(last accessed on May 5, 2025).
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REASONS FOR CHANGE

The Committee received testimony about links between
domestic organizations with tax-exempt status and international
terrorist organizations and believes the Code should not be
used to subsidize or finance violent terrorism around the
world. believes that any organization that is determined to
have provided material support or resources to a terrorist
organization should have its tax-exempt status terminated.
However, the Committee also believes that organizations that
are designated as terrorist supporting organizations should
receive adequate notice and be given the opportunity to
demonstrate that such designation was in error or,
alternatively, given the opportunity to cure.

EXPLANATION OF PROVISION

In general

The provision extends section 501(p) such that it applies
not only to terrorist organizations (as under present law) but
also to terrorist supporting organizations. The provision
treats a terrorist supporting organization as a terrorist
organization described in section 501(p)(2). The effect of this
treatment is that the tax-exempt status of a terrorist
supporting organization, and the eligibility of such
organization to apply for tax-exempt status, are suspended. The
period of suspension of a terrorist supporting organization is
treated as beginning on the date the Secretary designates the
organization as a terrorist supporting organization and ending
on the date the Secretary rescinds the designation, as
described below.
A terrorist supporting organization is any organization
that is designated by the Secretary as having provided, during
the three-year period ending on the date of such designation,
material support or resources to a terrorist organization or
terrorist supporting organization described in section 501(p)
in excess of a de minimis amount. For this purpose, the term
``material support or resources'' is defined by reference to
section 2339B of Title 18 of the U.S. Code,\1720\ except that
the term does not include support or resources that were
approved by the Secretary of State with the concurrence of the
Attorney General, or humanitarian aid provided with the
approval of the Office of Foreign Assets Control.
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\1720\Section 2339B defines ``material support or resources'' by
reference to section 2339A of Title 18 of the U.S. Code. Section 2339A,
in turn, provides that material support or resources means ``any
property, tangible or intangible, or service, including currency or
monetary instruments or financial securities, financial services,
lodging, training, expert advice or assistance, safehouses, false
documentation or identification, communications equipment, facilities,
weapons, lethal substances, explosives, personnel (1 or more
individuals who may be or include oneself), and transportation, except
medicine or religious materials.'' The term ``training'' is defined as
``instruction or teaching designed to impart a specific skill, as
opposed to general knowledge.'' The term ``expert advice or
assistance'' is defined as ``advice or assistance derived from
scientific, technical or other specialized knowledge.''
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Notice requirement

Before designating an organization as a terrorist
supporting organization, the Secretary is required to mail to
the most recent mailing address provided to the IRS on its most
recent annual information return or notice filed with the IRS
(or subsequently submitted form indicating a change of address)
a written notice. The notice must include: (1) a statement that
the Secretary will designate the organization as a terrorist
supporting organization unless the organization satisfies the
requirements outlined in the following paragraph (relating to
opportunity to cure), (2) the name of the organization or
organizations with respect to which the Secretary has
determined such organization provided material support or
resources, (3) a description of such material support or
resources, except to the extent that the Secretary determines
that disclosure of the description would be inconsistent with
national security and law enforcement interests, and (4) if the
Secretary makes a determination described in (3) (a ``national
security determination''), a statement that the Secretary has
made such a determination and that all or part of the
description of such material support or resources is included
in such notice by reason of such determination.

Opportunity to cure

In the case of such a notice, the Secretary shall, at the
end of the 90-day period beginning on the date the notice was
sent, designate the organization as a terrorist supporting
organization if, and only if, the organization has not during
such period: (1) demonstrated to the satisfaction of the
Secretary that the organization did not provide the material
support or resources, (2) made reasonable efforts to have such
support or resources returned to such organization and
certified in writing to the Secretary that such organization
will not provide any further support or resources to a
terrorist organization or terrorist supporting organization
described in section 501(p)(2), or (3) if such notice included
a statement that the Secretary has made a national security
determination, filed a complaint with a United States district
court of competent jurisdiction alleging that the Secretary's
national security determination is erroneous. Such a
certification is not valid if the organization making the
certification has provided any other such certification during
the preceding five years.

Rescission of designation

The Secretary shall rescind a designation if and only if:
(1) the Secretary determines that the designation was
erroneous; (2) after the Secretary receives a certification
from an organization that it did not receive the notice
described above, (a) the Secretary determines that it is
reasonable to believe that the organization did not receive the
notice, and (b) the organization satisfies the above
requirements relating to curing a deficiency (that is, the
organization demonstrates that it did not provide material
support or resources or made reasonable efforts to have such
support or resources returned and makes the required
certification); or (3) the Secretary determines that the
periods of suspension for all organizations to which the
material support or resources were provided have ended. The
certification described in (2) above is not treated as valid if
the organization making the certification has provided any
other such certification during the preceding five years.

Administration and judicial review of designation

Notwithstanding the present-law rule that disallows a
challenge to a designation as a terrorist organization in
certain administrative or judicial proceedings (section
501(p)(5)), in the case of the designation of an organization
as a terrorist supporting organization, a dispute regarding
such designation is subject to resolution by the IRS
Independent Office of Appeals (``IRS Appeals'') under section
7803(e) (which describes IRS Appeals). The dispute is subject
to IRS Appeals resolution in the same manner as if the
designation were made by the IRS. In addition, notwithstanding
section 501(p)(5), the United States district courts shall have
exclusive jurisdiction to review a final determination with
respect to an organization's designation as a terrorist
supporting organization. In the case of a determination that
was based on classified information,\1721\ such information may
be submitted to the reviewing court ex parte and in camera. For
purposes of such judicial review, a determination shall not
fail to be treated as a final determination merely because the
organization fails to utilize the dispute resolution process of
IRS Appeals described above. The Secretary is directed to
establish policies and procedures to ensure that employees of
the Department of the Treasury comply with all laws regarding
the handling and review of classified information.\1722\
---------------------------------------------------------------------------
\1721\As defined in section 1(a) of the Classified Information
Procedures Act.
\1722\As defined in section 1(a) of the Classified Information
Procedures Act.
---------------------------------------------------------------------------

EFFECTIVE DATE

The provision is effective for designations made after the
date of enactment in taxable years ending after such date.

Increase in Penalties for Unauthorized Disclosures of Taxpayer
Information (sec. 112210 of the bill and sec. 7213 of the Code)

PRESENT LAW

General rule of confidentiality

As a general rule, section 6103 provides that returns and
return information are confidential. The definition of return
information is very broad and includes any information received
or collected by the Internal Revenue Service (``IRS'') with
respect to the liability under the Code of any person for any
tax, penalty, interest, or offense. Returns and return
information cannot be disclosed unless there is an applicable
exception in the Code.
Section 6103 contains numerous narrowly-tailored exceptions
to the general rule of confidentiality, grouped into 13
categories (paragraphs (c) through (o)): (1) disclosures of
return and return information to designees of the taxpayer
(consent); (2) disclosures to State tax officials and State and
local law enforcement; (3) disclosures to persons having
material interest; (4) disclosure to committees of Congress;
(5) disclosures to the President and certain other persons; (6)
disclosure to certain Federal officers and employees for
purposes of tax administration, etc.; (7) disclosure to Federal
officers and employees for administration of Federal laws not
relating to tax administration (generally disclosures relating
to criminal law enforcement and GAO for audits of the IRS and
certain other agencies), (8) statistical use; (9) disclosure of
certain return and return information for tax administration
purposes (including investigative disclosures and passport
revocation); (10) disclosures of returns and return information
for purposes other than tax administration (includes 22
different exceptions); (11) disclosure of taxpayer identity
information; (12) certain other persons (tax administration
contractors); and (13) disclosure of return and return
information with respect to certain excise taxes (alcohol,
tobacco, firearms, wagering and the heavy vehicle use tax).
To protect the confidentiality of returns and return
information, section 6103 imposes recordkeeping and safeguard
requirements. By March 31 of each year, the IRS is required to
report on the number of certain disclosures made in the
previous calendar year. As a condition of receiving returns and
return information, specified recipients are required to meet
safeguard requirements to the satisfaction of the Secretary to
protect the confidential returns and return information. In
addition, the IRS performs periodic onsite inspections and is
required to submit a report which describes the procedures and
safeguards established and utilized by such recipients for
ensuring the confidentiality of returns and return information
they receive. The report also is required to describe instances
of deficiencies in, and failure to establish or utilize, such
procedures.

Criminal penalties for the unauthorized disclosure or inspection of
returns or return information

Under section 7213, criminal penalties apply to: (1)
willful unauthorized disclosures of returns and return
information by Federal and State employees and other persons;
(2) the offering of any item of material value in exchange for
a return or return information and the receipt of such
information pursuant to such an offer; and (3) the unauthorized
disclosure of return information received by certain
shareholders under the material interest provision of section
6103.
Under section 7213, a person can be subject to a fine of up
to $5,000, up to five years imprisonment, or both, together
with the costs of prosecution.\1723\ If the offense is
committed by a Federal employee or officer, the employee or
officer will be discharged from office upon conviction.
---------------------------------------------------------------------------
\1723\A fine of up to $250,000 can be imposed pursuant to 18 U.S.C.
sec. 3571. Section 3559 of Title 18 specifies that an offense with a
maximum authorized term of imprisonment of ``less than ten years but
five or more years'' is a ``Class D felony,'' and that an offense with
a maximum authorized term of imprisonment of ``less than twenty-five
years but ten or more years'' is a ``Class C felony.'
---------------------------------------------------------------------------
Under section 7213A, the willful and unauthorized
inspection of returns and return information can subject
Federal and State employees and others to a maximum fine of
$1,000, up to a year in prison, or both, in addition to the
costs of prosecution.\1724\ If the offense is committed by a
Federal employee or officer, the employee or officer will be
discharged from office upon conviction.
---------------------------------------------------------------------------
\1724\A fine of up to $100,000 can be imposed pursuant to 18 U.S.C.
sec. 3571(b)(4), applicable to Class A misdemeanors, defined in section
3559 of Title 18 as an offense with a maximum authorized term of
imprisonment of ``one year or less but more than six months.''
---------------------------------------------------------------------------
In addition, any person who intentionally accesses a
computer ``without authorization or exceeds authorized access,
and thereby obtains . . . information from any department or
agency of the United States'' can be prosecuted under 18 U.S.C.
section 1030(a)(2) and upon conviction may be imprisoned for a
year, or fined, or both.

Civil damage remedies for unauthorized disclosure or inspection

If a Federal employee makes an unauthorized disclosure or
inspection, under section 7431, a taxpayer can bring suit
against the United States in Federal district court. If a
person other than a Federal employee makes an unauthorized
disclosure or inspection, suit may be brought directly against
such person. No liability results from a disclosure based on a
good faith, but erroneous, interpretation of section 6103. A
disclosure or inspection made at the request of the taxpayer
will also relieve liability.
Upon a finding of liability, a taxpayer can recover the
greater of $1,000 per act of unauthorized disclosure (or
inspection), or the sum of actual damages plus, in the case of
an inspection or disclosure that was willful or the result of
gross negligence, punitive damages. The taxpayer may also
recover the costs of the action and, if found to be a
prevailing party, reasonable attorney fees.
The taxpayer has two years from the date of the discovery
of the unauthorized inspection or disclosure to bring suit. The
IRS is required to notify a taxpayer of an unauthorized
inspection or disclosure as soon as practicable after any
person is criminally charged by indictment or information for
unlawful inspection or disclosure. In addition, if the Internal
Revenue Service or a Federal or State agency (upon notice to
the Secretary by such Federal or State agency) proposes an
administrative determination as to disciplinary or adverse
action against an employee arising from the employee's
unauthorized inspection or disclosure of the taxpayer's return
or return information, the taxpayer is also required to be
notified.

REASONS FOR CHANGE

Charles Littlejohn, a contractor for the IRS, stole
confidential tax return information for thousands of the
nation's wealthiest individuals and disclosed this information
to two news organizations, which published articles on the
information. Although the information of thousands of taxpayers
was involved, Mr. Littlejohn was charged with only a single
count of willful unauthorized disclosure.\1725\ Mr. Littlejohn
was sentenced to the maximum provided by section 7213, $5,000
and five years in prison. The Committee believes that the
penalties for unauthorized disclosure should be strengthened by
increasing the maximum penalty to a $250,000 fine and 10 years
imprisonment, to serve as a deterrent to future violations of
the law. In addition, the bill ensures that each taxpayer
impacted by a disclosure will count as a separate and distinct
violation of the law.
---------------------------------------------------------------------------
\1725\Details of the Littlejohn prosecution, including court
filings, are available at https://www.justice.gov/criminal/criminal-
vns/case/united-states-v-charles-littlejohn.
---------------------------------------------------------------------------

EXPLANATION OF PROVISION

The provision increases the specified maximum fine in
section 7213 from $5,000 to $250,000, consistent with 18 U.S.C.
section 3571. The provision also increases from five years to
10 years the maximum term of imprisonment upon conviction of a
section 7213 violation. Under the provision, for a willful
unauthorized disclosure involving the returns or return
information of multiple taxpayers, a separate violation occurs
with respect to each such taxpayer whose return or return
information is disclosed.

EFFECTIVE DATE

The provision is effective for disclosures made after the
date of enactment.

Restriction on Regulation of Contingency Fees With Respect to Tax
Returns, etc. (sec. 112211 of the bill)

PRESENT LAW

The Code provides that a taxpayer may deduct all ordinary
and necessary expenses paid or incurred during the taxable year
in carrying on a trade or business.\1726\
---------------------------------------------------------------------------
\1726\Sec. 162(a); Treas. Reg. sec. 1.162-1(a).
---------------------------------------------------------------------------
A current deduction for an expense for which there is a
right or expectation of reimbursement may be disallowed because
these payments are not expenses of the taxpayer and are instead
in the nature of an advance or a loan. The extent to which the
right must be established has varied. Some cases have denied
the current deduction because the right of reimbursement was
fixed,\1727\ others have allowed the current deduction because
the right of reimbursement was uncertain,\1728\ and other cases
have denied the current deduction if the taxpayer's right to
reimbursement was subject to a contingency.
---------------------------------------------------------------------------
\1727\Charles Baloian Company, Inc. v. Commissioner, 68 T.C. 620,
626, 628 (1977); Manocchio v. Commissioner, 710 F.2d 1400, 1402 (9th
Cir. 1983); Glendinning, McLeish & Co. v. Commissioner, 61 F.2d 950,
952 (2d Cir. 1932); Webbe v. Commissioner, T.C. Memo. 1987-426, aff'd,
902 F.2d 688 (8th Cir. 1990).
\1728\George K. Herman Chevrolet, Inc. v. Commissioner, 39 T.C.
846, 853 (1963); Allegheny Corporation v. Commissioner, 28 T.C. 298,
305 (1957), acq., 1957-2 C.B. 3; Electric Tachometer Corporation v.
Commissioner, 37 T.C. 158, 161-162 (1961), acq., 1962-2 C.B. 4.
---------------------------------------------------------------------------
Courts have held that an attorney representing clients on a
contingent fee basis may not currently deduct advances to or
expenses paid on behalf of the clients as ordinary and
necessary business expenses.\1729\ The amounts in these cases
were to be repaid from any recovery. Courts have also held that
even if reimbursement is due only under certain circumstances,
generally no immediate deduction is allowable.\1730\
---------------------------------------------------------------------------
\1729\Burnett v. Commissioner, 356 F.2d 755, 760 (5th Cir. 1966),
cert. denied, 385 U.S. 832 (1966); Herrick v. Commissioner, 63 T.C.
562, 567, 568 (1975); Canelo v. Commissioner, 53 T.C. 217, 225 (1969),
aff'd, 447 F.2d 484 (9th Cir. 1971), acq. 1971-2 C.B. 2, nonacq. in
part, 1982-2 C.B. 2; Silverton v. Commissioner, T.C. Memo. 1977-198,
aff'd, 647 F.2d 172 (9th Cir.), cert. denied, 454 U.S. 1033 (1981);
Watts v. Commissioner, T.C. Memo. 1968-183.
\1730\Boccardo v. Commissioner, 12 Cl Ct. 184 (1987); Boccardo v.
Commissioner, 65 T.C. Memo 2739 (1993).
---------------------------------------------------------------------------
However, the Ninth Circuit reached the opposite conclusion
and held that attorneys who represent clients in ``gross fee''
contingency fee cases are not extending loans to clients and
therefore may treat litigation costs, such as court fees and
witness expenses, as deductible business expenses under the
Code.\1731\ The IRS does not follow this decision, except in
the Ninth Circuit, based on the fact that amounts advanced by
attorneys will be reimbursed by the client and therefore are
not deductible business expenses.\1732\
---------------------------------------------------------------------------
\1731\Boccardo v. Commissioner, 56 F.3d 1016 (9th Cir. 1995), rev'g
65 T.C. Memo 2739 (1993).
\1732\1997 FSA LEXIS 442 (June 2, 1997).
---------------------------------------------------------------------------

REASONS FOR CHANGE

Tax litigation may be expensive and may take many years to
resolve. As a result, taxpayers often engage legal services on
a contingency fee basis, allowing litigation of cases that the
taxpayer may not otherwise be able or willing to afford. The
Committee believes that the IRS regulation, prohibition, or
restriction of contingency fees in relation to preparation of
tax returns or refund claims improperly restricts taxpayers in
their ability to adequately litigate tax cases and also exceeds
the IRS's statutory authority.

EXPLANATION OF PROVISION

The provision specifies that the Secretary of the Treasury
may not regulate, prohibit, or restrict the use of a contingent
fee in connection with tax returns, claims for refund, or
documents in connection with these prepared on behalf of a
taxpayer.

EFFECTIVE DATE

The provision is effective on date of enactment.

Subtitle D--Increase in Debt Limit

Modification of Limitation on the Public Debt (sec. 113001 of the bill)

PRESENT LAW

The limitation on debt imposed by section 3101(b) of title
31 of the United States Code was re-established at $36.1
trillion on January 2, 2025, following a suspension of the
limit from June 3, 2023, through January 1, 2025.

EXPLANATION OF PROVISION

The provision increases the statutory limit by $4 trillion.

EFFECTIVE DATE

The provision is effective on the date of enactment.

II. VOTES OF THE COMMITTEE

In compliance with the Rules of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of Legislative proposals to comply with the
reconciliation directive included in section 2001 of the
Concurrent Resolution on the Budget for Fiscal Year 2025, H.
Con. Res. 14. on May 13, 2025.
The vote on Mr. Buchanan's motion to table Mr. Doggett's
appeal of the ruling of the chair was agreed to by a roll call
vote of 25 yeas to 19 nays (with a quorum being present). The
vote was as follows:

The vote on the amendment offered by Mr. Panetta to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would strike subtitle
D, was not agreed to by a roll call vote of 19 yeas to 26 nays
(with a quorum being present). The vote was as follows:

The vote on the amendment offered by Mr. Boyle to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would provide that no
provision in this title shall take effect unless prior to
enactment, the Congressional Budget Office certifies that this
Act does not increase the Federal deficit based on its ten-year
projection of the impacts of such Act under the current law
baseline as provided by the Congressional Budget and
Impoundment Control Act of 1974, was not agreed to by a roll
call vote of 19 yeas to 26 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Mr. Horsford to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would permanently
extend the temporary enhanced Advanced Premium Tax Credits, was
not agreed to by a roll call vote of 19 yeas to 25 nays (with a
quorum being present). The vote was as follows:

The vote on the amendment offered by Mr. Suozzi to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would increase the cap
on the deductibility of state and local taxes and would
increase the top individual income tax rate was not agreed to
by a roll call vote of 17 yeas to 25 nays (with a quorum being
present). The vote was as follows:

The vote on the amendment offered by Mr. Thompson to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would strike the
energy provisions in Part I of Subtitle C was not agreed to by
a roll call vote of 19 yeas to 25 nays (with a quorum being
present). The vote was as follows:

The vote on the amendment offered by Ms. Sanchez to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would terminate
tariffs imposed by Executive Orders 14257, 14193, and 14194 was
not agreed to by a roll call vote of 19 yeas to 26 nays (with a
quorum being present). The vote was as follows:

The vote on the amendment offered by Mr. Schneider to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would provide that the
standard deduction is further increased until January 1, 2029
was not agreed to by a roll call vote of 18 yeas to 26 nays
(with a quorum being present). The vote was as follows:

The vote on the amendment offered by Ms. DelBene to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would make the Child
Tax Credit fully refundable and further increase the credit
amount was not agreed to by a roll call vote of 19 yeas to 25
nays (with a quorum being present). The vote was as follows:

The vote on the amendment offered by Ms. Sewell to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would expand premium
tax credits for certain individuals was not agreed to by a roll
call vote of 19 yeas to 25 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Mr. Doggett to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would extend the
temporary enhanced Affordable Care Act (ACA) premium tax
credits for certain individuals was not agreed to by a roll
call vote of 19 yeas to 26 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Mr. Thompson to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would strike the
silencer tax cut was not agreed to by a roll call vote of 19
yeas to 25 nays (with a quorum being present). The vote was as
follows:

The vote on the amendment offered by Mr. Larson to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would permanently
increase the tax rates applicable to net investment income and
modifies taxes, benefits, and administrative authorities
related to the Social Security programs, was not agreed to by a
roll call vote of 19 yeas to 26 nays (with a quorum being
present). The vote was as follows:

The vote on the amendment offered by Mr. Doggett to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would modify the
application of several tax provisions in the case of taxpayers
with over $400,000 in income was not agreed to by a roll call
vote of 19 yeas to 26 nays (with a quorum being present). The
vote was as follows:

The vote on the amendment offered by Ms. Chu to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would modify the
application of several tax provisions in the case of taxpayers
with over $10,000,000 in income was not agreed to by a roll
call vote of 19 yeas to 26 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Mr. Beyer to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would modify the
application of several tax provisions in the case of taxpayers
with over $100,000,000 in income was not agreed to by a roll
call vote of 19 yeas to 26 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Mr. Gomez to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would modify the
application of several tax provisions in the case of taxpayers
with over $1,000,000,000 in income was not agreed to by a roll
call vote of 19 yeas to 25 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Ms. Moore (WI) to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would limit the
section 199A deduction to $25,000 and would phase the deduction
out for business owners with over $200,000 in income for single
filers and over $400,000 in income for joint filers was not
agreed to by a roll call vote of 19 yeas to 26 nays (with a
quorum being present). The vote was as follows:

The vote on the amendment offered by Mr. Davis to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would increase the
Child and Dependent Care Tax Credit was not agreed to by a roll
call vote of 19 yeas to 25 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Mr. Evans to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would increase
reporting requirements for the 199A deduction was not agreed to
by a roll call vote of 19 yeas to 25 nays (with a quorum being
present). The vote was as follows:

The vote on the amendment offered by Ms. Chu to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would strike Sections
112201, 112202, and 112203 from the underlying bill, was not
agreed to by a roll call vote of 19 yeas to 25 nays (with a
quorum being present). The vote was as follows:

The vote on the amendment offered by Ms. Sanchez to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would renew and expand
Trade Adjustment Assistance, was not agreed to by a roll call
vote of 19 yeas to 24 nays (with a quorum being present). The
vote was as follows:

The vote on the amendment offered by Mr. Gomez to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would further increase
the section 45S tax credit was not agreed to by a roll call
vote of 19 yeas to 25 nays (with a quorum being present). The
vote was as follows:

The vote on the amendment offered by Mr. Horsford to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would establish a tax
credit for certain travel and tourism expenses incurred by
individuals was not agreed to by a roll call vote of 18 yeas to
25 nays (with a quorum being present). The vote was as follows:

The vote on the amendment offered by Mr. Doggett to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would strike Sec.
110109 from the Committee Print was not agreed to by a roll
call vote of 18 yeas to 24 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Ms. Sewell to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would strike Sec.
112021 from the Committee Print was not agreed to by a roll
call vote of 19 yeas to 24 nays (with a quorum being present).
The vote was as follows:

The vote on the amendment offered by Ms. DelBene to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would provide a
refundable tax credit for fertility treatment expenses was not
agreed to by a roll call vote of 19 yeas to 24 nays (with a
quorum being present). The vote was as follows:

The vote on the amendment offered by Mr. Beyer to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would modify the tax
treatment of certain items related to investment services
partnership interests was not agreed to by a roll call vote of
18 yeas to 25 nays (with a quorum being present). The vote was
as follows:

The vote on the amendment offered by Mr. Panetta to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would update payments
under the Medicare physician fee schedule at a rate equal to
that of the Medicare Economic Index (MEI) was not agreed to by
a roll call vote of 19 yeas to 25 nays (with a quorum being
present). The vote was as follows:

The vote on the amendment offered by Ms. Plaskett to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would prevent this Act
from taking effect until certain certifications are provided by
the Congressional Budget Office and modify the application of
several tax provisions in the case of taxpayers with over
$400,000 in income was not agreed to by a roll call vote of 19
yeas to 25 nays (with a quorum being present). The vote was as
follows:

The vote on the amendment offered by Mr. Horsford to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would modify the
requirements for the deduction for qualified tips was
withdrawn.

The vote on the amendment offered by Mr. Gomez to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would extend the
temporary enhanced ACA tax credits to certain individuals was
not agreed to by a roll call vote of 19 yeas to 24 nays (with a
quorum being present). The vote was as follows:

The vote on the amendment offered by Mr. Horsford to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would expand the Work
Opportunity Tax Credit was not agreed to by a roll call vote of
19 yeas to 24 nays (with a quorum being present). The vote was
as follows:

The vote on the amendment offered by Mr. Gomez to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would amend the
amendment in the nature of a substitute to include H.R. 10025
(118th Congress) was not agreed to by a roll call vote of 19
yeas to 25 nays (with a quorum being present). The vote was as
follows:

The vote on Mr. Buchanan's motion to table Mr. Horsford's
appeal of the ruling of the chair was agreed to by a roll call
vote of 26 yeas to 18 nays (with a quorum being present). The
vote was as follows:

The vote on the amendment offered by Mr. Horsford to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would increase the
deductibility of certain start-up and organizational expenses
was not agreed to by a roll call vote of 19 yeas to 25 nays
(with a quorum being present). The vote was as follows:

The vote on the amendment offered by Mr. Schneider to the
amendment in the nature of a substitute to Legislative
proposals to comply with the reconciliation directive included
in section 2001 of the Concurrent Resolution on the Budget for
Fiscal Year 2025, H. Con. Res. 14, which would strike title XI,
was not agreed to by a roll call vote of 19 yeas to 25 nays
(with a quorum being present). The vote was as follows:

The vote on the motion to adopt the Committee Print as
amended was agreed to by a roll call vote of 26 yeas to 19 nays
(with a quorum being present). The vote was as follows:

The motion that the Committee transmit the recommendations
of the Committee on Ways and Means, and all appropriate
accompanying material including minority, additional,
supplemental or dissenting views, to the House Committee on the
Budget, in order to comply with the reconciliation directives
included in section 2001 of the Concurrent Resolution on the
Budget for Fiscal Year 2025, H. Con. Res. 14, and consistent
with section 310 of the Congressional Budget and Impoundment
Control Act of 1974 was ordered favorably transmitted to the
Committee on the Budget by a roll call vote of 26 yeas and 19
nays. The vote was as follows:

IV. BUDGET EFFECTS OF THE BILL

A. Committee Estimate of Budgetary Effects

Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives, the Committee adopts as its own the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974. The Committee has requested but not
received from the Director of the Congressional Budget Office a
cost estimate for the Committee's provisions.
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the committee print, as
reported.
The committee print, as reported, is estimated to have the
following effects on Federal fiscal year budget receipts for
the period 2025 through 2034.

Clause 8 of rule XIII of the Rules of the House of
Representatives requires that an estimate provided by the Joint
Committee on Taxation to the Director of the Congressional
Budget Office under section 201(f) of the Congressional Budget
Act of 1974 for any major legislation shall, to the extent
practicable, incorporate the budgetary effects of changes in
economic output, employment, capital stock, and other
macroeconomic variables resulting from such legislation. Major
legislation is defined as legislation having a gross budgetary
effect (before incorporating macroeconomic effects) that is
greater in any fiscal year than 0.25 percent of the current
projected gross domestic product of the United States for that
fiscal year. The bill meets this definition of major
legislation.
The staff of the Joint Committee on Taxation is currently
analyzing changes in economic output, employment, capital
stock, and other macroeconomic variables resulting from the
bill for purposes of determining these budgetary effects.
However, it was not practicable to complete this analysis,
which requires accounting for the effects of each provision in
this bill, along with interactions between these provisions, by
the filing of this report.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority

In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority.

C. Cost Estimate Prepared by the Congressional Budget Office

With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause (3)(c)(3) of rule XIII of the Rules
of the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has requested
but not received a cost estimate for this bill from the
Director of Congressional Budget Office. The Chairman of the
Committee shall cause such estimate and statement to be printed
in the Congressional Record upon its receipt by the Committee.

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

A. Committee Oversight Findings and Recommendations

With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.

B. Statement of General Performance Goals and Objectives

With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.

C. Applicability of House Rule XXI, Clause 5(b)

Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present. The Committee has
carefully reviewed the bill, and states that the bill does not
provide such a Federal income tax rate increase.

D. Information Relating to Unfunded Mandates

This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does contain
Federal mandates on the private sector. The 34 provisions are
listed below. The Committee has determined that the bill does
not impose a Federal intergovernmental mandate on State, local,
or tribal governments.
Subtitle A, Part 1: 1. Termination of deduction for
personal exemptions 2. Extension of limitation on deduction for
qualified residence interest; extension of limitation on
casualty loss deduction; termination of miscellaneous itemized
deductions 3. Limitation on tax benefit of itemized deductions
4. Extension of limitation on exclusion and deduction for
moving expenses.
Subtitle C, Part 1: 5. Termination of previously-owned
clean vehicle credit 6.
Termination of clean vehicle credit 7. Termination of
qualified commercial clean vehicles credit 8. Termination of
energy efficient home improvement credit 9. Termination of
residential clean energy credit 10. Termination of new energy
efficient home credit 11. Phase out and restrictions on clean
electricity production credit 12. Phase out and restrictions on
clean electricity investment credit 13. Restrictions on carbon
oxide sequestration credit 14. Phase-out and restrictions on
advanced manufacturing production credit 15. Limitation on
individual deductions for certain State and local taxes. 16.
Excessive employee remuneration from controlled group members
and allocation of deduction 17. Expanding application of tax on
excess compensation within tax-exempt organizations 18.
Modification of the excise tax on net investment income of
private colleges and universities 19. Increase in rate of tax
on net investment income of certain private foundations 20.
Unrelated business taxable income increased by amount of
certain fringe benefit expenses for which deduction is
disallowed 21. Name and logo royalties treated as unrelated
business taxable income 22. Limitation on excess business
losses of noncorporate taxpayers 23. 1-percent floor on
deductions of charitable corporations made by corporations 24.
Enforcement of remedies against unfair foreign taxes 25.
Limitation on drawback of taxes paid with respect to
substituted merchandise.
Subtitle C, Part 2: 26. Certain aliens ineligible for
premium tax credit 27. Disallowing premium tax credit during
periods of Medicaid ineligibility due to alien status 28.
Excise tax on remittance transfers 29. Social Security number
requirement for American Opportunity and Lifetime Learning
Credits.
Subtitle C, Part 3: 30. Requiring Exchange verification of
eligibility for health plans 31. Disallowing premium tax credit
in case of certain coverage enrolled in during special
enrollment period 32. Eliminating limitation on recapture of
advance payment of premium tax credit 33. Enforcement
provisions with respect to COVID-related employee retention
credits 34. Earned income tax credit reforms.

E. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits

With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.

F. Duplication of Federal Programs

In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).

G. Tax Complexity Analysis

Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, for each such provision identified by
the staff of the Joint Committee on Taxation, a summary
description of the provision is provided below along with an
estimate of the number and type of affected taxpayers, and a
discussion regarding the relevant complexity and administrative
issues.
Following the analysis of the staff of the Joint Committee
on Taxation are the comments of the IRS and Treasury regarding
each provision included in the complexity analysis.

LIST OF PROVISIONS IN THE COMPLEXITY ANALYSIS

SUBTITLE A--MAKE AMERICAN WORKERS AND FAMILIES THRIVE AGAIN

Part 1--Permanently Preventing Tax Hikes on American Families and
Workers

1. SEC. 110001. EXTENSION OF MODIFICATION OF RATES

Summary description of the provision

Number of affected taxpayers

It is estimated that the provision will affect over 10
percent of individual tax returns.

Discussion

It is not anticipated that individuals will need to keep
additional records due to this provision. The provision should
not result in an increase in disputes with the IRS, nor will
regulatory guidance be necessary to implement the provision.
The IRS will not need to modify its forms, publications, or
wage withholding schedules, other than to take account of the
new inflation indexing for certain bracket thresholds.

2. SEC. 110004. EXTENSION OF INCREASED CHILD TAX CREDIT AND PERMANENT
ENHANCEMENT

Summary description of the provision

Number of affected taxpayers

It is estimated that the provision will affect over 10
percent of individual tax returns.

Discussion

It is not anticipated that individuals will need to keep
additional records due to these provisions, since individuals
generally already keep their SSNs on file. The IRS will need to
update Schedule 8812 and the related instructions to reflect
the new requirement that the taxpayer and their spouse (if
applicable), in addition to each qualifying child, have work-
authorized SSNs in order for the taxpayer to claim the child
tax credit. The new SSN and joint return requirements may
increase the frequency and duration of disputes between the IRS
and taxpayers with respect to child tax credit claims.

3. SEC. 110005. EXTENSION OF DEDUCTION FOR QUALIFIED BUSINESS INCOME
AND PERMANENT ENHANCEMENT

Summary description of the provision

The provision permanently extends the section 199A
qualified business income deduction, increases the deduction
from 20 percent to 23 percent, modifies the limitation rules
for certain taxpayers whose income exceeds the threshold
amount, expands the types of qualifying income to include
dividends from business development companies, and modifies the
threshold amount inflation adjustment for taxable years
beginning after 2025.

Number of affected taxpayers

It is estimated that the provision will affect over 10
percent of individual tax returns.

Discussion

It is not anticipated that individuals will need to keep
additional records due to the provision. The provision may,
however, increase the number of questions that taxpayers ask
the IRS, such as how to apply the new limitation phase-in
amount for taxpayers with taxable income exceeding the
threshold amount of $157,500 ($315,000 in the case of a joint
return), indexed for inflation. This increased volume of
questions could have an adverse impact on other elements of IRS
operations, such as levels of taxpayer service in other areas.
The IRS will need to add to the package of individual income
tax forms a new worksheet so that taxpayers can accurately
calculate their qualified business income (taking into account
the limitation phase-ins) under the new rules. This worksheet
will require a series of calculations.

Part 2--Additional Tax Relief for American Families and Workers

4. SEC. 110112. REINSTATEMENT OF PARTIAL DEDUCTION FOR CHARITABLE
CONTRIBUTIONS OF INDIVIDUALS WHO DO NOT ELECT TO ITEMIZE

Section 110112 of the bill reinstates the section 170(p)
non-itemizer deduction for charitable contributions for taxable
years beginning after December 31, 2024, and before January 1,
2029. The proposal lowers the maximum deduction amount to $300
for taxpayers who are married filing jointly and to $150 for
all other taxpayers. The proposal applies to taxable years
beginning after December 31, 2024.

Part 3--Investing in Health of American Families and Workers

5. SEC. 110208. CERTAIN AMOUNTS PAID FOR PHYSICAL ACTIVITY, FITNESS,
AND EXERCISE TREATED AS AMOUNTS PAID FOR MEDICAL CARE

Section 110208 of the bill expands the definition of
qualified medical expenses for health savings account (``HSA'')
purposes to include certain sports and fitness expenses paid
for the purpose of participating in a physical activity,
including (1) membership at a fitness facility and (2)
participation or instruction in physical exercise or physical
activity, subject to certain restrictions.
The proposal limits distributions from an HSA for sports
and fitness expenses for any taxable year to $500 for single
taxpayers and $1,000 in the case of a joint or head of
household return. These amounts are indexed to inflation. The
limit for every month is 1/12th of the relevant total annual
amount. The provision is effective for taxable years beginning
after December 31, 2025.

Number of affected taxpayers

It is estimated that the provision will affect over 10
percent of taxpayers during the budget window.

Discussion

The IRS will need to modify its forms and publications to
reflect the provision. It will need to update information to
inform the public about the rules for sports and fitness
expenses. In particular, the IRS will need to direct taxpayers
to track sports and fitness expenses separately from other HSA
spending to account for the provision's monthly and annual
limits. Taxpayers may need to keep additional records regarding
incurred sports and fitness expenses.

6. SEC. 110210. FSA AND HRA TERMINATIONS OR CONVERSIONS TO FUND HSAS

Section 110210 of the bill permits amounts in a health
flexible spending arrangement (``FSA'') or health reimbursement
arrangement (``HRA'') to be rolled over into an HSA if (1) the
distribution is made in connection with the employee
establishing coverage under a high deductible health plan
(``HDHP''), and (2) during the four-year period preceding the
establishment of such coverage, the employee was not covered
under an HDHP. Limits apply to the amount that may be rolled
over, and the distribution must be reported on Form W-2. In
addition, if the qualified HSA distribution is made before the
end of the plan year, and the individual remains enrolled in
the health FSA or HRA after the distribution, the health FSA or
HRA from which the distribution is made must be converted to an
HSA-compatible FSA or HRA, as applicable, for the portion of
the plan year after the distribution is made. The provision is
effective for distributions made after December 31, 2025.

Number of affected taxpayers

It is estimated that the provision will affect over 10
percent of taxpayers during the budget window.

Discussion

Enforcement of the four-year rule may be challenging. In
order to determine whether an individual has been covered under
an HDHP for the four-year period, the IRS will need to rely on
the individual's reporting of this information on the Form
8889, and it will be difficult for the IRS to collect and
verify the necessary information for an individual over a
period of years.
The IRS will also need to modify its forms and publications
to reflect the provision. It will need to issue guidance under
the provision, and it may need to make IT programming changes
to process form changes. It will need to coordinate with the
Social Security Administration on changes to the Form W-2. In
addition, the IRS will need to develop a comprehensive
communication strategy to ensure that IRS employees and
taxpayers understand the change. Taxpayers may need to keep
additional records regarding rollovers and conversions of FSAs
and HRAs to HSA-compatible arrangements.

7. SEC. 110212. CONTRIBUTIONS PERMITTED IF SPOUSE HAS HEALTH FLEXIBLE
SPENDING ARRANGEMENT

Section 110212 of the bill provides that for purposes of
determining whether an individual is eligible to contribute to
an HSA, coverage under the employee's spouse's health FSA for
any plan year of such FSA is disregarded, provided that certain
requirements are met. In order to qualify for this exception,
the aggregate reimbursements under the health FSA for the plan
year must not exceed the aggregate expenses that would be
eligible for reimbursement under the FSA if the expenses were
determined without regard to any expenses paid or incurred with
respect to the otherwise HSA-eligible individual. This
provision is effective for plan years beginning after December
31, 2025.

Number of affected taxpayers

It is estimated that the provision will affect over 10
percent of taxpayers during the budget window.

Discussion

The IRS will need to modify its forms and publications to
reflect the provision. It will need to update information on
its website and provide communications to external
stakeholders. The IRS will also need to issue guidance under
the provision, and it may need to make programming changes to
process form changes. Additionally, taxpayers enrolled in a
spousal FSA may need to keep additional records regarding
incurred medical expenses.

8. SEC. 110213. INCREASE IN HEALTH SAVINGS ACCOUNT CONTRIBUTION
LIMITATION FOR CERTAIN INDIVIDUALS

Section 110213 of the bill increases the limit on
deductions related to aggregate HSA contributions for a year by
$4,300 for taxpayers with self-only coverage and by $8,550 for
those with family coverage. For eligible individuals with self-
only coverage or filing a return as a single filer, married
filing separately, or head of household, the increased amount
phases out ratably over a range beginning at $75,000 and ending
at $100,000 of adjusted gross income. For eligible individuals
with family coverage and who are filing as married filing
jointly the increased amount phases out ratably over a range
beginning at $150,000 and ending at $200,000 of adjusted gross
income. All these values are adjusted for inflation. The
provision is effective for taxable years beginning after
December 31, 2025.

Number of affected taxpayers

It is estimated that the provision will affect over 10
percent of taxpayers during the budget window.

Discussion

The IRS will need to modify its forms and publications to
reflect the provision. It will need to update information on
its website and provide communications to the public regarding
the HSA contribution and deduction limits. It will also need to
issue guidance under the provision and may need to make IT
programming changes to process form changes. In particular, the
IRS will need to amend Form 8889 to account for the increased
limit as well as the added complexity of calculating each
taxpayer's contribution and deduction limit based on adjusted
gross income, health coverage status, and filing status.

SUBTITLE B--MAKE RURAL AMERICA AND MAIN STREET GROW AGAIN

Part 2--Additional Tax Relief for Rural America and Main Street

9. SEC. 111104. REPEAL OF REVISION TO DE MINIMIS RULES FOR THIRD PARTY
NETWORK TRANSACTIONS

Summary description of provision

The proposal reverts to the previous de minimis reporting
exception for third party settlement organizations, and the
same threshold the IRS has followed for calendar years 2022 and
2023. A third party settlement organization is not required to
report unless the aggregate value of third party network
transactions with respect to a participating payee for the year
exceeds $20,000 and the aggregate number of such transactions
with respect to a participating payee exceeds 200. The proposal
also makes a conforming change to the backup withholding dollar
threshold\1733\ to align with the restoration of the previous
de minimis reporting threshold.
---------------------------------------------------------------------------
\1733\Sec. 3406(b)(6).
---------------------------------------------------------------------------

Number of affected taxpayers

It is estimated that the provision will affect more than 10
percent of individual or small business tax returns.

Discussion

If greater reporting from unrelated third parties were
available, it is possible that the IRS could more readily
identify areas of underreported income of the payees. In
general, the more payments to which information reporting and/
or withholding applies, the greater the improvement in
compliance. However, proponents of the provision have noted
that if the previous threshold is not reinstated, it could
yield to confusion for online platforms and taxpayers with
casual or low-level on-line activity, which could result in
overreporting of income and therefore overpayment of taxes as
well as ineligibility for certain tax benefits. They contend
that aggregate reporting on a Form 1099-K of gross proceeds
will create confusion for taxpayers who will have to report
each sale or transaction independent of others to correctly
calculate gain or loss. Proponents further content that the
lower threshold may require taxpayers to hire tax professionals
and keep onerous records and receipts or may mislead them into
thinking the existence of a Form 1099-K represents taxable
income they must report.

10. SEC. 111105. INCREASE IN THRESHOLD REPORTING FOR REQUIRING
INFORMATION REPORTING WITH RESPECT TO CERTAIN PAYEES

Summary description of provision

The provision changes the information reporting threshold
for certain payments to persons engaged in a trade or
business\1734\ and payments of remuneration for services to
$2,000 in a calendar year, with the threshold amount to be
indexed annually for inflation in calendar years after 2026. No
change is made to the information reporting threshold for
direct sales.
---------------------------------------------------------------------------
\1734\Sec. 6041(a).
---------------------------------------------------------------------------
The provision also makes a conforming change to the backup
withholding dollar threshold\1735\ to align with the new $2,000
reporting threshold. Under the provision, both the information
reporting thresholds and the backup withholding thresholds are
for transactions that equal or exceed $2,000 (indexed for
inflation for calendar years after 2026).
---------------------------------------------------------------------------
\1735\Sec. 3406(b)(6).
---------------------------------------------------------------------------

Number of affected taxpayers

It is estimated that the provision will affect more than 10
percent of individual or small business tax returns.

Discussion

If greater reporting from unrelated third parties were
available, it is possible that the IRS could more readily
identify areas of underreported income of the payees. In
general, the more payments to which information reporting and/
or withholding applies, the greater the improvement in
compliance. However, numerous critics have pointed to the fact
that not raising the reporting thresholds for inflation since
1954 poses a disproportionate administrative burden on those
required to comply with the reporting obligations, including
small businesses. For a small business without sufficient
personnel or an automated payroll system, meeting these
reporting requirements may be time consuming and complicated.
The payer must collect tax identification and other personal
information from the payee and must remit a Form 1099 to both
the payee and the IRS. Even for businesses with sufficient
systems in place, the administrative costs (e.g., printing and
mailing) of gathering tax information from a single payee might
not justify the compliance gain, especially for low dollar,
non-recurring transactions.

SUBTITLE C--MAKE AMERICA WIN AGAIN

Part 1--Working Families Over Elites

11. SEC. 112018. LIMITATION ON INDIVIDUAL DEDUCTIONS FOR CERTAIN STATE
AND LOCAL TAXES, ETC.

Summary description of the provision

The provision generally limits an individual taxpayer's
deduction for State and local taxes, other than property taxes
incurred in connection with a trade or business, to $30,000
($15,000 for a married individual filing separately). This
limitation amount is reduced by 20 percent of the excess of the
taxpayer's modified adjusted gross income over $400,000
($200,000 in the case of a married individual filing
separately). However, the limitation amount may not be reduced
below $10,000 ($5,000 in the case of a married individual
filing separately). An exception to this limitation is made for
a taxpayer's distributive share of a partnership's or S
corporation's State or local income taxes imposed at the entity
level if at least 75 percent of the entity's gross receipts are
derived from qualified trades or business (within the meaning
of section 199A(d)(1)).
The provision modifies the list of items for which a
partner of a partnership must separately take into account such
partner's distributive share. The provision requires separate
accounting of a partner's distributive share of the
partnership's foreign income taxes, income taxes paid to U.S.
possessions, State and local taxes subject to the deduction
limitation, and non- business foreign real property taxes. The
provision further denies the partnership a deduction for any
such taxes or payments in computing its taxable income.
(Similar changes apply to S corporations and their
shareholders.)
The provision enacts a new addition to income tax, which is
owed by an individual in certain cases when a partnership or S
corporation of which the individual is an owner allocates to
that individual a disproportionately small share of an entity-
level State or local tax payment relative to the individual's
share of owner-level tax benefits granted by the State or local
jurisdiction on account of the entity-level payment.
The provision requires partnerships and S corporations to
report, both on their own returns (Form 1065 and Form 1120-S,
respectively) and their reports to owners (Schedule K-1),
whether or not they derived any gross receipts (within the
meaning of section 448(c)) from specified service trades or
businesses (within the meaning of section 199A(d)(2)) in the
taxable year.

Number of affected taxpayers

It is estimated that the provision will affect more than 10
percent of individual or small business tax returns.

Discussion

The provision will require certain partnerships and S
corporations and their owners to newly keep separate account of
certain State and local tax payments. The IRS will need to
modify Forms 1065 and 1120-S and the corresponding Schedules K-
1 to implement the provision's new separate statement
requirements, deduction disallowances, and entity-level gross
receipts reporting requirements. The IRS will need to modify
its individual income tax forms, instructions, and internal
procedures to implement the provision's new deduction
limitation and new addition to tax. Enforcement of the new
provision is expected to increase the volume of disputes
between the IRS and taxpayers, primarily with respect to
certain passthrough entity tax payments made to State or local
jurisdictions.

Part 2--Removing Taxpayer Benefits for Illegal Immigrants

12. SEC. 112105. EXCISE TAX ON REMITTANCE TRANSFERS

Summary description of provision

The proposal generally imposes a five-percent excise tax on
any remittance transfer (from a sender to a designated
recipient), to be paid by the sender with respect to such
transfer. If the sender does not make the excise tax payment at
the time of the remittance transfer, and to the extent that
such tax is not collected from the sender, the tax is owed by
the remittance transfer provider. The excise tax is collected
by the remittance transfer provider and remitted to the
Secretary of the Treasury.\1736\
---------------------------------------------------------------------------
\1736\For purposes of the proposal, the terms ``remittance
transfer,'' ``remittance transfer provider,'' ``designated recipient,''
and ``sender'' have the same meanings as such terms are used in section
1693o-1 of Title 15 of the United States Code.
---------------------------------------------------------------------------
The proposal provides two means for an exception from the
excise tax for remittance transfers. First, the excise tax on a
remittance transfer does not apply if a ``verified United
States sender''\1737\ makes such remittance transfer through a
``qualified remittance transfer provider.''\1738\ Second, the
proposal allows for a refundable income tax credit in the
amount of the aggregate excise taxes paid by a sender if
certain requirements are met, on remittance transfers during
the taxable year.
---------------------------------------------------------------------------
\1737\A ``verified United States sender'' is any sender who is
verified by a qualified remittance transfer provider as being a citizen
or national of the United States.
\1738\A ``qualified remittance transfer provider'' is any
remittance transfer provider which enters into a written agreement with
the Secretary pursuant to which such provider agrees to verify the
status of a sender as a citizen or national of the United States.
---------------------------------------------------------------------------
To claim the credit, the sender must include his or her
Social Security number (and, if married, that of his or her
spouse) on his or her tax return for the relevant taxable year
and must demonstrate, to the satisfaction of the Secretary,
that the excise tax with respect to which the tax credit is
determined was paid by him or her and is with respect to a
remittance transfer for which he or she provided certification
and certain information to the remittance transfer provider.
The proposal requires that each remittance transfer
provider submit an information return setting forth certain
information. Each person required to make a return shall also
furnish to each person who has certified an intent to claim the
credit a payee statement with: (1) the name and address of the
information contact of the required reporting person; and (2)
the information provided to the Secretary with respect to such
claim.

Number of affected taxpayers

It is estimated that the provision will affect more than 10
percent of individual or small business tax returns.

Discussion

The provision requires new information reporting from
remittance transfer providers. In the case of remittance
transfers sent by a verified United States sender via a
qualified remittance transfer provider, the qualified
remittance transfer provider must report the aggregate number
and value of such remittance transfers to the IRS. In the case
of senders who have certified to a remittance transfer provider
an intent to claim the credit with respect to the excise tax on
a remittance transfer, the remittance transfer provider must
report information to the IRS on such senders and provide a
statement to such senders of the information provided to the
IRS. Remittance transfer providers must also report to the IRS
the excise tax collected and remitted by the remittance
transfer provider to the Secretary from senders who either are
not United States citizens or nationals or choose not to so
verify. In order for a sender who is a United States citizen or
national to avoid paying the excise tax, a qualified remittance
transfer provider must ascertain such sender's status as a
United States citizen or national. For the sender to instead
claim a tax credit for excise tax paid, such sender must
provide a work-authorized SSN, proof of payment of the excise
tax, and if married, must file a joint return on which both
spouses provide work-authorized SSNs.

Part 3--Preventing Fraud, Waste, and Abuse

13. SEC. 112207. TASK FORCE ON THE TERMINATION OF DIRECT FILE

The provision directs the Secretary of the Treasury to
terminate the IRS Direct File program as soon as practicable,
but no later than 30 days after date of enactment.
Out of any money in the Treasury not otherwise
appropriated, the provision provides for appropriations for the
fiscal year ending September 30, 2026, for necessary expenses
of the Department of Treasury to deliver to Congress, within 90
days following the date of enactment, a report on 1) the cost
of a new public-private partnership to provide for free tax
filing for up to 70 percent of all taxpayers calculated by
adjusted gross income to replace free file and any IRS-run
direct file programs; 2) taxpayer opinions and preferences
regarding a taxpayer-funded, government-run service or a free
service provided by the private sector; and 3) assessment of
the feasibility of a new approach, how to make the options
consistent and simple for taxpayers across all participating
providers, how to provide features to address taxpayer needs,
and how much money should be appropriated to advertise the new
option, up to $15 million, to remain available until September
30, 2026.

Number of affected taxpayers

It is estimated that the provision will affect more than 10
percent of individual or small business tax returns.

Discussion

In the 2024 tax filing season, the voluntary Direct File
pilot program was initially launched for taxpayers who were
full-year residents in one of 12 States. The scope of the pilot
was also limited by the types of income, deductions,
adjustments, and credits that were supported. The IRS issued a
report on the results of the pilot in May of 2024.\1739\
Subsequently, in the 2025 tax filing season, the program was
expanded and made available in 25 participating States and for
certain types of income, credits, and deductions.
---------------------------------------------------------------------------
\1739\Department of the Treasury and Internal Revenue Service,
``IRS Direct File Pilot Program, Filing Season 2024 After Action
Report,'' Publication 5969 (5-2024) Catalog Number 94963W, May 3, 2024.
---------------------------------------------------------------------------

COMMENTS FROM IRS AND TREASURY

Department of the Treasury,
Internal Revenue Service,
Washington, DC, May 16, 2025.
Mr. Thomas A. Barthold,
Chief of Staff, Joint Committee on Taxation,
Washington, DC.
Dear Mr. Barthold: I am responding to your letter dated May
14, 2025, in which you requested a complexity analysis related
to the ``description of the provision for inclusion in the
Committee Report for legislative proposals to comply with the
reconciliation directive included in section 2001 of the
Concurrent Resolution on the Budget for Fiscal Year 2025, H.
Con. Res. 14.''
Enclosed are the combined comments of the Internal Revenue
Service (IRS) and the Treasury Department for inclusion in the
complexity analysis.
Our analysis covers the provisions that you identified in
your letter:
1. Subtitle A, Part 1, sec. 110001. Extension of
modification of rates
2. Subtitle A, Part 1, sec. 110004. Extension of
increased child tax credit and permanent enhancement
3. Subtitle A, Part 1, sec. 110005, Extension of
deduction for qualified business income and permanent
enhancement
4. Subtitle A, Part 2, sec. 110112. Reinstatement of
Partial Deduction for Charitable Contributions of
Individuals Who Do Not Elect to Itemize
5. Subtitle A, Part 3, sec. 110208. Certain Amounts
Paid for Physical Activity, Fitness, and Exercise
Treated as Amounts Paid for Medical Care
6. Subtitle A, Part 3, sec. 110210. FSA and HRA
terminations or conversions to fund HSAs
7. Subtitle A, part 3, sec. 110212. Contributions
permitted if spouse has health Flexible Spending
Arrangement
8. Subtitle A, part 3, sec. 110213. Increase in
Health Savings Account Contribution Limitation for
Certain Individuals
9. Subtitle B, Part 2, sec. 111104. Repeal of
revision to de minimis rules for third party network
transactions
10. Subtitle B, Part 2, sec. 111105. Increase in
threshold reporting for requiring information reporting
with respect to certain payees
11. Subtitle C, Part 1, sec. 112018. Limitation on
individual deductions for certain State and local
taxes, etc.
12. Subtitle C, Part 2, sec. 112105. Excise tax on
remittance transfers
13. Subtitle C, Part 3, sec. 112207. Task force on
the termination of Direct File
Please note that for purposes of this complexity analysis,
IRS staff assumed timely enactment of this legislation. If
legislation is not enacted before the end of the year, there
would be complexity for the IRS and for taxpayers that is not
addressed in this response.
Our comments are based on the description of the provisions
provided in your letter. This analysis does not include the
administrative cost estimates for the changes that would be
required. Due to the short turnaround time, our comments are
provisional and subject to change upon a more complete and in-
depth analysis of the provisions.
I hope this information is helpful. If you have any
questions, please feel free to contact me, or your staff may
contact Amy Klonsky, National Director, Legislative Affairs, at
202-317-6985.
Sincerely,
Edward T. Killen,
Acting Chief Tax Compliance Officer.
Enclosure.

Complexity Analysis of Budget Reconciliation

LEGISLATIVE RECOMMENDATIONS

1. Subtitle A, Part 1, sec. 110001. Extension of modification of rates

Section 110001 of the bill makes permanent the regular
income tax rate schedules for individuals, estates, and trusts
enacted by Public Law 115-97. The proposal generally modifies
the indexing for inflation for bracket thresholds by providing
one additional year of inflation in the cost-of-living
adjustment. Under the proposal, the cost-of-living adjustment
for the regular income tax brackets for 2026 is generally the
percentage by which the chained CPI for 2025 exceeds the
chained CPI for 2016. The result is that the bracket thresholds
are larger than they would otherwise be absent this additional
year of inflation. However, the dollar amount at which the 37-
percent rate bracket begins and the 35-percent rate bracket
ends (the ``37-percent rate bracket threshold'') is not
provided this additional year of inflation in the cost-of-
living adjustment. Thus, the cost-of-living adjustment for the
37-percent rate bracket threshold for 2026 is the percentage by
which chained CPI for 2025 exceeds the chained CPI for 2017.

IRS and Treasury Comments

Forms, instructions, and publications would need
to be revised.
Programming changes will be needed to update
systems for the new tax rates.

2. Subtitle A, Part 1, sec. 110004. Extension of increased child tax
credit and permanent enhancement

Section 110004 of the bill temporarily increases the
maximum child tax credit to $2,500 for taxable years beginning
after December 31, 2024, and before December 31, 2028. For
taxable years beginning after December 31, 2028, the maximum
child tax credit will revert to a permanent amount of $2,000.
This amount is indexed for inflation in taxable years beginning
after 2028. The inflation adjustment is the percentage by which
chained CPI for the preceding calendar year exceeds the chained
CPI for 2024. The proposal makes permanent the maximum amount
of the refundable additional child tax credit per qualifying
child of $1,400 adjusted for inflation ($1,700 in 2025). The
proposal also makes permanent the earned income threshold of
$2,500 for purposes of the earned income formula. The proposal
treats any amount treated as a dividend received under section
501(d) as earned income which is taken into account in
computing taxable income for the taxable year. The proposal
makes permanent the income phaseout threshold amounts of
$400,000 for taxpayers filing jointly and $200,000 for all
other taxpayers. Under the proposal, the $500 nonrefundable
credit for each dependent of the taxpayer other than a
qualifying child is permanent. This credit is not adjusted for
inflation.
Under the proposal, the SSN of the taxpayer, the taxpayer's
spouse (if married filing jointly), and the qualifying child
must appear on the return. The SSN for each individual must be
issued before the due date of the return. Each SSN also must be
issued to a citizen or national of the United States or
pursuant to a provision of the Social Security Act relating to
the lawful admission for employment in the United States. The
proposal applies rules similar to the rules of section 32(d),
meaning married individuals must file a joint return in order
to receive the child tax credit. Marital status is determined
under section 7703(a). Under the proposal, an individual is not
treated as married if the individual (1) is married and does
not file a joint return for the taxable year, (2) resides with
a qualifying child for more than one-half of the taxable year,
and (3) either does not have the same principal place of abode
as their spouse during the last six months of the taxable year
or has a decree, instrument, or agreement (other than a decree
of divorce) described in section 121(d)(3)(C) with respect to
their spouse and is not a member of the same household of their
spouse by the end of the taxable year.

IRS and Treasury Comments

Forms, instructions and publications that have
already been released to the public in draft will need to be
revised.
Additional documentation may need to be retained
by married taxpayers may need to retain documentation
substantiating that they meet the requirements to claim the
credit on a separate return, including documentation that they
lived separately from their spouse for the last six months of
the year.
Programming changes will be needed.
Internal Revenue Manuals and training materials
will need to be updated.
External communications with the public would
need updating and sharing.
IRS.gov updates and digital tools would need to
be provided.

3. Subtitle A, Part 1, sec. 110005, Extension of deduction for
qualified business income and permanent enhancement

The proposal permanently extends the section 199A
deduction, increases the section 199A deduction to 23 percent,
modifies the phase-in rules for certain taxpayers whose income
exceeds the threshold amount, expands the type of qualifying to
include dividends from business development companies, and
modifies the threshold amount inflation adjustment for taxable
years beginning after 2025.

IRS and Treasury Comments

Forms, instructions, and publications would need
to be updated.
IT programming would need to be reviewed and
potentially updated to reflect the changes.
Internal Revenue Manuals and employee training
would need to be updated.
Training materials for new employees would need
to be reviewed and potentially updated.
Internal communications would be shared with all
employees.
External communications would be necessary to
communicate changes.
IRS.gov updates would need to be provided.
IRS efforts to identify areas of noncompliance
would be challenging due to the new phase-in rules that can
only be verified through an examination.

4. Subtitle A, Part 2, sec. 110112. Reinstatement of Partial Deduction
for Charitable Contributions of Individuals Who Do Not Elect to
Itemize

IRS and Treasury Comments

Forms, instructions and publications will need
to be revised.
Programming changes will be needed.

5. Subtitle A, Part 3, sec. 110208. Certain Amounts Paid for Physical
Activity, Fitness, and Exercise Treated as Amounts Paid for
Medical Care

Section 110208 of the bill expand the definition of
qualified medical expenses for health savings account (``HSA'')
purposes to include certain sports and fitness expenses paid
for the purpose of participating in a physical activity,
including (1) membership at a fitness facility and (2)
participation or instruction in physical exercise or physical
activity, subject to certain restrictions.
The proposal limits distributions from an HSA for sport and
physical activity expenses for any taxable year to $500 for
single taxpayers and $1,000 in the case of a joint or head of
household return. These amounts are indexed to inflation. The
limit for every month is 1/12th of the relevant total amount.
The provision is effective for taxable years beginning after
December 31, 2025.

IRS and Treasury Comments

Forms, instructions and publications will need
to be revised.
Taxpayers may need to retain additional
documentation regarding their gym memberships and instructional
physical activities to substantiate that they satisfy the
requirements for excluding these distributions.
Programming would need to be reviewed to
potentially update.
Internal Revenue Manual and training materials
will need to be updated.
External communications with the public will
need updating.
IRS.gov will need updating and digital tools
would need to be provided.

6. Subtitle A, Part 3, sec. 110210. FSA and HRA terminations or
conversions to fund HSAs

IRS and Treasury Comments

Forms, instructions and publications will need
to be revised
Taxpayers may need to retain additional
records, such as documentation of their health coverage
during the four-year period preceding the establishment
of the rollover.
IRS programming changes will be needed.
Also, other agencies that receive W-2 information, such
as SSA, may need to update their systems.
Internal Revenue Manual and training
materials will need to be updated.
External communications with the public will
need updating.
IRS.gov will need updates and digital tools
would need to be provided.

7. Subtitle A, part 3, sec. 110212. Contributions permitted if spouse
has health Flexible Spending Arrangement

IRS and Treasury Comments

Instructions and publications will need to be
updated
Taxpayers may need to retain additional
documentation regarding the aggregate reimbursements under the
health FSA for the plan year and any expenses paid or incurred
with respect to the otherwise HSA-eligible individual that may
have been eligible for reimbursement.
Programming will need to be reviewed for
potential changes.
Internal Revenue Manual and training materials
will need updating.
External communication with the public will need
updating:
IRS.gov updates needed and digital tools will
need to be provided.

8. Subtitle A, part 3, sec. 110213. Increase in Health Savings Account
Contribution Limitation for Certain Individuals

IRS and Treasury Comments

Instructions and publications will need to be
updated.
Recordkeeping:
Taxpayers may need to retain additional
documentation regarding their gym memberships and
instructional physical activities to substantiate that
they satisfy the requirements for excluding these
distributions.
Internal Revenue Manuals and training materials
will need updating.
External communications with the public will
need updating.
IRS.gov updates needed and digital tools will
need to be provided.

9. Subtitle B, Part 2, sec. 111104. Repeal of revision to de minimis
rules for third party network transactions

The proposal reverts to the previous de minimis reporting
exception for third party settlement organizations, and the
same threshold the IRS has followed for calendar years 2022 and
2023. A third party settlement organization is not required to
report unless the aggregate value of third party network
transactions with respect to a participating payee for the year
exceeds $20,000 and the aggregate number of such transactions
with respect to a participating payee exceeds 200. The proposal
also makes a conforming change to the backup withholding dollar
threshold\1\ to align with the restoration of the previous de
minimis reporting threshold.
---------------------------------------------------------------------------
\1\Sec. 3406(b)(6).
---------------------------------------------------------------------------

IRS and Treasury Comments

Reduces payor filing burden (for some payors,
the reduction in burden could be significant).
Increases taxpayer recordkeeping obligations
because the information returns would not cover all
transactions and income.
Forms, instructions and publications would need
to be updated.
IT programming would need to be reviewed and
potentially updated to reflect the new reporting requirements.
Internal Revenue Manuals and employee training
would need to be updated.
Training materials for new employees would need
to be reviewed and potentially updated.
Internal communications would be shared with all
employees.
External communications would be necessary to
communicate changes. Communication also would need to address
inaccurate perceptions that the change to the reporting
requirements changes the tax consequences of any taxable
amounts not reported to IRS.
IRS.gov updates would need to be provided.
IRS efforts to identify income underreporting
and income tax nonfilers could be affected, due to reduced
income visibility to IRS.

10. Subtitle B, Part 2, sec. 111105. Increase in threshold reporting
for requiring information reporting with respect to certain
payees

The proposal changes the information reporting threshold
for certain payments to persons engaged in a trade or
business\2\ and payments of remuneration for services\3\ to
$2,000 in a calendar year, with the threshold amount to be
indexed annually for inflation in calendar years after 2026.
The proposal also makes a conforming change to the backup
withholding dollar threshold\4\ to align with the new $2,000
reporting threshold. Under the proposal, both the information
reporting thresholds and the backup withholding thresholds are
for transactions that equal or exceed $2,000 (indexed for
inflation for calendar years after 2026).
---------------------------------------------------------------------------
\2\Sec. 6041(a).
\3\Sec. 6041A(a),
\4\Sec. 3406(b)(6).
---------------------------------------------------------------------------

IRS and Treasury Comments

Reduces payor filing burden (for some payors,
the reduction in burden could be significant).
Increases taxpayer recordkeeping obligations
because the information returns would not cover all
transactions and income.
Forms, instructions, and publications would need
to be updated.
IT programming would need to be reviewed and
potentially updated to reflect the new reporting requirements.
Internal Revenue Manuals and employee training
would need to be updated.
Training materials for new employees would need
to be reviewed and potentially updated.
Internal communications would be shared with all
employees.
External communications would be necessary to
communicate changes. Communication also would need to address
that the change to the reporting requirements does not change
the tax consequences of any taxable amounts not reported to
IRS.
IRS.gov updates would need to be provided.
IRS efforts to identify income underreporting
and income tax nonfilers could be affected, due to reduced
income visibility to IRS.

11. Subtitle C, Part 1, sec. 112018. Limitation on individual
deductions for certain State and local taxes, etc.

Section 112018 of the bill removes the temporary
limitation, enacted by Public Law 115-97, on individual State
and local and foreign tax deductions taken under section 164.
In its place, the proposal modifies section 275, which denies
deductions for certain taxes, to permanently deny individuals
(along with trusts, estates, partnerships, and S corporations)
a deduction for certain State and local and foreign taxes. The
proposal denies a deduction for ``disallowed foreign real
property taxes,'' defined as foreign real property taxes other
than those paid or accrued in carrying on a trade or business
or an activity described in section 212 (relating to expenses
for the production of income). The proposal also limits the
deduction for the taxpayer's aggregate of ``specified taxes,''
defined to comprise: (i) State and local and foreign property
taxes, other than disallowed foreign real property taxes and
State and local property taxes paid or accrued in a trade or
business or an activity described in section 212, (ii) State
and local income, war profits, excess profits, and general
sales taxes, other than income, etc. taxes paid or accrued by a
partnership or S corporation in carrying on a qualified trade
or business (within the meaning of section 199A(d)(1)) if at
least 75 percent of the gross receipts (within the meaning of
section 448(c)) of all trades or businesses under common
control with such partnership or S corporation are derived from
qualified trades or business, (iii) real estate taxes paid by a
cooperative housing corporation, and (iv) ``substitute
payments.''
A substitute payment is generally defined as any amount
(other than a tax already defined as a specified tax) paid,
incurred, or accrued to a State or local jurisdiction if, by
reason of the payment, one or more persons are entitled to
``specified tax benefits'' equal to or exceeding 25 percent of
the payment. Specified tax benefits are benefits determined
with respect to such payment and allowed against, or determined
by reference to, a tax already defined as a specified tax. In
determining whether a payment is a substitute payment, the
following two assumptions apply: First, the value of a tax
credit or refund is assumed to be the amount of such credit or
refund, and the value of a tax deduction or exclusion is
assumed to be 15 percent of the amount of such deduction or
exclusion. Second, in the case of a payment by a partnership or
S corporation, it is assumed that all the owners of such entity
are individuals resident in the jurisdiction of the entity or
entities providing the specified tax benefits (and otherwise
eligible for such benefits).
The individual deduction for the aggregate of specified
taxes is limited to $30,000 ($15,000 in the case of a married
individual filing a separate return). This limitation amount is
reduced by 20 percent of the excess of the taxpayer's modified
adjusted gross income over $400,000 ($200,000 in the case of a
married individual filing separately). However, the limitation
amount may not be reduced below $10,000 ($5,000 in the case of
a married individual filing separately). Modified adjusted
gross income is defined as adjusted gross income increased by
any exclusion for foreign earned income, foreign housing costs,
and income from sources within certain U.S. possessions.
The proposal modifies the list of items for which a partner
of a partnership must separately take into account such
partner's distributive share. The proposal requires separate
accounting of a partner's distributive share of the
partnership's: (i) foreign income, war profits, and excess
profits taxes, (ii) income, war profits, and excess profits
taxes paid or accrued to U.S. possessions, (iii) specified
taxes (other than income, etc. taxes paid or accrued to U.S.
possessions), and (iv) disallowed foreign real property taxes.
The proposal further denies the partnership a deduction for any
such taxes or payments in computing its taxable income.
(Similar changes apply to S corporations and their
shareholders.)
The proposal requires partnerships and S corporations to
report, both on their own returns (Form 1065 and Form 1120-S,
respectively) and their reports to owners (Schedule K-1),
whether or not they derived any gross receipts (within the
meaning of section 448(c)) from specified service trades or
businesses (within the meaning of section 199A(d)(2)) in the
taxable year.

IRS and Treasury Comments

Forms, instructions and publications will need
updating. Recordkeeping: We do not anticipate that taxpayers
would need to retain any additional records in connection with
this proposal.
Programming changes will be needed.
Internal Revenue Manual and training materials
will need updating.
External communication with the public will need
updating.
IRS.gov will need updates and digital tools will
need to be provided.

12. Subtitle C, Part 2, sec. 112105. Excise tax on remittance transfers

The proposal generally imposes a five-percent excise tax on
any remittance transfer (from a sender to a designated
recipient), to be paid by the sender with respect to such
transfer. If the sender does not make the excise tax payment at
the time of the remittance transfer, and to the extent that
such tax is not collected from the sender, the tax is owed by
the remittance transfer provider. The excise tax is collected
by the remittance transfer provider and remitted to the
Secretary of the Treasury.\1\
---------------------------------------------------------------------------
\1\For purposes of the proposal, the terms ``remittance transfer,''
``remittance transfer provider,'' ``designated recipient,'' and
``sender'' have the same meanings as such terms are used in section
1693o-1 of Title 15 of the United States Code.
---------------------------------------------------------------------------
The proposal provides two means for an exception from the
excise tax for remittance transfers. First, the excise tax on a
remittance transfer does not apply if a ``verified United
States sender''\2\ makes such remittance transfer through a
``qualified remittance transfer provider.''\3\ Second, the
proposal allows for a refundable income tax credit in the
amount of the aggregate excise taxes paid by a sender, if
certain requirements are met, on remittance transfers during
the taxable year. To claim the credit, the sender must include
his or her social security number (and, if married, that of his
or her spouse) on his or her tax return for the relevant
taxable year and must demonstrate, to the satisfaction of the
Secretary, that the excise tax with respect to which the tax
credit is determined was paid by him or her and is with respect
to a remittance transfer for which he or she provided
certification and certain information to the remittance
transfer provider.
---------------------------------------------------------------------------
\2\A ``verified United States sender'' is any sender who is
verified by a qualified remittance transfer provider as being a citizen
or national of the United States.
\3\A ``qualified remittance transfer provider'' is any remittance
transfer provider which enters into a written agreement with the
Secretary pursuant to which such provider agrees to verify the status
of a sender as a citizen or national of the United States.
---------------------------------------------------------------------------
The proposal requires that each remittance transfer
provider submit an information return setting forth certain
information. Each person required to make a return shall also
furnish to each person who has certified an intent to claim the
credit a payee statement with: (1) the name and address of the
information contact of the required reporting person; and (2)
the information provided to the Secretary with respect to such
claim.

IRS and Treasury Comments

Increases burden on remittance transfer
providers by requiring:
New quarterly filing requirement,
New information reporting requirement, and
If electing into an agreement with Treasury,
conducting identification verification at the time of
remittance transfer.
Requires development of verification agreement
for the remittance transfer providers to validate the senders'
status. This would include outlining the acceptable forms for
validation and developing training for the remittance transfer
providers.
Forms, instructions and publications will need
updating
Requires a new information reporting return and
instructions that captures the following:
in the case of remittance transfers sent by
a verified United States sender via a qualified
remittance transfer provider, the aggregate number and
value of such remittance transfers
in the case of senders who have certified to
the remittance transfer provider an intent to claim the
credit with respect to the excise tax on a remittance
transfer,
the name, address, and social
security number of the senders,
the amount of excise tax paid by
such senders, and
the amount of excise tax remitted by
the remittance transfer provider to the
Secretary with respect to such remittance
transfers; and
with respect to all other remittance
transfers,
the aggregate amount of excise tax
paid with respect to such transfers, and
the aggregate amount of tax remitted
by the remittance transfer
Programming changes will be needed.
Internal Revenue Manuals and employee training
would need to be updated.
External communications would be necessary to
communicate changes.
IRS.gov updates would need to be provided.

13. Subtitle C, Part 3, sec. 112207. Task force on the termination of
Direct File

The proposal directs the Secretary of the Treasury to
terminate the IRS Direct File program as soon as practicable,
but no later than 30 days after date of enactment.
The proposal provides appropriations for necessary expenses
of the Department of Treasury to deliver to Congress, within 90
days following the date of enactment, a report on the cost of a
new public-private partnership to provide for free tax filing
for up to 70 percent of all taxpayers; taxpayer opinions and
preferences regarding a taxpayer-funded, government-run service
or a free service provided by the private sector; assessment of
the feasibility of a new approach, how to make the options
consistent and simple for taxpayers across all participating
providers, provide features to address taxpayer needs, and how
much money should be appropriated to advertise the new option.

IRS and Treasury Comments

Task Force on the Termination of Direct File:
Taxpayers will need to be given advance
notice of the termination of the program in order to
timely submit any returns currently in process.
The ability to create or submit a new return
will need to be turned off. However, access to
submitted returns will need to remain available to
ensure prior Direct File users are able to access their
returns. This will require some programming changes.
There will be minimal changes to
instructions, publications and Internal Revenue
Manuals.
Internal communications would need to be
shared with all employees
External communications would be necessary
to address the timing of the termination of the
program.
IRS.gov updates will be needed to a number
of sites, in addition to the Direct File homepage.
Tax forms, instructions, and publications
would need to be revised to remove references to Direct
File.

VI. CHANGES IN EXISTING LAW PROPOSED BY THE BILL, AS REPORTED

A. Changes in Existing Law Proposed by the Bill, as Reported

Pursuant to clause 3(e) of rule XIII of the Rules of the
House of Representatives, the Committee requested, but did not
receive the text of changes in existing law made by the
committee print, as reported.

VII. DISSENTING VIEWS

DISSENTING VIEWS ON LEGISLATIVE PROPOSALS TO COMPLY WITH THE
RECONCILIATION DIRECTIVE INCLUDED IN SECTION 2001 OF THE CONCURRENT
RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2025, H. CON. RES. 14.

Committee Democrats oppose the budget reconciliation
legislative recommendations related to tax and health. This
bill represents a trillion-dollar giveaway to the ultra-wealthy
and big corporations while ripping health care away from
millions of hard-working Americans. It guts the investments
Democrats created in the Inflation Reduction Act (IRA) to bring
hundreds of thousands of manufacturing jobs to America while
ensuring access to affordable health care--and all to reward
the richest few.
In 2017, Republicans passed their Tax Scam on the promise
that it would pay for itself, raise wages, and help working
families. None of that happened. Instead, it exploded the
deficit, worsened inequality, and left everyday Americans
behind.
This bill is old wine in new bottles: Once again,
Republicans are promising that massive tax cuts for the top
will lead to economic growth, higher wages and more jobs. None
of this could be further from the truth. Don't take our word
for it, take the words of the right-leaning Tax Foundation,
which found that this bill would actually shrink wages and
shrink our capital stock. In fact, they concluded that, despite
the ``growth'' our colleagues on the other side of the aisle
have claimed would result from passage of this legislation,
``American incomes measured by GNP would increase by less than
0.05 percent.''\1\
---------------------------------------------------------------------------
\1\https://taxfoundation.org/research/all/federal/big-beautiful-
bill-house-gop-tax-plan/.
---------------------------------------------------------------------------
This is the brass ring our Republican colleagues are
reaching for: ineffective, deficit-exploding tax cuts for the
top, financed by taking away health care for hard-working
Americans.

BOONDOGGLE FOR BILLIONAIRES

Make no mistake about it, despite our colleagues' loud
protests, this bill is a massive giveaway to the top. The Joint
Committee's distribution tables don't lie:
In 2027, the average tax cut for a taxpayer
making over $1 million per year is $81,500.
In that same year, the average tax cut for a
taxpayer making under $50,000 per year is $265.
That means the average person making over $1,000,000 gets more
than 300 times what the average person making under $50,000
gets. In the meantime, the data shows that taxpayers earning
under $30,000 per year see an aggregate tax hike of $5 billion
by 2029.
Our colleagues always reply with the same tired talking
points. They protest ``of course we cut more taxes for the
rich, they pay the most in taxes.'' But, as multiple Democratic
members of the Committee pointed out at markup, no rule says
you have to design tax cuts the way Republicans have chosen to.
There is much freedom in legislative design. Our Republican
colleagues even rejected the President's overtures, as well as
multiple Democratic amendments, to let the tax cuts expire only
for the richest. They rejected amendments that would roll back
the tax cuts only on taxpayers making $400,000 or more per
year. Then, they rejected the same amendment at $10 million.
Then $100 million. And in fact they wouldn't allow tax cuts to
expire for people who make $1 billion per year. At least they
are consistent.

WHILE THEY SHOWER THE WEALTHY WITH CASH, REPUBLICANS ARE MAKING LIFE
HARDER FOR ORDINARY PEOPLE

In order to ``pay for'' their billionaire boondoggle,
Republicans want to gut over a trillion dollars from the
Affordable Care Act (ACA), Medicare, Medicaid and SNAP, all
while doing nothing to stop the President's chaotic and costly
tariffs. Republicans could have chosen to lower costs for
families. They could have extended the expanded Child Tax
Credit that cut child poverty in half. They could have made ACA
tax credits permanent. They could have made meaningful progress
with long-term care or housing. Instead, they chose to give
trillions of dollars to those who need the help the least.
All the while their child tax credit rules will prevent 2
million citizen children from receiving the child tax credit,
and another 17 million citizen children to lose out on part of
the credit because their households don't earn enough money. At
the same time, in their never-ending quest to drown the
neediest in paperwork requirements, Republicans have proposed
new ``certification requirements'' on the EITC, the nation's
largest anti-poverty program. This will doubtlessly cause
eligible taxpayers to forgo the credit and will impose yet even
more time and paperwork burdens on those who continue to do so.
Additionally, this legislation will give rise to more
Americans losing health coverage than any other law in our
history. According to the nonpartisan Congressional Budget
Office, 14 million will lose health coverage. That's not fiscal
responsibility--it's cruelty masquerading as policy.

REPUBLICAN HEALTH PROVISIONS: HIGHER COSTS, LESS CARE, MORE UNINSURED

The health care provisions of this bill are a continuation
of Republicans' ongoing quest to attack and destroy the
Affordable Care Act, and in so doing take health care away from
millions of Americans. According to the nonpartisan
Congressional Budget Office (CBO), the Republican tax bill will
cause more than 13.7 million individuals to lose their health
insurance coverage. Its nearly $1 trillion dollars in cuts to
health care--including nearly three quarters of a trillion
dollars from Medicaid alone--would precipitate the largest
termination of health coverage in the history of the U.S.
Six million Americans--nearly 25 percent of all ACA
marketplace enrollees--will lose coverage from Republican
policies sabotaging the ACA. In total, these coverage losses
represent a staggering 43 percent increase in the number of
uninsured Americans. Together with the legislation considered
in the Energy and Commerce Committee, these provisions would
cut $324 billion from the ACA Marketplaces, and together with
ending the enhanced tax credits, would result in a total cut of
$682 billion to the ACA. Failure to extend the enhanced tax
credits is a glaring omission in the Republican bill that
results in an enormous tax increase on the millions of
Americans who purchase their own health insurance coverage
through the ACA Marketplaces.
Around one-third of Marketplace enrollees
are small businesses or self-employed individuals.
Nearly 1 in 6 non-elderly people in the U.S.
had some form of ACA coverage in 2024 (but more than 1
in 5 in seven states: Louisiana, Oregon, Florida, New
York, California, New Mexico, and Vermont).
In 2024, more than half of the enrollees in
the ACA marketplace were women--totaling 11.2 million.
Nearly 5.5 million adults aged 55 and over
enrolled in coverage through the ACA in 2024--24
percent of total enrollment.
The enhanced health care tax credits sunset at the end of
2025, like the rest of the individual tax provisions in the
Republican bill. Yet the Republicans unanimously opposed one
amendment to add the enhanced tax credits to the bill and
another amendment to extend the credits only for children and
pregnant women. Not one Republican was willing to stand up in
support of lowering health costs.
This year, a record 24.2 million Americans purchased their
own coverage on the ACA marketplaces, and the vast majority--
around 22 million--receive tax credits to lower their costs.
These tax credits have resulted in historic lows in the rate of
uninsurance nationwide and historic savings on health insurance
premiums. CBO projects that failing to extend these vital tax
credits will result in insurance premiums increasing by nearly
eight percent each year. This means nearly 24 million working
Americans will see a tax increase for health care at the same
time millionaires will see an average tax cut of almost
$80,000.
The Republican bill goes even further to sabotage the ACA,
including sneaky technical policies that add hours of
unnecessary red tape for those who need coverage and penalize
Americans just for working extra hours in a year.
First, the Republican bill ends the practice of auto-
reenrollment. Typically, Americans in private insurance remain
enrolled from year to year unless something changes. This bill
forbids that approach, requiring working families, small
business owners, and the self-employed to resubmit paperwork
every single year they want to maintain health care coverage,
even if nothing has changed, just to prove their continued
eligibility. The bill also blocks states from implementing
policies to make enrollment easier. The State of Washington
estimates that 42 percent of their Marketplace enrollees would
be affected by this policy. The State of California estimates
that this provision will likely discourage younger, healthier
people from enrolling, undermining market stability and driving
costs up for everyone. While Republicans are pleased to heap
bureaucracy on middle class Americans, they voted down an
amendment to apply similar paperwork to people earning more
than $10 million a year to get their breaks. Republicans want
different rules for the wealthy than for ordinary Americans.
This legislation also eliminates the repayment and
reconciliation protections for consumers in current law (also
called ``true-up''), penalizing those who have income
fluctuations during the year, including those who work extra
hours, get a bonus, or experience other unforeseen life events.
This change will result in many Americans being forced to repay
sums that even exceed their increase in income. It is a
disincentive for individuals with unstable incomes to seek
coverage and is a penalty against those who are able to work
additional hours. This policy alone is another $20 billion tax
on working Americans who purchase their own health coverage in
the Marketplace. The Center on Budget and Policy Priorities
notes, ``The Republican proposal would eliminate this repayment
cap, penalizing people for mid-year changes to their household
or financial situation that are frequently impossible to
predict and subjecting them to large repayment amounts--in some
cases raising their taxes by more than a thousand dollars
unexpectedly.''\2\
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\2\https://www.cbpp.org/blog/republican-proposals-would-raise-
taxes-for-enrollees-in-affordable-care-act-marketplaces.
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Finally, the bill targets the lowest income workers with a
provision that specifically blocks workers earning less than
150 percent of the federal poverty level (an annual income of
$23,475 for an individual, $48,225 for a family of four) from
being able to access a Special Enrollment Period (SEP) to sign
up for affordable coverage through the ACA as soon as they
learn they are eligible. This SEP has helped millions of
individuals overcome challenges enrolling in health coverage,
many of whom face greater employment, income, and household
volatility and may not be aware of their eligibility to enroll
in Marketplace coverage during the Open Enrollment Period. It
would force individuals to remain uninsured for many months.
During the mark up, Republicans had the gall to accuse these
workers who have fluctuating incomes of committing fraud--
showing just how little they understand or care about these
workers.
These new paperwork burdens are layered on top of the
Republicans gutting by 90 percent the ACA navigator program
that helps consumers when they enroll in health plans and
making draconian cuts to the Internal Revenue Service, making
it more difficult for consumers to resolve issues needed to
enroll in health coverage. Regarding similar provisions in the
Energy and Commerce-marked legislation, the National
Association of Insurance Commissioners noted, ``Resulting
coverage losses would compromise the integrity and health of
the risk pool, discourage carrier participation, lead to higher
premiums, and destabilize state insurance markets.''\3\
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\3\https://content.naic.org/sites/default/files/health-letter-to-
cms-marketplace-intergity-nprm-naic-comments-final-april-2025_0.pdf
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The Republican bill also includes draconian policies to ban
taxpaying, lawfully present individuals from accessing coverage
under Medicare and the ACA. Nearly 48 million immigrants live
in the U.S., representing 14 percent of the total population of
335 million. Immigrants of all legal statuses, like all other
residents, pay income, payroll, property, sales, or other taxes
throughout the U.S. In fact, they generated some $1.6 trillion
in economic activity in 2022 and paid more than $579 billion in
local, state, and federal taxes.\4\ Currently, lawfully present
immigrants can qualify for Medicare under certain circumstances
and can purchase coverage through the ACA marketplaces.
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\4\https://www.cfr.org/in-brief/how-does-immigration-affect-us-
economy.
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Republicans falsely claim their legislation removes illegal
immigrants from Medicare and the ACA. JCT confirmed in the
mark-up that this is not the case and the legislation's
provisions apply to legally present individuals, including
people who are Temporary Protected Status recipients, refugees,
and non-citizens granted asylum--who have worked and paid taxes
to qualify for coverage.
The Massachusetts Health Connector expects that the loss of
lawfully present immigrants from their coverage due to loss of
APTC eligibility would spike premiums in the individual and
small group market in Massachusetts, due to the fact that
immigrants are better actuarial risk than citizen peers. The
Health Connector finds that its immigrant enrollees, on
average, have 25 percent lower medical claims than its citizen
members, due to the lower age of immigrant enrollees as well as
lower utilization of medical services.
The Republican justification for tearing health coverage
away from millions of Americans is ``fraud.'' This Republican
argument relies on an ill-informed and shoddy analysis to claim
lower income consumers are committing fraud. According to Keep
Americans Covered, ``Paragon's report, however, relies on
problematic data, fails to account for income misestimations,
and exaggerates the extent of possible enrollment fraud. The
result is a skewed and misleading analysis that wrongfully
concludes enhanced tax credits should not be extended.''\5\
Republicans' ``proof'' is simply that low-income Americans are
trying to get affordable coverage when their states didn't
expand Medicaid. The real fraud here is Republicans who claim
they care about Americans' health but block Americans' access
to health coverage at every turn.
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\5\https://americanscovered.org/wp-content/uploads/2025/02/Paragon-
Response-Report-FINAL.pdf.
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According to estimates by the Center on Budget Policy
Priorities, ``Without enhanced PTCs, the average 60-year-old
with an individual income of $60,241 per year (just over 400
percent of FPL) would have to spend 20 percent of their income
on health insurance premiums for the benchmark plan on average
in 2024. A 60-year-old with an individual income of $75,301 per
year (just over 500 percent of FPL) would have to spend 16
percent of their income on premiums. These estimates are far
higher in West Virginia, the highest premium state, where a 60-
year-old with an income just above 400 percent of FPL would
have to spend 36 percent of their income on benchmark plan
premiums if enhanced subsidies were not available. Even 30-
year-olds would have to spend more than 15 percent of their
income on benchmark plan premiums in high-premium states like
Alaska and West Virginia or states with community rating like
Vermont.'' By failing to extend the enhanced tax credits, which
ensures affordability of health insurance for middle class
Americans, individuals like those above would see their out-of-
pocket costs increase dramatically.
In exchange for this decimation of access to health care
coverage, the Republican bill offers the American people Health
Savings Accounts (HSAs) and Health Reimbursement Accounts
(HRAs). In reality, these are no substitute for access to high-
quality, robust health coverage. HSAs provide little help to
people who have lower incomes or who struggle to afford health
care. After paying premiums and paying upfront for needed
medical care prior to meeting the deductible, many people won't
have money left to put into an HSA.
In fact, HSAs disproportionately benefit the wealthy:
People with higher incomes receive the biggest tax benefit for
each dollar contributed to an HSA because the value of a tax
deduction rises with an individual's tax bracket. According to
the Center on Budget and Policy Priorities, ``An analysis of
2021 IRS data found that tax returns with incomes of $1 million
or more were the most likely to report individual HSA
contributions, and returns between $500,000 and $1 million were
the most likely to report employer contributions.''\6\ This is
not a solution to the rising cost of health care: It is another
example of Republicans turning their back on working Americans
with policies that help the wealthy.
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\6\https://www.cbpp.org/blog/five-reasons-lawmakers-should-reject-
expansions-of-health-savings-accounts.
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Lastly, the Republican legislation includes a Medicare
hospital rifle shot in their bill allowing 20 hospitals to
convert to rural emergency hospital status, sacrificing full-
service care for limited emergency services. Patients would
lose out on access to surgical procedures requiring inpatient
care, for example. Even for common conditions that can be
safely managed in rural settings, patients who need inpatient
care would need to be transferred or take on a greater travel
burden themselves. This would negatively impact rural
individuals' ability to receive timely care.
Taken together, these health policies in the Republican
bill are not about health at all--they are about redistributing
resources in our tax code from the lower and middle class to
the wealthy. And in doing so, they will decimate our health
care system, stripping out the very foundation that ensures
nursing home residents get care, pregnant moms and kids can
routinely go to the doctor, and people with disabilities can
live independently in their communities.
The harm this bill does extends beyond those receiving
their health coverage through Medicare, the ACA, or Medicare.
The massive rise in the number of uninsured will result in a
huge increase in both medical debt and in uncompensated care.
The latter will affect the financial stability of thousands of
hospitals, nursing homes, and health clinics across the country
causing them to close their doors. When a hospital closes due
to the Republican health cuts it doesn't just affect those
whose insurance was terminated--it affects every single person
in the community who uses that hospital for care. The closure
of hospitals and other providers also means job loss.
Communities that have already experienced economic shock
from President Trump's failed economic policies will see higher
unemployment rates as health care providers--often the largest
employers--close their doors and state funding is slashed
through Medicaid cuts. The Commonwealth Fund notes, ``Combined
losses from proposed Medicaid and SNAP cuts would reach $1.1
trillion over a decade, including a $95 billion loss of federal
funding in 2026 alone. State gross domestic products (GDPs)
would be $113 billion lower, exceeding federal budget savings.
About 1.03 million jobs would be lost nationwide in health
care, food-related industries, and other sectors. State and
local governments would lose $8.8 billion in state and local
tax revenues. Not extending the enhanced health insurance
premium tax credits that are scheduled to expire after December
2025 would lead to an additional 286,000 jobs lost in 2026, for
a combined total of more than 1.3 million jobs lost in the
United States.''\7\
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\7\https://www.commonwealthfund.org/publications/issue-briefs/2025/
mar/how-cuts-medicaid-snap-could-trigger-job-loss-state-revenue.
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ASSURING THE DECLINE OF AMERICAN ENERGY

For months, Congressional Republicans promised to take a
scalpel rather than a sledgehammer to the Inflation Reduction
Act's clean energy credits. But this bill is a hack job
disguised as surgery, delivering the actual or functional
repeal of most of these credits.
The bill repeals electric vehicle (EV) credits that cede
the growing EV and battery industries to China, as well as
knocking out a key motivation for onshoring vital critical-
minerals supply chains. Also repealed are popular consumer
credits for home energy efficiency improvements, building new
energy efficient homes, and installing residential energy
generation like solar panels. Millions of taxpayers have used
these credits to save billions of dollars on their utility
bills at the same time as easing the burden on America's
strained grid.
The bill places crushing restrictions on clean electricity
credits that will make them unworkable and repeal them in
practice. It also yanks the rug out from under electricity
generation projects by eliminating a safe-harbor provision for
projects that have begun construction and sunsetting the
ability to transfer credits after two years. Similar
restrictions will hobble the advanced manufacturing credit and
jeopardize a manufacturing renaissance currently underway in
the United States. New technologies like advanced nuclear,
clean hydrogen, and enhanced geothermal risk being snuffed out
at their infancy.
The vast majority of investments that relied on these
credits found homes in red states or districts, such that the
voters who gave Republicans a Congressional majority will
suffer the results of repeal. Somehow, the energy provisions in
this legislation manage to be simultaneously bad for business,
household utility bills, rural jobs, and technological
innovation. Instead of the American Energy Dominance that Trump
promised, this legislation will guarantee American Energy
Decline.

BORROWING TO CUT TAXES, ONCE AGAIN

It's the same playbook, time and time again. Republicans
preach fiscal responsibility under Democrats, then explode the
deficit the moment tax handouts for billionaires are on the
table, putting our nation on a fast track to fiscal calamity.
The official JCT score would lead one to believe that this
bill would add ``only'' $3.8 trillion to the national debt over
the next ten years. As Democratic members demonstrated at the
markup, that number doesn't tell the whole story:
Republicans' deceptive budget window used
for their reconciliation process was intentionally
designed to provide a nine-year score, rather than a
ten-year score, lopping tax year 2035 off the revenue
table. An additional year would have added an
additional $400 billion, making the ten-year score more
like $4.2 trillion.
Republicans are once again using accounting
gimmicks to hide the true cost of their policies. By
making temporary items that they know they will make
permanent eventually, Republicans are hiding an
additional $1.4 trillion from the cost of the bill.
None of this accounts for the additional
interest that will be needed to manage the national
debt, which, when CBO provides this score, will be well
over $500 billion and perhaps as high as $1 trillion.
In other words, the cost of this bill is not $3.8 trillion. The
real cost of this bill is over $6 trillion.
Our colleagues have tried to paper over their fiscal
recklessness by fabricating outlandish growth numbers out of
thin air, arguing with no evidence that the tax cuts in this
bill will create an additional $2.6 trillion of revenue,
attributable to economic growth. No serious economist believes
this. Not one. No one before the Ways & Means Committee has
ever testified to a growth effect approaching this number. We
have requested a dynamic score analysis from the Joint
Committee on Taxation, and when that score is released and
shows paltry revenue gains, rest assured that our Republican
colleagues will resort to their time-tested playbook of
attacking the referees, rather than owning up to their own
shortcomings.

CONCLUSION

Ways & Means Democrats dissent, because this bill is a bad
deal for the American people. Hardworking Americans should not
be asked to finance tax cuts for billionaires by sacrificing
their health care, their food security, and crucial economic
assistance.
Committee Republicans could have worked with us. Together,
we could have developed a product that provided tax relief for
the bottom 98 percent of Americans, paid for responsibly. Our
colleagues instead chose to go it on their own, knowing full
well this would require them to cater to the cruelest instincts
of the most radical right-wing fringe of their party. And cater
to them this bill does.
Our door is always open, should they change their minds.
Sincerely,
Richard E. Neal,
Ranking Member.

VOTES OF THE COMMITTEE ON THE BUDGET

----------

Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires each committee report to accompany any
bill or resolution of a public character to include the total
number of votes cast for and against on each roll call vote, on
a motion to report, and any amendments offered to the measure
or matter, together with the names of those voting for and
against.
Listed below are the actions taken in the Committee on the
Budget of the House of Representatives on the One Big Beautiful
Bill Act.
On May 16, 2025, the Committee met in open session, a
quorum being present.
Vice Chairman Smucker asked unanimous consent to be
authorized consistent with clause 1(a)(2) of rule XI of the
Rules of the House of Representatives, to declare a recess at
any time during the committee meeting.
There was no objection to the unanimous consent request.
Chairman Arrington asked unanimous consent that the first
reading of the bill be dispensed with and that the bill be
considered as read.
There was no objection to the unanimous consent request.
Vice Chairman Smucker made a motion to favorably report the
One Big Beautiful Bill Act to the House of Representatives.
On May 16, 2025, the motion to favorably report the One Big
Beautiful Bill Act was not agreed to by a vote of 16 ayes to 21
noes.
The Committee took the following vote:

Chairman Arrington declared the Committee in recess subject
to the call of the chair.
On May 18, 2025, the Committee reconvened, a quorum being
present.
Vice Chairman Smucker made a motion to reconsider the vote
to favorably report the One Big Beautiful Bill Act to the House
of Representatives.
The motion to reconsider the vote by which the One Big
Beautiful Bill Act was ordered reported was agreed to by a roll
call vote of 21 ayes to 16 noes.
Immediately after this vote, on May 18, 2025, the bill was
ordered favorably reported to the House of Representatives by a
roll call vote of 17 ayes, 16 noes, and 4 present.
The Ranking Member requested the requisite number of days
for the minority to file its views.
Chairman Arrington asked unanimous consent that the motion
to reconsider be laid on the table, on the measure reported
that the staff be authorized to make any necessary technical
and conforming corrections prior to filing the bill, and that,
pursuant to clause 1 of rule XXII of the House of
Representatives, the Chair be authorized to offer motions to go
to conference on the reported bill or any companion measure
from the Senate.
There was no objection to the unanimous consent request.
The Committee considered the following motions to instruct
on the rule for consideration of the One Big Beautiful Bill
Act:
Motion to Instruct #1 offered by Representative Balint.
Ms. Balint moves that the Committee on the Budget direct
its Chairman to request on behalf of the Committee that the
rule for consideration of the bill make in order an amendment
to strike all sections of the bill estimated by the
Congressional Budget Office to increase the number of
individuals without health insurance.
Motion to Instruct #2 offered by Representative Amo.
Mr. Amo moves that the Committee on the Budget direct its
Chairman to request on behalf of the Committee that the rule
for consideration of the bill make in order an amendment to
implement President Trump's request to raise the income tax
rate for millionaires.
Motion to Instruct #3 offered by Representative McGarvey.
Mr. McGarvey moves that the Committee on the Budget direct
its Chairman to request on behalf of the Committee that the
rule for consideration of the bill make in order an amendment
to strike all sections of the bill estimated by the
Congressional Budget Office to reduce participation in the
Supplemental Nutrition Assistance Program.
Motion to Instruct #4 offered by Representative Jayapal.
Ms. Jayapal moves that the Committee on the Budget direct
its Chairman to request on behalf of the Committee that the
rule for consideration of the bill include a point of order
prohibiting the use of a current policy baseline to estimate
the effects of a future amendment between the houses or
conference report on the bill.
On May 18, 2025, the Committee on the Budget also took the
following votes:

OTHER HOUSE REPORT REQUIREMENTS

----------

Related Committee Hearings

For the purposes of section 3(c)(6) of rule XIII of the
Rules of the House of Representatives, the following hearing
was used to develop this legislation:
On May 7, 2025, the Committee held a hearing titled ``The
Fiscal State of the Nation.'' The Committee received testimony
from the following witnesses:
Dr. Joshua Rauh, Ph.D., Senior Fellow at the Hoover
Institution, Stanford University;
Dr. Paul Winfree, Ph.D., President and CEO, Economic Policy
Innovation Center;
Mr. Don Schneider, Deputy Head of U.S. Policy, Piper
Sandler; and
Mr. Michael Linden, Senior Policy Fellow, Washington Center
for Equitable Growth.

Committee Consideration

On Friday, May 16, 2025, and Sunday, May 18, 2025, the
Committee met in open session and ordered the bill, H.R. __,
favorably reported, without amendment, by a roll call vote of
17 ayes, 16 noes, and 4 present, a quorum being present.

Committee Oversight Findings and Recommendations

Clause 3(c)(1) of rule XIII of the Rules of the House of
Representatives requires each committee report to contain
oversight findings and recommendations pursuant to clause
2(b)(1) of rule X. The Committee on the Budget has examined its
activities over the past session and has determined that there
are no specific oversight findings in the text of the reported
bill.

Committee Cost Estimate

Pursuant to clause 3(d) of rule XIII of the Rules of the
House of Representatives, the Committee adopts as its own the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to sections 402 and 423 of the
Congressional Budget Act of 1974. The Committee has requested
but not received from the Director of the Congressional Budget
Office a cost estimate for the consolidated provisions.

New Budget Authority and Cost Estimate Prepared by the Congressional
Budget Office

Pursuant to clause 3(d) of rule XIII of the Rules of the
House of Representatives and section 308(a) of the
Congressional Budget Act of 1974 (relating to estimates of new
budget authority, new spending authority, new credit authority,
or increased or decreased revenues or tax expenditures), and
pursuant to clause 3(c)(2) and (3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has requested
but not received a statement as to whether these consolidated
provisions contain any new budget authority, spending
authority, credit authority, or an increase or decrease in
revenues or tax expenditures.

Federal Mandates Statement

Section 423 of the Congressional Budget Act of 1974
requires a statement of whether the provisions of the reported
bill include unfunded mandates. Any statements regarding
unfunded mandates for a legislative recommendation submitted by
an instructed committee are included under the appropriate
title of this report.

Federal Advisory Committee Act Statement

No advisory committee within the meaning of section 5(b) of
the Federal Advisory Committee Act was created by this
legislation.

Applicability to the Legislative Branch

Any finding that a legislative recommendation submitted by
an instructed committee relates to the terms and conditions of
employment or access to public services or accommodations
within the meaning of section 102(b)(3) of the Congressional
Accountability Act (Public Law 104-1) is included under the
appropriate title of this report.

Duplication of Federal Programs

Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, no provision of the legislation
establishes or reauthorizes a program of the Federal government
known to be duplicative of another Federal program, a program
that was included in any report from the Government
Accountability Office to Congress pursuant to section 21 of
Public Law 111-139, or a program related to a program
identified in the most recent Catalog of Federal Domestic
Assistance.

Statement of Performance Goals and Objectives

This bill is reported pursuant to Title II of H. Con. Res.
14, the Concurrent Resolution on the Budget for Fiscal Year
2025. Pursuant to Clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the goals and objectives of this
bill are to enact President Trump's America First agenda,
prevent a harmful tax increase, provide necessary funding for
border and defense priorities, and rein in out-of-control
spending.

Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits

In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, the bill does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI
of the Rules of the House of Representatives.

Section-by-Section Analysis

One, Big, Beautiful Bill Act of 2025
Section-By-Section

SECTION-BY-SECTION TABLE OF CONTENTS

Page
SECTION 1--SHORT TITLE........................................... 1955
SECTION 2--TABLE OF CONTENTS..................................... 1955
TITLE I--COMMITTEE ON AGRICULTURE................................ 1956
Subtitle A--Nutrition........................................ 1956
Subtitle B--Investment in Rural America...................... 1958
TITLE II--COMMITTEE ON ARMED SERVICES............................ 1967
TITLE III--COMMITTEE ON EDUCATION AND WORKFORCE.................. 1970
Subtitle A--Student Eligibility.............................. 1970
Subtitle B--Loan Limits...................................... 1971
Subtitle C--Loan Repayment................................... 1971
Subtitle D--Pell Grants...................................... 1973
Subtitle E--Accountability................................... 1973
Subtitle F--Regulatory Relief................................ 1974
Subtitle G--Limitation on Authority.......................... 1975
TITLE IV--ENERGY AND COMMERCE.................................... 1975
Subtitle A--Energy........................................... 1975
Subtitle B--Environment...................................... 1982
Subtitle C--Communications................................... 1983
Subtitle D--Health........................................... 1989
TITLE V--COMMITTEE ON FINANCIAL SERVICES......................... 1990
TITLE VI--COMMITTEE ON HOMELAND SECURITY......................... 1996
TITLE VII--COMMITTEE ON THE JUDICIARY............................ 1996
Subtitle A--Immigration Matters.............................. 2005
Subtitle B--Regulatory Matters............................... 2005
Subtitle C--Other Matters.................................... 2006
TITLE VIII--COMMITTEE ON NATURAL RESOURCES....................... 2006
Subtitle A--Energy and Mineral Resources..................... 2010
Subtitle B--Water, Wildlife, and Fisheries................... 2011
Subtitle C--Federal Lands.................................... 2014
TITLE IX--COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM........... 2014
TITLE X--COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE.......... 2017
TITLE XI--COMMITTEE ON WAYS AND MEANS............................ 2020
Subtitle A--Make American Families and Workers Thrive Again.. 2023
Subtitle B--Make Rural America and Main Street Grow Again.... 2038
Subtitle C--Make America Win Again........................... 2046
Subtitle D--Increase in Debt Limit........................... 2063

TITLE I--COMMITTEE ON AGRICULTURE

SECTION-BY-SECTION

Subtitle A--Nutrition

Sec. 10001. Thrifty Food Plan

Section 10001 amends section 3(u) of the Food and Nutrition
Act of 2008 to provide a cost neutrality provision that would
prevent the Secretary from increasing the cost of the thrifty
food plan based on a reevaluation or update of market baskets,
which under this section may not occur more frequently than
every 5 years. This section also requires the Secretary to
publish in the Federal Register with an opportunity for comment
a notice prior to any update of the thrifty food plan market
baskets. Under section 3(u)(4), the Secretary would be required
to adjust the cost of the thrifty food plan to reflect changes
in the Consumer Price Index.

Sec. 10002. Able Bodied Adults Without Dependents Work Requirements

Subsection (a) of section 10002 amends the exceptions
listed for able bodied adults without dependents (ABAWD) in
Section 6(o)(3) of the Food and Nutrition Act to the SNAP work
requirement. Specifically, this section would increase the age
with which ABAWDs must continue working to qualify for SNAP to
64 (up from 54 currently); it changes the generic, functional
definition of ``dependent child'' for ABAWD purposes from under
18 years of age to under 7; and it carves out an exception to
the work requirements for a person responsible for a child 7
years of age or older who is married and resides with an
individual who complies with the SNAP work requirements.
Subsection (b) of section 10002 keeps in place the October
1, 2030 sunset provision currently in law for the ABAWD
exception for: homeless individuals; veterans; and individuals
who are 24 years of age or younger and who were in foster care
under the responsibility of a State on the date of attaining 18
years of age or such higher age as the State has elected under
section 475(8)(B)(iii) of the Social Security Act.

Sec. 10003. Able Bodied Adults Without Dependents Waivers

Paragraph (1) of section 10003 amends Section 6(o)(4)(A) of
the Food and Nutrition Act--which addresses State waiver
requests to the work requirement for ABAWDs--by requiring
county or county-equivalents to have unemployment rates of over
10% to be eligible for waivers, such waivers being valid for
not more than 12 consecutive months. Currently, the Secretary
has wide discretion to issue such waivers indefinitely across
entire States if the Secretary determines the area does not
have a sufficient number of jobs.
Paragraph (2) of section 10003 amends Section 6(o)(6)(F) to
lower the maximum number of exempt ABAWDs not living in a
waived county or county-equivalent from the SNAP work
requirement from 8 percent of such individuals in the State to
1 percent.

Sec. 10004. Availability of Standard Utility Allowances Based on
Receipt of Energy Assistance

Subsection (a) of section 10004 amends Section
5(e)(6)(C)(iv)(I) of the Food and Nutrition Act to limit the
use of payments of $20 or more from the Low-Income Home Energy
Assistance Act of 1981 (or similar energy assistance program)
to automatically qualify for the standard utility allowance in
determining SNAP allotments to only households with elderly or
disabled members. Currently, all households qualify.
Subsection (b)(1) of section 10004 amends Section 5(k)(4)
of the Food and Nutrition Act to limit the exclusion from
income for the purposes of determining SNAP allotments,
payments made pursuant to State law to provide energy
assistance to a household to only households with an elderly or
disabled member. Subsection (b)(2) amends Section 5(k)(4) of
the Food and Nutrition Act to limit the inclusion of expenses
paid on behalf of a household under a State law to provide
energy assistance as ``out-of-pocket'' expenses to be
considered in the excess shelter deduction for purposes of
determining SNAP allotments to only households with an elderly
or disabled member. Currently, all households enjoy those
benefits.

Sec. 10005. Restrictions on Internet Expenses

Section 10005 amends Section 5(e)(6) of the Food and
Nutrition Act by adding at the end a new subparagraph (E) that
explicitly forbids the use of household internet costs from
being used in computing the excess shelter expense deduction in
determining the size of household SNAP allotments.

Sec. 10006. Matching Funds Requirements

Subsection (a) of section 10006 amends Section 4(a) of the
Food and Nutrition Act by adding a new paragraph (2). Paragraph
(2)(A) would require all States to contribute 5 percent of the
cost of SNAP allotments beginning in fiscal year 2028.
Paragraph (2)(B) increases the percentage that States must
contribute based on each respective State's SNAP error rate.
States with error rates of between 6 and 8 percent must
contribute 15 percent; States with error rates of between 8 and
10 percent must contribute 20 percent; and States with error
rates equal to or greater than 10 percent must contribute 25
percent.
Subsection (b) of section 10006 is a rule of construction
meant to add further clarity that in no event may the federal
government pay towards SNAP allotments an amount greater than
the ``Federal Share'' (100 percent minus the State Share
described in subsection (a)).

Sec. 10007. Administrative Cost Sharing

Section 10007 amends Section 16(a) of the Food and
Nutrition Act by reducing the federal share of the cost of
administering SNAP from 50 percent to 25 percent, thereby
increasing the State share of administrative costs from 50
percent to 75 percent.

Sec. 10008. General Work Requirement Age

Paragraph (1) of section 10008 amends Section 6(d)(1) of
the Food and Nutrition Act by changing the general SNAP work
requirement age from over 15 and under 60, to over 17 and under
65. Paragraph (2) amends Section 6(d)(2) by increasing the age
of a child for which a parent will be exempted from the general
SNAP work requirements from under the age of 6 to under the age
of 7.

Sec. 10009. National Accuracy Clearinghouse

Section 10009 amends Section 11(x)(2) of the Food and
Nutrition Act by adding at the end a new subparagraph (D) that
would require state agencies to use indications of multiple
issuances of SNAP benefits to prevent multiple issuances of
other federal and State assistance program benefits.

Sec. 10010. Quality Control Zero Tolerance

Section 10010 amends Section 16(c)(1)(A)(ii) of the Food
and Nutrition Act by reducing the tolerance level for errors in
SNAP from $37 in 2014 dollars (adjusted annually to account for
inflation) to $0.

Sec. 10011. National Education and Obesity Prevention Grant Program
Repealer

Section 10011 repeals Section 28 of the Food and Nutrition
Act: The National Education and Obesity Prevention Grant
Program.

Sec. 10012. Alien SNAP Eligibility

Section 10012 amends Section 6(f) of the Food and Nutrition
Act to limit SNAP benefits to only individuals who reside in
the United States and are citizens or lawful permanent
residents of the United States.

Sec. 10012. Emergency Food Assistance

Section 10013 amends Section 203D(d)(5) of the Emergency
Food Assistance Act of 1983 to extend mandatory funding for
each fiscal year through 2031 to carry out federal projects
aimed at reducing food waste, providing food to individuals in
need, and building relationships between agricultural
production, processing, and distribution.

Subtitle B--Investment in Rural America

Sec. 10101. Safety Net

Section 10101(a) amends section 1111 of the Agricultural
Act of 2014 to include a 10% to 20% increase to the statutory
reference price for all covered commodities. Effective
beginning in the 2031 crop year, the reference price for all
covered commodities above shall equal the reference price in
the previous crop year multiplied by 1.005 and cannot exceed
115 percent of the reference price for such covered commodity.
Section 10101(b) amends section 1112 of the Agricultural
Act of 2014 to maintain all current base acres while providing
a 1-time allocation of new base for not more than an additional
30,000,000 base acres for producers who currently do not have
base or whose average planted and prevented plant acres exceed
the current base acres on the farm. Additionally, section
10101(b) requires a pro-rated reduction by the Secretary if the
total number of eligible acres allocated to base acres across
all farms in the U.S. would exceed 30,000,000 acres beginning
in crop year 2026.
Section 10101(c) amends section 1115 of the Agricultural
Act of 2014. The subsection requires producers to make an
election to obtain PLC or ARC coverage on a covered-commodity-
by-covered-commodity basis through crop year 2031.
Section 10101(d) amends section 1116 of the Agricultural
Act of 2014 to extend PLC through crop year 2031.
Section 10101(e) amends section 1117 of the Agricultural
Act of 2014 to extend ARC through crop year 2031. The
subsection also increases the agricultural risk coverage
guarantee to 90 percent of the benchmark revenue for crop years
2025 through 2031. It further increases the payment rate
calculation to include 12.5 percent of the benchmark revenue in
crop years 2025 through 2031.
Section 10101(f) amends section 1001 of the Food Security
Act of 1985 to define the term ``qualified pass through
entity'' to include partnerships, S-Corps, LLCs, joint
ventures, and general partnerships. The subsection requires the
Secretary to treat such entities in the same manner as current
law treats general partnerships and joint ventures for the
purposes of applying payment limitations.
Section 10101(g) amends section 1001 of the Food Security
Act of 1985 to increase the payment limitation for Title I
payments from $125,000 to $155,000, adjusted annually to
account for inflation based on the Consumer Price Index for All
Urban Consumers published by the Bureau of Labor Statistics of
the Department of Labor.
Section 10101(h) amends section 1001D(b) of the Food
Security Act of 1985 to provide an exception to the AGI means
test for purposes of determining eligibility for disaster and
conservation programs if the person or entity derives more than
75 percent of their average gross income from farming,
ranching, and silviculture activities. Farming, ranching, and
silviculture activities include agri-tourism, direct-to-
consumer marketing of agricultural products, the sale of
agricultural equipment owned by an operation.
Section 10101(i) amends section 1202 of the Agricultural
Act of 2014 to include, for crop years 2026 through 2031,
modest increases in loan rates for most loan commodities, while
providing for a more substantial increase in loan rates for
commodities that did not receive an increase in the
Agricultural Improvement Act of 2018. Section 10101(i) also
establishes a special rule for the effective price for PLC
where the loan rate shall be equal to $0.30 per pound for seed
cotton and $3.30 per bushel for corn.
Section 10101(i) further amends section 1204(g) of the
Agricultural Act of 2014 to require the Secretary to make
cotton storage payments for upland cotton and extra-long staple
cotton in the same manner as provided in 2006 for upland
cotton. The payment rate shall be equal to the lesser of the
submitted tariff rate for the current marketing year and the
maximum storage payment rate of $4.90 for California and
Arizona and $3.00 in all other states. The subsection also
enhances flexibility for loan redemption of upland cotton and
modernizes loan provisions for extra-long staple cotton.
Section 10101(j) amends section 1204 of the Agricultural
Act of 2014 by establishing the repayment rate of a marketing
assistance loan for upland cotton to be the lowest prevailing
world market price during the 30-day period beginning on the
date on which such loan was repaid was used. Section 10101(j)
also provides for a refund of a marketing loan for upland
cotton that is repaid by a producer. Section 10101(j) further
updates the formula for the prevailing world market price for
upland cotton to provide that, for any period which price
quotations for Middling (M) one and three-thirty-second inch
cotton are available, is based on the average of the 3 lowest-
priced growths that are quoted. Lastly, section 10101(j)
establishes the repayment rate of a marketing assistance loan
for extra long staple cotton to be the lesser of the loan rate
established for the commodity or the prevailing world market
price. The prevailing world market price for extra long staple
cotton shall be adjusted to U.S. quality and location, as well
as include the average costs to market the commodity taking
into account transportation costs on the date the loan was
repaid.
Section 10101(k) amends section 1207(c) of the Agricultural
Act of 2014. The subsection increases the Economic Adjustment
Assistance for Textile Mills payment rate from $0.03/lb. to
$0.05/lb. of upland cotton used by the mill, beginning August
1, 2025.
Section 10101(l) provides various sugar program updates.
Subsection (l)(1) amends section 156 of the Federal Agriculture
Improvement and Reform Act of 1996 to increase, for crop years
2025 through 2031, the loan rate for sugarcane to $0.24 per
pound. The subsection further increases the loan rate for sugar
beets to 136.55 percent of the loan rate for raw sugar.
Subsection (l)(2) amends section 167 of the Federal
Agriculture Improvement and Reform Act of 1996 to increase for
the 2025 crop year and each subsequent crop year the storage
payments to $0.34 per hundredweight per month for refined sugar
and $0.27 per hundredweight per month for raw cane sugar.
Subsection (l)(3) amends Section 359b(a)(1) of the
Agricultural Adjustment Act of 1938 to require the Secretary to
provide sugar estimates for flexible marketing allotments for
sugar through crop year 2031. The subsection also amends
Section 359c(g)(2) of the Agricultural Adjustment Act of 1938
to require the Secretary to give priority to sugar beet
processors that have sugar available, if the Secretary makes an
upward adjustment in an allotment.
Subsection (l)(4) amends section 359k of Agricultural
Adjustment Act of 1938. The subsection requires USTR, in
consultation with the Secretary, to provide an upfront
reallocation of the TRQ shortfall at the beginning of the quota
year and then a subsequent reallocation of any remaining
shortfall to quota holding countries by March 1st of each year.
Subsection (l)(5) amends section 359k(b)(1) of the
Agricultural Adjustment Act of 1938 to clarify that the
Secretary has the authority to take action to increase the
supply of sugar before April 1st only if it is for the sole
purpose of responding directly to an emergency shortage of
sugar in the United States market that is caused by a war,
flood, hurricane, or other natural disaster, or other similar
event.
Subsection (l)(6) amends Section 359l(a) of the
Agricultural Adjustment Act of 1938 to extend the period of
effectiveness for flexible marketing allotments for sugar
through the 2031 crop year.
Section 10101(m) provides various dairy policy updates.
Section (m)(1) amends section 1401 of the Agricultural Act of
2014 to update the definition of ``production history'' and
amends section 1405 of the Agricultural Act of 2014 to update
the production history for dairy operations participating in
the program to the highest annual milk marketings of such dairy
during any one of the 2021, 2022, or 2023 calendar years.
Subsections (m)(2) and (m)(3) amend sections 1406 and 1407
of the Agricultural Act of 2014 to increase the tier I and tier
II coverage limit under the DMC program from the first 5
million pounds of milk to the first 6 million pounds of milk.
Subsection (m)(3) also provides an option for producers to
receive a 25 percent discount on their DMC premiums if they
lock in coverage from calendar years 2026 through 2031.
Subsection (m)(4) amends section 1409 of the Agricultural
Act of 2014 to extend dairy margin coverage through calendar
year 2031.
Subsection (n) amends Section 1602 of the Agricultural Act
of 2014 to suspend permanent price support authority through
calendar year 2031.
Subsection (o) amends section 1614(c) of the Agricultural
Act of 2014 to provide for the implementation authority and
funding for Title I of this Act. The subsection further
provides CCC funds to implement Title I programs and
authorities, including to carry out dairy mandatory cost
surveys and for USDA to update and modernize their technology.
Subsection (p) amends section 1501 of the Agricultural Act
of 2014 to provide various livestock safety net updates.
Subsection (p)(1) establishes a payment rate for predation
losses at 100 percent of the market value of the animal for
losses caused by a federally protected species. Subsection
(p)(1) also establishes a payment rate for losses due to
adverse weather or disease at 75 percent of the market value of
the animal. The market value for both payment rates is
determined by the Secretary, who may consider the ability of
eligible producers to document regional price premiums for
affected livestock that exceed the national average market
price for those livestock. The paragraph further establishes a
supplemental payment for the loss of unborn livestock incurred
since January 1, 2024.
Subsection (p)(2) provides that an eligible livestock
producer that owns or leases grazing land or pastureland that
is physically located in a county that is rated by the U.S.
Drought Monitor as having a D2 (severe drought) intensity in
any area of the county for at least 4 consecutive weeks during
the normal grazing period for the county, as determined by the
Secretary, shall be eligible to receive assistance in an amount
equal to 1 monthly payment using the monthly payment rate
determined under the livestock forage disaster program; or 2
monthly payments if for any of the 7 of the 8 consecutive weeks
during the normal grazing period for the county.
Subsection (p)(3) establishes that eligible producers on a
farm of farm-raised fish, including fish grown as food for
human consumption, shall be eligible to receive payments to aid
in the reduction of losses due to piscivorous birds. The
payment rate for payments shall be not less than $600 per acre
of farm-raised fish.
Subsection (p)(4) decreases the threshold for producers to
qualify for the program to a tree mortality rate that exceeds
normal mortality. Additionally, the reimbursement rate
increases from 50 percent to 65 percent of the cost of pruning,
removal, and other costs incurred by an eligible orchardist or
nursery tree grower to salvage existing trees or, in the case
of tree mortality, to prepare the land to replant trees.
Subsection (q) provides that in determining honeybee colony
losses eligible for emergency assistance for livestock, honey
bees, and farm-raised fish under section 1501(d) of the
Agricultural Act of 2014, the Secretary shall utilize a normal
mortality rate of 15 percent. Subsection (r) amends section
502(b) of the Federal Crop Insurance Act to establish, among
other criteria, that a beginning farmer or rancher, and a
veteran farmer or rancher, are farmers or ranchers that have
operated a farm or ranch for not more than 10 years.
Additionally, subsection (r) amends 508(e)(8) of the
Federal Crop Insurance Act to increase the crop insurance
policy premium to varying percentage points greater than
premium assistance otherwise available, depending on the
reinsurance year that a beginning farmer or rancher is in for
an applicable policy or plan of insurance.
Subsection (r)(2) amends Section 508(e)(2)(H)(i) of the
Federal Crop Insurance Act to provide that in the case of
supplemental coverage options, the amount shall be equal to the
sum of 80 percent of the additional premium associated with the
coverage and the premium calculated for the coverage to cover
operating and administrative expenses.
Subsection (s) amends section 508(c)(4) of the Federal Crop
Insurance Act to enhance the coverage level for Whole Farm
Revenue Protection and certain area wide coverage options, as
well as increases the premium cost share the Corporation pays
for the supplemental coverage option.
Subsection (t) amends Section 508(e)(2) of the Federal Crop
Insurance Act to provide additional premium support in the
catastrophic risk protection provided by the Corporation, with
varying degrees of support depending on the level of additional
coverage of the recorded or appraised average yield indemnified
at not greater than 100 percent of the expected market price,
or a comparable coverage for a policy or plan of insurance that
is not based on individual yield. Subsection (u) amends Section
508(k) of the Federal Crop Insurance Act to provide that
beginning with the 2026 reinsurance year and for each
reinsurance year thereafter, in addition to the terms and
conditions of the Standard Reinsurance Agreement, to cover
additional expenses for loss adjustment procedures, the
Corporation shall pay an additional administrative and
operating expense subsidy to approved insurance providers for
eligible contracts, with the payment to an approved insurance
provider to 6 percent of the net book premium.
Subsection (u) also establishes a reimbursement level for
administrative and operating expenses with respect to specialty
crop contacts to be equal to or greater than the percent that
is the greater of 17 percent of the premium used to define loss
ratio and the percent of the premium used to define loss ratio
that is otherwise applicable for the reinsurance year under the
terms of the Standard Reinsurance Agreement in effect for the
reinsurance year.
Subsection (u) further requires the Corporation, beginning
with the 2026 reinsurance year and for each reinsurance year
thereafter, to increase the total administrative and operating
expense reimbursements otherwise required under the Standard
Reinsurance Agreement in effect for the reinsurance year in
order to account for inflation in a manner that is consistent
with the increases provided with respect to the 2011 through
2015 reinsurance years.
Subsection (v) amends section 515(l)(2) of the Federal Crop
Insurance Act to provide that the Corporation may use, from
amounts made available from the insurance fund established
under section 516(c) of the Federal Crop Insurance Act, not
more than $6,000,000 for fiscal year 2026 and each subsequent
fiscal year.
Subsection (w) amends section 516(b)(2)(C)(i) of the
Federal Crop Insurance Act to provide that for each of the 2014
and subsequent reinsurance years, the Corporation may use the
insurance fund established under section 516, but not to exceed
$7,000,000 for each of fiscal years 2014 through 2025 and
$10,000,000 for fiscal year 2026 and each fiscal year
thereafter, to pay costs to reimburse expenses incurred for the
operations and review of policies, plans of insurance, and
related materials (including actuarial and related
information); and to assist the Corporation in maintaining
program actuarial soundness and financial integrity.
Subsection (x) amends Section 523 of the Federal Crop
Insurance Act to establish a Poultry Insurance Pilot Program.
Under the pilot program, contract poultry growers, including
growers of broilers and laying hens, may elect to receive
index-based insurance from extreme weather-related risks
resulting in increased utility costs (including costs of
natural gas, propane, electricity, water, and other appropriate
costs, as determined by the Corporation) associated with
poultry production.

Sec. 10102. Conservation

Subsection (a) of section 10102 amends section 1240O(b) of
the Food Security Act of 1985 to provide $1,000,000 in
mandatory funding, beginning in fiscal year 2026 and available
until expended, from the Commodity Credit Corporation to carry
out the Grassroots Source Water Protection Program. Subsection
(a) also extends the authorized appropriations of $20,000,000
for the Grassroots Source Water Protection Program for each
fiscal year through fiscal year 2031.
Subsection (b) of section 10102 amends section 1240R(f)(1)
of the Food Security Act of 1985 to provide $10,000,000 in
mandatory funding, provided by the Commodity Credit
Corporation, for each fiscal year through fiscal year 2031 to
carry out the Voluntary Public Access and Habitat Incentive
Program.
Subsection (c) of section 10102 amends section 2408(g)(1)
of the Agriculture Improvement Act of 2018 to provide
$15,000,000 in mandatory funding, provided by the Commodity
Credit Corporation, for each fiscal year through fiscal year
2031 to carry out the Federal Swine Eradication and Control
Pilot Program.
Subsection (d) if section 10102 extends and amends section
1241(a) of the Food Security Act of 1985 to increase mandatory
funding, provided by the Commodity Credit Corporation at the
following levels:
The Agriculture Conservation Easement Program, under
subchapter VII, is funded at:
$625,000,0000 for fiscal year 2026;
$650,000,000 for fiscal year 2027;
$675,000,000 for fiscal year 2028;
$7000,000,000 for fiscal year 2029;
$7000,000,000 for fiscal year 2030; and
$700,000,000 for fiscal year 2031.
The Environmental Quality Incentives Program, under subpart
A of part IV of subchapter IV, is funded at:
$2,655,000,000 for fiscal year 2026;
$2,855,000,000 for fiscal year 2027;
$3,255,000,000 for fiscal year 2028;
$3,255,000,000 for fiscal year 2029;
$3,255,000,000 for fiscal year 2030; and
$3,255,000,000 for fiscal year 2031.
The Conservation Stewardship Program, under subpart B of
part IV or subchapter IV, is funded at:
$1,300,000,000 for fiscal year 2026;
$1,325,000,000 for fiscal year 2027;
$1,350,000,000 for fiscal year 2028;
$1,375,000,000 for fiscal year 2029;
$1,375,000,000 for fiscal year 2030; and
$1,375,000,000 for fiscal year 2031.
Subsection (d) amends section 1271D(a) of the Food Security
Act of 1985 to provide $425,000,000 in mandatory funding for
fiscal year 2026 and $450,000,000 for each of fiscal years 2027
through 2031, from the Commodity Credit Corporation, to carry
out the Rural Conservation Partnership Program.
Additionally, subsection (d) amends and extends section 15
of the Watershed Protection and Flood Prevention Act to provide
$150,000,000 in mandatory funding, to remain available until
expended, for fiscal year 2026 from the Commodity Credit
Corporation to carry out watershed protection and flood
prevention. This subsection also rescinds conservation funding
from the Inflation Reduction Act.

Sec. 10103. Trade

Section 10103 amends section 203(f) of the Agricultural
Trade Act of 1978 to provide mandatory funding of $489,500,000
for each of fiscal years 2026 through 2031, to remain available
until expended, to fund agricultural trade promotion and
facilitation. Of the $489,500,000 provided for each of fiscal
years 2026 through 2031, $400,000,000 is allocated to the
Market Access Program, $69,000,000 is allocated to the Foreign
Market Development Cooperator Program, $8,000,000 is allocated
to the E (Kika) de la Garza Emerging Marketing Program,
$9,000,000 is allocated to the Technical Assistance for
Specialty Crops Program, and $3,500,000 is allocated to the
Priority Trade Fund. Additionally, this section establishes
that any of the funds listed above that remain unobligated one
year after the end of the fiscal year in which the funds were
first made available are to be reallocated to the priority
trade fund.

Sec. 10104. Research

Subsection (a) of section 10104 amends section 1672E(d)(1)
of the Food, Agriculture, Conservation, and Trade Act of 1990
by extending mandatory funding for each fiscal year through
2031 from the Commodity Credit Corporation to carry out the
Urban, Indoor, and Other Emerging Agriculture Production,
Research, Education, and Extension Initiative.
Subsection (b) of section 10104 amends section
7601(g)(1)(A) of the Agricultural Act of 2014 to provide
$37,000,000 in mandatory funding, to remain available until
expended, from the Commodity Credit Corporation to carry out
the Foundation for Food and Agriculture Research. The Secretary
shall transfer these funds to the Foundation no later than 30
days after the date of the enactment of this Act.
Subsection (c) of section 10104 amends section 1446 of the
National Agricultural Research, Extension, and Teaching Policy
Act of 1977 to provide $60,000,000 in mandatory funding from
the Commodity Credit Corporation, to remain available until
expended, for fiscal year 2026 to carry out the Scholarships
for Students at 1890 Institutions.
Subsection (d) of section 10104 amends section 1680(c) of
the Food, Agriculture, Conservation, and Trade Act of 1990 to
provide $8,000,000 in mandatory funding, available until
expended, from the Commodity Credit Corporation to carry out
the Assistive Technology Program for Farmers with Disabilities
Program.
Subsection (e) of section 10104 amends section 412(k)(1)(B)
of the Agricultural Research, Extension, and Education Reform
Act of 1998 to provide $80,000,000 in mandatory funding through
fiscal year 2025 and $175,000,000 through fiscal year 2026 from
the Commodity Credit Corporation to carry out the Specialty
Crop Research Initiative.
Subsection (f) of section 10104 amends section 6 of the
Research Facilities Act to provide $125,000,000 in mandatory
funding for each year beginning with fiscal year 2026 from the
Commodity Credit Corporation to carry out the study, plan,
design, structure, and related costs of the Agriculture
Research Facilities under this subchapter.

Sec. 10105. Secure Rural Schools; Forestry

Subsection (a)(1) amends Section 101 of the Secure Rural
Schools and Community Self- Determination Act to extend the
authority for the Secretaries to calculate eligible State and
county payments under the Act through fiscal year 2026. It also
creates a special rule for fiscal year 2024 payments which may
have already been received by eligible States and counties.
Subsection (a)(2) amends Sections 208 and 305 of the Secure
Rural Schools and Community Self-Determination Act to extend
the authorities to initiate projects to expend funds under the
Act through fiscal year 2028, and requiring project funds not
obligated by September 30, 2029 to be deposited in the Treasury
of the United States.
Subsection (b) amends Section 205(g) of the Secure Rural
Schools and Community Self-Determination Act to extend the
authorities under that section through October 1, 2026. It also
strikes Section 205(g)(6), which required a report to Congress.
Subsection (c) makes technical corrections to sections 205
and 206 of the Secure Rural Schools and Community Self-
Determination Act.
Subsection (d)(1) rescinds all of the unobligated balances
of the funds made available under paragraphs 1 through 4 of
section 23002(a) of subtitle D of Public Law 117-169.
Subsection (d)(2) rescinds $100,719,676 of the unobligated
balances available under section 23003(a)(1) of subtitle D of
Public Law 117-169.

Sec. 10106. Energy

Subsection (a) of section 10106 amends and extends section
90002(k)(1) of the Farm Security and Rural Investment Act of
2002 by extending mandatory funding provided by the Commodity
Credit Corporation through fiscal year 2031.
Subsection (b) of section 10106 amends section
9005(g)(1)(F) of the Farm Security and Rural Investment Act of
2002 by extending mandatory funding for each fiscal year
through 2031, provided by the Commodity Credit Corporation, to
carry out the Bioenergy Program for Advanced Biofuels.

Sec. 10107. Horticulture

Subsection (a) of section 10107 amends section 420(f) of
the Plant Protection Act to provide $75,000,000 in mandatory
funding through fiscal year 2025 and increase funding to
$90,000,000 for fiscal year 2026 and each fiscal year
thereafter. Funding is made available through the Commodity
Credit Corporation to carry out plant pest and disease
management and disaster prevention.
Subsection (b) of section 10107 amends section 101(l)(1) of
the Specialty Crops Competitiveness Act of 2004 to extend the
Secretary's authority to make grants through fiscal year 2025.
Also, subsection (b) raises the mandatory funding authorization
to $100,000,000 for fiscal year 2026, from the Commodity Credit
Corporation, to carry out state assistance for specialty crops.
Subsection (c) of section 10107 amends section 7407(d)(1)
of the Farm Security and Rural Investment Act of 2002 to
authorize $10,000,000 in mandatory funding for fiscal years
2026 through 2031 to carry out organic production and market
data initiatives.
Subsection (d) of section 10107 amends section 2123(c)(4)
of the Organic Foods Production Act of 1990 to provide
$1,000,000 in mandatory funding through fiscal years 2024 and
2025 and $5,000,000 for fiscal year 2026, provided by the
Commodity Credit Corporation, to carry out the modernization
and improvement of international trade technology systems and
data collection funding.
Subsection (e) of section 10107 amends section
10606(d)(1)(C) of the Farm Security and Rural Investment Act of
2002 by extending mandatory funding from the Commodity Credit
Corporation through fiscal year 2031 to carry out the National
Organic Certification Cost-Share Program.
Subsection (f) of section 10107 amends section 10109(c)(1)
of the Agriculture Improvement Act of 2018 to provide mandatory
funding from the Commodity Credit Corporation for the Multiple
Crop and Pesticide Use Survey to be funded at--
$500,000 for fiscal year 2019, to remain available
until expended;
$100,000 for fiscal year 2024, to remain available
until expended; and
$5,000,000 for fiscal year 2026, to remain available
until expended.

Sec. 10108. Miscellaneous

Subsection (a) of section 10108 amends and extends section
10409A(d)(1) of the Animal Health Protection Act to provide
$30,000,000 in mandatory funding for each of the fiscal years
2023 through 2025, from the Commodity Credit Corporation, to
carry out animal disease prevention and management. Of the
$30,000,000 provided in funding, no less than $18,000,000
should be made available for each fiscal year to carry out the
National Animal Disease Preparedness and Response Program.
Additionally, subsection (a) provides $233,000,000 in
mandatory funding from the Commodity Credit Corporation for
each of the fiscal years 2026 through 2030, of which
$10,000,000 is allocated to National Animal Health Laboratory
Network, $70,000,000 is allocated to the National Animal
Disease Preparedness and Response Program, and $153,000,000 is
allocated to the National Animal Vaccine and Veterinary
Countermeasure Bank.
Subsection (a) also provides $75,000,000 in mandatory
funding from the Commodity Credit Corporation for fiscal year
2031 and each fiscal year thereafter to carry out these
programs, of which $45,000,000 is allocated to the National
Animal Disease Preparedness and Response Program.
Subsection (b) of section 10108 amends and extends section
209(c) of the Agriculture Marketing Act of 1946 to provide
$3,000,000 in mandatory funding, available until expended, for
fiscal year 2025 from the Commodity Credit Corporation to carry
out the Sheep Production and Marketing Grant Program.
Subsection (c) of section 10108 amends and extends section
12314 of the Agricultural Act of 2014 by directing the
Secretary to make annual payments through fiscal year 2031 from
the Pima Agriculture Cotton Trust Fund. Subsection (c) also
amends section 12315 of the Agriculture Act of 2014 by
extending all activities under this subsection to fiscal year
2031 to carry out wool research and promotion.
Additionally, subsection (c) of section 10108 amends
section 12605(d) of the Agriculture Improvement Act of 2018 to
extend mandatory funding, to remain available until expended
for each fiscal year to 2031, from the Commodity Credit
Corporation to carry out the Emergency Citrus Disease Research
and Development Trust Fund.

EXPLANATION OF PROVISIONS

TITLE II--COMMITTEE ON ARMED SERVICES

Sec. 20001--Enhancement of Department of Defense Resources for
Improving the Quality of Life for Military Personnel

This section provides over $7.3 billion in mandatory
funding and $1.24 billion in direct spending for the following
purposes: to renovate military barracks and unaccompanied
housing; to prevent shortages in the provision of healthcare
services under the Defense Health Program; to provide
supplemental payments of Basic Allowance Housing to military
personnel; to extend eligibility for Temporary Lodging Expense
Allowance from 14 to 21 days to cover out-of-pocket expenses
for servicemembers undergoing permanent change of station; to
expand educational opportunities and childcare fee assistance
for servicemembers; to expand professional licensure assistance
programs for military spouses; and to carry out additional
activities under the Defense Community Infrastructure Program.
This section also provides temporary authority for the military
services to enter into public-private partnerships for the
renovation of existing and construction of new unaccompanied
housing. CBO estimates this authority will increase direct
spending by $1.24 billion.

Sec. 20002--Enhancement of Department of Defense Resources for
Shipbuilding

This section provides $33.7 billion in mandatory funding
for the following purposes: to improve infrastructure and
expand capacity at private shipyards and throughout the
maritime industrial base supply chain; to construct new battle
force ships; and to develop and procure autonomous unmanned
surface and subsurface vessels.

Sec. 20003--Enhancement of Department of Defense Resources for
Integrated Air and Missile Defense

This section provides $24.7 billion in mandatory funding
for the following purposes: to develop and deploy new space and
terrestrial based capabilities to detect and interdict
missiles, including hypersonic missiles bound for the homeland
with kinetic and non-kinetic means; to accelerate the
deployment of ongoing missile defense systems, and to improve
all related infrastructure.

Sec. 20004--Enhancement of Department of Defense Resources for
Munitions and Supply Chain Resiliency

This section provides $20.4 billion in mandatory funding
for the following purposes: to develop and acquire additional
stocks of hypersonic, air-to-air, cruise, anti-ship, ballistic,
and anti-radiation missiles; to develop and acquire additional
stocks of torpedoes, mines, and underwater explosives; to
develop and acquire additional stocks of munitions, ammunition,
and one way attack autonomous systems; to improve
infrastructure and expand capacity in the munitions industrial
base; to expand domestic capacity to mine and refine rare earth
elements and critical minerals; and to develop and acquire
additional missile defense interceptors, counter UAS systems,
and other air defense systems. This section also provides
mandatory funds for loan and loan guarantees to develop
reliable sources of critical minerals.

Sec. 20005--Enhancement of Department of Defense Resources for Scaling
Low-Cost Weapons into Production

This section provides $13.5 billion in mandatory funding
for the following purposes: to expand the capacity of the small
UAS industrial base; to develop and deploy joint command and
control technologies; to attract commercial innovation for
defense capabilities; to expand joint prototyping and
experimentation; to accelerate integrations of commercial
innovation to support defense logistics; to expand programs to
scale commercial technologies for defense purposes; to scale
the development of low cost, attritable weapons systems; to
improve the test, AI, and autonomy ecosystem; to expand quantum
computing research; and to improve qualification activities and
technical data management to enhance competition in the defense
industrial base. This section also provides mandatory funds for
Office of Strategic Capital loans and loan guarantees.

Sec. 20006--Enhancement of Department of Defense Resources for
Improving the Efficiency and Cybersecurity of the Department of
Defense

This section provides $380 million in mandatory funding for
the following purposes: to replace antiquated business systems
and deploy automation and artificial intelligence systems to
accelerate the audit of Department financial statements; and to
improve the cybersecurity of Department information technology
systems.

Sec. 20007--Enhancement of Department of Defense Resources for Air
Superiority

This section provides $7.2 billion in mandatory funding for
the following purposes: to acquire additional and modernize
existing fighter, cargo, tanker and special purpose aircraft;
to prevent the retirement of certain fighter aircraft; and to
acquire next generation manned and unmanned aircraft.

Sec. 20008--Enhancement of Resources for Nuclear Forces

This section provides $12.9 billion in mandatory funding
for the following purposes: to accelerate the modernization of
the nuclear deterrent; to improve the readiness of existing
nuclear forces; and to improve the infrastructure and expand
the scientific and production capacity of the nuclear
enterprise.

Sec. 20009--Enhancement of Department of Defense Resources to Improve
Capabilities of United States Indo-Pacific Command

This section provides $11.1 billion in mandatory funding
for the following purposes: to improve military readiness
through additional campaigning and exercises; to improve
existing and build new infrastructure to support military
operations; to improve kinetic, non-kinetic, and ISR
capabilities; to expand offensive cyber operations; to resource
economic security operations; to enhance space superiority; and
to expand joint military training and provide additional
military support to the government of Taiwan.

Sec. 20010--Enhancement of Department of Defense Resources for
Improving the Readiness of the Armed Forces

This section provides $11.5 billion in mandatory funding
for the following purposes: to acquire spare parts to keep
ships, aircraft, and land systems mission capable; to modernize
and improve the infrastructure of military depots and
shipyards; to acquire additional capabilities for Special
Operation Forces; to improve readiness of Marine Corps and
National Guard units; and to acquire additional capabilities
for Army and Marine Corps forces.

Sec. 20011--Improving Department of Defense Border Support and
Counterdrug Missions

This section provides $5 billion in mandatory funding for
the deployment and operation of military personnel and assets
in support of Department of Homeland Security activities to the
secure the borders of the United States.

Sec. 20012--Enhancement of Military Intelligence Programs

This section provides $2 billion in mandatory funding to
improve certain military intelligence programs.

Sec. 20013--Department of Defense Oversight

This section provides $10 million in mandatory funding to
the Department of Defense Inspector General to audit funds
provided under this title. It also provides for the
transmission to the Department of a classified memorandum
regarding funds made available under this title for classified
programs.

Sec. 20014--Military Construction Projects Authorized

This section provides authorization to use military
construction funds provided under this title and requires the
military departments to submit an expenditure plan to Congress
for military construction projects funded under this title.

Sec. 20015--Plan Required

This section requires the Secretary of Defense to submit an
expenditure plan to Congress for funding provided under this
title. It also requires annual reports to Congress on the
expenditure of funds made available under this title.

Sec. 20016--Limitation on Availability of Funds

This section prohibits the outlay of funds provided under
this title beyond September 30, 2034.

TITLE III--COMMITTEE ON EDUCATION AND WORKFORCE

Section-by-Section

SUBTITLE A--STUDENT ELIGIBILITY

Sec. 30001. Student Eligibility

Student Eligibility. Streamlines the categories of
non-citizens that would be eligible to receive a grant, loan,
or work assistance under the Higher Education Act (HEA) to
include lawful permanent residents (LPR), certain nationals of
Cuba, certain nationals of Ukraine or Afghanistan, and
individuals that are part of a Compact of Free Association.

Sec. 30002. Amount of Need; Cost of Attendance; Median Cost of College

Amount of Need; Cost of Attendance; Median Cost of
College. Caps the total amount of federal student aid a student
can receive annually at the ``median cost of college,'' defined
as the median cost of attendance for students enrolled in the
same program of study nationally and calculated by the
Secretary using data from the previous award year.
Exemption of Certain Assets. Restores exemptions
of certain assets under the Free Application for Federal
Student Aid.

SUBTITLE B--LOAN LIMITS

Sec. 30011. Loan Limits

Termination of Authority to Make Certain Loans.
Terminates authority to make Grad PLUS loans and subsidized
loans for undergraduate students on or after July 1, 2026;
includes a three-year exception for students who were enrolled
in a program of study as of June 30, 2026, and had received
such loans for such program.
Unsubsidized Loans: Amends the maximum annual loan
limit for unsubsidized loans disbursed on or after July 1,
2026, to the median cost of students' program of study; amends
aggregate limits for such loans disbursed to students for an
undergraduate program ($50,000), graduate program ($100,000),
and professional program ($150,000).
Parent PLUS Loans: Requires undergraduate students
to exhaust their unsubsidized loans before parents can utilize
Parent PLUS to cover their remaining cost of attendance;
establishes an aggregate limit for Parent PLUS loans of $50,000
for parents on behalf of their dependent child; includes a
three-year exception for students who were enrolled in a
program of study as of June 30, 2026, and had received such
loans for such program.
Additional Reforms. Allows financial aid
administrators to reduce annual borrowing limits below the
statutory maximum as long as such limits are applied equally to
all students; requires federal student loans to be pro-rated
for students who are enrolled less than full-time.

SUBTITLE C--LOAN REPAYMENT

Sec. 30021. Loan Repayment

Income-Contingent Repayment; Transition Authority;
Limitation of Regulatory Authority. Terminates all repayment
plans authorized under income-contingent repayment (ICR);
requires the Secretary to transfer borrowers enrolled in an ICR
plan or an administrative forbearance associated with such
plans into the statutorily authorized income-based repayment
(IBR) plan; prohibits the Secretary from issuing or modifying
regulations with respect to IBR and the Repayment Assistance
Plan with the exception of interim final rules with respect to
transitioning borrowers to IBR, modifying IBR terms consistent
with the Amendments made under this section, and implementing
the Repayment Assistance Plan established under this section;
waives negotiated rulemaking with respect to transitioning
borrowers to IBR and modifying the terms of such plan.
Repayment Plans for Loans Before July 1, 2026.
Maintains all current repayment options for borrowers with
existing loans disbursed prior to July 1, 2026, with the
exception of ICR; amends the terms of IBR to require borrowers
to pay 15 percent of discretionary income, eliminates the
standard repayment cap and partial financial hardship
requirement, and requires borrowers to pay a maximum of 240 or
300 qualifying payments for undergraduate and graduate
borrowers, respectively; allows borrowers with excepted PLUS
loans who were enrolled in ICR to access IBR.
Repayment Plans for Loans After July 1, 2026.
Repeals all plans authorized under ICR for current and new
borrowers. Terminates existing repayment plans for loans
disbursed on or after July 1, 2026, and establishes the
following new standard repayment plan and Repayment Assistance
Plan for borrowers with such loans:
Standard Repayment Plan. Establishes a
standard repayment plan with fixed monthly payments and
repayment terms that range from 10 to 25 years based on
the amount borrowed.
Repayment Assistance Plan. Establishes a
new Repayment Assistance Plan with payments calculated
based on borrowers' total adjusted gross income (AGI),
ranging from 1 to 10 percent depending on a borrower's
income; includes a minimum monthly payment of $10;
offers balance assistance to borrowers making their
required on-time payments by waiving unpaid interest
and providing a matching payment-to-principal of up to
$50; allows borrowers currently in repayment to enroll
in such plan; includes a maximum repayment term equal
to 360 qualifying payments, which may include previous
payments made under ICR, IBR, and other qualifying
existing plans.

Sec. 30022. Deferment; Forbearance

Economic Hardship and Unemployment Deferments.
Terminates economic hardship and unemployment deferments for
loans disbursed on or after July 1, 2025.
Discretionary Forbearances. Amends the terms of
discretionary forbearances for loans disbursed on or after July
1, 2025, to prohibit use of such forbearances for more than
nine months during a 24-month period.
Medical and Dental Residency Deferment. Amends the
terms of medical and dental residency deferments for loans
disbursed on or after July 1, 2025, to allow for zero interest
accrual for up to four years.

Sec. 30023. Loan Rehabilitation

Loan Rehabilitation. Allows borrowers with
existing and new defaulted loans to rehabilitate their loans
twice instead of once allowing these borrowers a smoother
transition out of default and into repayment; requires payments
for rehabilitation to be no less than $10 for loans disbursed
on or after July 1, 2025.

Sec. 30024. Public Service Loan Forgiveness

Repayment Assistance Plan. Allows payments made
under the Repayment Assistance Plan to count as a qualifying
payment for purposes of Public Service Loan Forgiveness (PSLF).
Qualifying Jobs. Clarifies that payments made by
new borrowers on or after July 1, 2025, who are serving in a
medical or dental residency do not count as a qualifying
payment for purposes of PSLF.

Sec. 30025. Student Loan Servicing

Additional Mandatory Funds. Provides $500 million
in each of the fiscal years 2025 and 2026 to the Secretary for
costs associated with returning borrowers back into repayment
on their loans and to help with the costs of building the new
repayment plan.

SUBTITLE D--PELL GRANTS

Sec. 30031. Eligibility

Foreign Income. Requires foreign income exempt
from taxation or foreign income for which an individual
receives a foreign tax credit to be included in the AGI
calculation for purposes of calculating Pell Grant eligibility.
Ineligibility Due to High Student Aid Index.
Students with a student aid index that equals or exceeds twice
the amount of the maximum Pell Grant amount are rendered
ineligible for Pell, regardless of their AGI.
Definition of Full Time Enrollment. Defines full
time for purposes of the Pell Grant as expected to complete at
least 30 semester or trimester hours, or 45 quarter credit
hours (or the clock hour equivalent) in each academic year.
Ineligibility for Less Than Half Time Enrollment.
Requires students to be enrolled on at least a half-time basis
(expected to complete at least 15 semester or trimester hours)
in each academic year to be eligible to receive a Pell Grant.

Sec. 30032. Workforce Pell Grants

Workforce Pell Grant Program. Expands eligibility
for Pell Grants on or after July 1, 2026, to students enrolled
in short-term, high-quality, workforce aligned programs that
meet the requirements of this section; includes guardrails for
student outcomes including value-added earnings, completion
rates, and job placement rates; allows students enrolled in
programs operating outside of the accreditation system to be
eligible for such grants.

Sec. 30033. Pell Shortfall

Additional Funds. Provides $10.5 billion for
fiscal years 2026, 2027, and 2028 to reduce the funding
shortfall for the Pell Grant program.

SUBTITLE E--ACCOUNTABILITY

Sec. 30041. Agreements with Institutions

Agreements with Institutions. Creates skin-in-the-
game accountability for colleges and universities by amending
the terms of the Direct Loan program participation agreement to
require institutions to reimburse the Secretary for a
percentage of the non-repayment balance associated with loans
disbursed on or after July 1, 2027; calculates the
reimbursement percentage based on the total price the
institution charges students for a program of study and the
value-added earnings of students after they graduate or, in the
case of students who do not graduate, the completion rate of
the institution or program.
Penalties for Late or Missed Payments:
Establishes escalating penalties for late payments,
starting with requiring institutions to pay interest on
late payments and scaling up to loss of Title IV
eligibility.
Relief for Voluntary Program Closure:
Waives 50 percent of payments due for a given program
if an IHE voluntarily agrees to cease disbursement of
federal student loans for the program (or a
substantially similar program) for 10 years.
Reservation of Funds. Requires the
Secretary to reserve all reimbursements received from
institutions for the purpose of awarding PROMISE
Grants.

Sec. 30042. Campus-Based Aid Programs

PROMISE Grants. Establishes a ``PROMISE'' program
to provide performance-based grants to institutions.
Funding Formula. Provides funds to
institutions based on a formula that rewards colleges
for strong earnings outcomes, low tuition, and
enrolling and graduating low-income students; sets the
maximum amount an institution can receive annually at
$5,000 per federal student aid recipient.
Use of Funds. Provides flexibility to
use funds to meet the maximum price guarantee required
under the program, as well as other initiatives to
improve o college affordability, college access, and
student successes in ways that best suit the needs of
the institution and its students; requires institutions
to report and evaluate how funds are used and
disseminate best practices based on those evaluations.
Maximum Price Guarantee. Requires that,
as a condition of receiving PROMISE grants,
institutions must provide prospective students a
guaranteed maximum total price for a given program of
study based on income and financial need categories
established by the Secretary; requires such guarantee
to be for a minimum period of enrollment (up to six
years or the institution's median time to completion,
whichever is less).

SUBTITLE F--REGULATORY RELIEF

Sec. 30051. Regulatory Relief

90/10 Rule. Permanently repeals the 90/10 rule
which targeted one sector of higher education in favor of
creating a sector-neutral accountability plan.
Gainful Employment. Permanently repeals the
Gainful Employment rule which unfairly targeted one sector of
higher education.
Other Repeals. Repeals the Biden-Harris
administration's regulations pertaining to borrower defense to
repayment and closed school discharges.

SUBTITLE G--LIMITATION ON AUTHORITY

Sec. 30061. Limitation on Authority of the Secretary to Propose or
Issue Regulations and Executive Actions

Limits on Authority. Requires the Secretary to
confirm that any new regulations or executive actions issued
related to the student loan program will not increase costs to
the federal government. Prohibits any regulations from being
issued that cannot meet that threshold.

TITLE IV--ENERGY AND COMMERCE

Section-by-Section Explanation

SUBTITLE A--ENERGY

Section 41001. Rescissions relating to certain Inflation Reduction Act
programs

This section would rescind the unobligated balance of any
amounts made under the following sections of the Inflation
Reduction Act (IRA).
a. State-Based Energy Efficiency Training Grants--This
would rescind the unobligated balance of any remaining amounts
made under section 50123 of the Inflation Reduction Act, the
State-Based Energy Efficiency Training Grants. This program was
intended to provide training assistance and education for the
implementation of the IRA's Home Energy Whole-House Rebate
Program (Sec. 50121) or the High-Efficiency Electric Home
Rebate Program (Sec. 50122) for additional home energy
efficiency upgrades and retrofits.
b. Funding for Department of Energy Loan Program Office--
This would rescind the unobligated balance of any amounts made
under section 50141 of the Inflation Reduction Act, Funding for
Department of Energy Loan Program Office. This provided funding
to cover the cost of credit subsidies associated with loan
guarantees made under Section 1703 of the Energy Policy Act of
2005, which authorized loans for unproven technologies.
c. Advanced Technology Vehicle Manufacturing--This would
rescind the unobligated balance of any amounts made under
section 50142 of the Inflation Reduction Act, Advanced
Technology Vehicle Manufacturing. This funding covered the cost
of credit subsidies to provide loans for vehicle and vehicle
supply chain manufacturing facilities.
d. Energy Infrastructure Reinvestment Financing--This would
rescind the unobligated the balance of any amounts made under
section 50144 of the Inflation Reduction Act, Energy
Infrastructure Reinvestment Financing. The IRA established this
program to provide funds to cover the cost of loan guarantees
under another new loan program known as the Energy
Infrastructure Reinvestment Financing program. Unlike projects
in the traditional Department of Energy (DOE) loan programs
focused on new, innovative technologies, this program
authorized loans for retooling, repowering, or replacing energy
infrastructure that has ceased operations.
e. Tribal Energy Loan Guarantee Program--This would rescind
the unobligated balance of any amounts that were supposed to be
made available under section 50145 of the IRA for the Tribal
Energy Loan Guarantee Program. These funds covered credit
subsidies under the Tribal Energy Loan Guarantee Program, which
the Energy Policy Act of 1992 authorized.
f. Transmission Facility Financing--This would rescind the
unobligated balance of any amounts made under section 50151 of
the Inflation Reduction Act, Transmission Facility Financing.
This program was intended to pay direct loans to non-federal
borrowers for transmission facilities designated under Section
216(a) of the Federal Power Act, in a National Interest
Electric Transmission Corridor (NIETC). While a small number of
NIETCs were designated, no loans were awarded from this
program.
g. Grants to Facilitate the Siting of Interstate
Electricity Transmission Lines--This would rescind the
unobligated balance of any amounts made under section 50152 of
the Inflation Reduction Act, Grants to Facilitate the Siting of
Interstate Electricity Transmission Lines. This program
provides grants to transmission siting authorities (state,
local and tribal governments) to facilitate siting and
permitting for certain interstate and offshore electricity
transmission lines.
h. Interregional and Offshore Wind Electricity Transmission
Planning, Modeling, and Analysis--This would rescind the
unobligated balance of any amounts made under section 50153 of
the Inflation Reduction Act, Interregional and Offshore Wind
Electricity Transmission Planning, Modeling, and Analysis. The
program intended to cover expenses associated with
interregional and offshore wind electricity transmission
planning, modeling, and analysis.
i. Advanced Industrial Facilities Deployment Program--This
would rescind the unobligated balance of any amounts made under
section 50161 of the Inflation Reduction Act, Advanced
Industrial Facilities Deployment Program. This program was
meant to provide financial assistance--grants, direct loans,
rebates, or cooperative agreements--to industrial or
manufacturing facilities to subsidize technology installations
with the stated intent of reducing greenhouse gas emissions.

Section 41002. FERC certificates and fees for certain energy
infrastructure at international boundaries of the United States

Notwithstanding any requirements or statutory obligations
under federal and state law, including siting, environmental
and safety reviews, and permitting, Section 41002 requires an
application for a certificate of crossing for cross-border
energy infrastructure to include a $50,000 payment, and directs
the Federal Electricity Regulatory Commission to issue the
certificate. No person may construct, connect, operate, or
maintain a cross-border segment for the import or export of
designated energy products, or the transmission of electricity,
without first obtaining the certificate of crossing. This fee
structure does not apply to cross-border segments that were
previously approved by a Presidential permit.

Section 41003. Natural gas exports and imports

Under Section 41003, applications to the Secretary of
Energy to export natural gas from the United States to a non-
free trade agreement country shall include a $1,000,000 user
fee paid by the applicant. Upon receipt of the application and
collection of the fee, the Secretary of Energy shall deem the
application in the public interest. This Section does not alter
or impact the applicant's existing obligations and requirements
under the Natural Gas Act or the Federal Energy Regulatory
Commission's authorities.

Section 41004. Funding for Department of Energy loan guarantee expenses

Section 41004 appropriates $5,000,000 to the Department of
Energy to remain available for 5 years to carry out section 116
of the Alaska Natural Gas Pipeline Act (15 U.S.C. 720n).

Section 41005. Expedited Permitting

Section 41005 allows applicants for an authorization under
Section 3, or a certificate of public convenience and necessity
under section 7 of the Natural Gas Act, to participate
voluntarily in an expedited permitting process upon the payment
of $10,000,000 or one percent of the project's projected
capital cost.
Within one year of payment of the fee, each Federal, State,
interstate, or Tribal agency with relevant authorities shall
review and approve Federal authorizations, subject to any
conditions determined necessary to comply with the underlying
statute by the agency. For States, this includes their
authorities to impose conditions for any certifying authorities
delegated to States by federal law. Following such approval,
the Federal Electricity Regulatory Commission (FERC) shall
review the application and approve the application subject to
any conditions determined necessary by FERC.
The Commission may extend this timeline by a period of 6
months if granted consent by the applicant. Should the
authorization not be approved under the applicable deadline, it
shall be deemed approved, notwithstanding any procedural
requirements of the underlying law.
No court shall have jurisdiction to review a claim under
this section except for a claim brought by the applicant or a
person who has suffered, or likely and imminently will suffer,
direct and irreparable economic harm from the approval. An
organization may only bring a claim on behalf of one or more of
its members if each member of the organization or association
has suffered, or likely and imminently will suffer, harm.
Courts shall apply clear and convincing evidence as the
standard of review for such claims. The United States Court of
Appeals for the D.C. Circuit shall have original and exclusive
jurisdiction over any claim alleging the invalidity of the
process or that the federal authorization is beyond the scope
of authority granted by the federal law to such agency.

Section 41006. Carbon dioxide, hydrogen, and petroleum pipeline
permitting

Pursuant to Section 41006, applicants for carbon dioxide,
oil, or hydrogen pipeline projects, as defined by section
60102(i) of title 49 of the U.S. Code, may apply for a license
authorizing the project to be considered in the same manner,
and in accordance with the requirements of, an application for
a certificate of public convenience and necessity under section
7 of the Natural Gas Act, including a fee of $10,000,000.

Section 41007. De-Risking Compensation Program

Section 41007 would appropriate $10 million, to remain
available through September 30, 2034, for administrative costs
for the Secretary of Energy to establish a De-Risking
Compensation Program at the Department of Energy. The program
would provide compensation to sponsors of federally permitted
energy projects that enroll in the program for unrecoverable
capital losses caused by subsequent federal actions that revoke
permits or approvals, or cancel, delay, or render the project
unviable. The program would be available to applicants who
invest in energy projects relating to coal, critical minerals,
oil, natural gas, or nuclear energy and are valued at no less
than $30 million. The sponsors would pay 5 percent of their
projected share of capital contribution to the project and an
annual premium into a Treasury Department fund. Upon
demonstration of unrecoverable losses due to subsequent federal
actions that caused the losses, the Secretary of Energy would
compensate the project sponsor for up to the full amount of the
loss from the available funds.

Section 41008. Strategic Petroleum Reserve

Section 41008 appropriates $2,000,000,000 to the Department
of Energy for fiscal year 2025 for activities related to the
Strategic Petroleum Reserve. Of this amount, $218,000,000 is
appropriated for repairs to the caverns, and $1,321,000,000 is
appropriated for the acquisition of petroleum products for
storage in the Strategic Petroleum Reserves. The remaining
funding is appropriated to the Department of Energy to buy back
the sales mandates by Section 20003 of Public Law 115-97.

Section 41009. Rescissions of previously appropriated unobligated funds

Section 41009 would rescind the previously appropriated
unobligated balances from the base appropriations for the
following programs; Office of Inspector General, Office of
Clean Energy Demonstrations, Office for Human Capital, Federal
Energy Management Programs, State and Community Energy
Programs, Office of Minority Economic Impact, Office of Energy
Efficiency and Renewable Energy, Office of General Counsel,
Office of Indian Energy Policy and Programs, Office of
Management, Office of the Secretary, Office of Public Affairs,
and the Office of Policy at the Department of Energy. These
rescissions do not include funds appropriated under the
Inflation Reduction Act, Infrastructure Investment and Jobs
Act, and any funds from emergency appropriations. Amounts
rescinded in this section do not include current, FY 2025, base
year appropriations.

SUBTITLE B--ENVIRONMENT

PART 1--REPEALS AND RESCISSIONS

Section 42101. Repeal and rescission relating to clean heavy-duty
vehicles

This section repeals section 132 of the Clean Air Act and
rescinds any unobligated balance made available under section
132. This portion of the IRA established a program to grant
awards for purchasing electric vehicles.

Section 42102. Repeal and rescission relating to grants to reduce air
pollution at ports

This section repeals section 133 of the Clean Air Act and
rescinds any unobligated balance made available under that
section. This section of the IRA created a competitive grant
and rebate program for the purchase of zero-emission port
equipment or technology.

Section 42103. Repeal and rescission relating to grants to the
Greenhouse Gas Reduction Fund

This section repeals section 134 of the Clean Air Act and
rescinds any unobligated balance made available under that
section. This section of the IRA appropriated funds to the
Environmental Protection Agency (EPA) to establish grant
programs commonly referred to as ``Green Banks.''

Section 42104. Repeal and rescission relating to diesel emissions
reductions

This section repeals section 60104 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This portion of the IRA appropriated additional funds
to the Diesel Emissions Reduction Act for use only in certain
communities.

Section 42105. Repeal and rescission relating to funding to address air
pollution

This section repeals section 60105 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This provision appropriated additional funds for air
monitoring.

Section 42106. Repeal and rescission relating to funding to address air
pollution at schools

This section repeals section 60106 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This section of the IRA provides grants for monitoring
and reducing air pollution in schools, technical assistance,
and design, construction and renovation standards for school
buildings.

Section 42107. Repeal and rescission relating to low emissions
electricity program

This section repeals section 135 of the Clean Air Act and
rescinds any unobligated balance made available under that
section. This portion of the IRA appropriated money for
consumer related education, technical assistance, industry
related outreach, intergovernmental outreach related to the
reduction of emissions from domestic electrical generation.

Section 42108. Repeal and rescission relating to funding for Section
211(o) of the Clean Air Act

This section repeals section 60108 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This provision of the IRA does not fund the EPA's
administration of the program. Rather, the funding is for data
collection of greenhouse gas emissions and testing the
environmental impact of biofuels.

Section 42109. Repeal and rescission relating to funding for
implementation of the American Innovation and Manufacturing Act

This section repeals section 60109 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This section of the IRA does not amend or alter the
American Innovation and Manufacturing (AIM) Act, it merely
provides funds to assist with AIM Act implementation and
compliance.

Section 42110. Repeal and rescission relating to funding for
enforcement technology and public information

This section repeals section 60110 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This provision of the IRA provides funding to update
software used by EPA and states to track environmental
compliance actions.

Section 42111. Repeal and rescission relating to greenhouse gas
corporate reporting

This section repeals section 60111 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This provision of the IRA provided funding for
enhanced standardization and transparency for corporate climate
action commitments.

Section 42112. Repeal and rescission relating to environmental product
declaration assistance

This section repeals section 60112 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This section of the IRA provided funding to create
environmental product declarations advertising the
environmental impact of products.

Section 42113. Repeal of funding for Methane Emissions and Waste
Reduction Incentive Program for petroleum and natural gas
systems

This section repeals subsections (a) and (b) of section 136
of the Clean Air Act and rescinds any unobligated balance made
available under that section. These repeals and amendments
extend by 10 years the date by which the charge associated with
the Methane Emissions Reduction Program shall begin to be
imposed and collected.

Section 42114. Repeal and rescission relating to greenhouse gas air
pollution plans and implementation grants

This section repeals section 137 of the Clean Air Act and
rescinds any unobligated balance made available under that
section. This section of the IRA establishes a slush fund for
states, local governments and Tribes to use for ``Climate
Change Action Plans'' and environmental justice initiatives.

Section 42115. Repeal and rescission relating to Environmental
Protection Agency efficient, accurate, and timely reviews

This section repeals section 60115 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This section of the IRA funds the hiring and training
new staff and conflict with EPA's initiatives to create a more
effective and efficient workforce, along with President Trump's
executive orders to reduce government spending and waste. The
funding does not address the root causes of permitting delays
and conflicts with EPA's current directives.

Section 42116. Repeal and rescission relating to low-embodied carbon
labeling for construction materials

This section repeals section 60116 of Public Law 117-169
and rescinds any unobligated balance made available under that
section. This provision of the IRA provided funding to
administer a program that would identify and label construction
materials and products with low greenhouse gas emissions life
cycles.

Section 42117. Repeal and rescission relating to environmental and
climate justice block grants

This section repeals section 138 of the Clean Air Act and
rescinds any unobligated balance made available under that
section. This section of the IRA funds programs designated as
environmental justice programs.

PART 2--REPEAL OF EPA RULE RELATING TO MULTI-POLLUTANT EMISSION
STANDARDS

Section 42201. Repeal of EPA rule relating to multi-pollutant emissions
standards for light- and medium-duty vehicles

This section repeals the final rule issued by the
Environmental Protection Agency relating to ``Multi-Pollutant
Emissions Standards for Model Years 2027 and Later Light-Duty
and Medium-Duty Vehicles.''

PART 3--REPEAL OF NHTSA RULE RELATING TO CAFE STANDARDS

Section 42301. Repeal of NHTSA rule relating to CAFE standards for
passenger cars and light trucks

This section repeals the final rule issued by the National
Highway Traffic Safety Administration relating to ``Corporate
Average Fuel Economy Standards for Passenger Cars and Light
Trucks for Model Years 2027 and Beyond and Fuel Efficiency
Standards for Heavy-Duty Pickup Trucks and Vans for Model Years
2030 and Beyond.''

SUBTITLE C--COMMUNICATIONS

PART 1--SPECTRUM AUCTIONS

Section 43101. Identification and auction of spectrum

Subsection (a) would require the National
Telecommunications and Information Administration (NTIA) and
the Federal Communications Commission (FCC), not later than 2
years after enactment of this Act, to identify at least 600
megahertz (MHz) of commercial or federal spectrum in the
covered band to be auctioned by 2034. It would also require the
President, acting through the Assistant Secretary for
Communications and Information, to withdraw or modify the
assignments to Federal Government stations of spectrum
identified, and notify the Commission not later than 30 days
after completing any necessary withdrawals or modifications. It
includes a rule of construction to ensure that nothing in this
section changes the respective authorities of the NTIA or the
FCC with respect to spectrum allocated for Federal use, non-
Federal use, or shared Federal and non-Federal use.
Subsection (b) would require the FCC to auction the
spectrum identified in subsection (a) on an exclusive, licensed
basis for mobile broadband services, fixed broadband services,
mobile and fixed broadband services, or a combination thereof.
Specifically, not later than 3 years after the data of
enactment, the FCC would be required to auction at least 200
MHz of the identified spectrum under subsection (a), and not
later than 6 years after the date of enactment, auction the
remaining spectrum identified under subsection (a).
Subsection (c) would require auction proceeds to cover 110
percent of federal relocation or sharing costs as required
under section 309(j)(16)(B) of the Communications Act of 1934.
Subsection (d) would reauthorize the FCC's spectrum auction
authority through September 30, 2034.
Subsection (e) defines key terms. Specifically, it defines
the ``covered band'' as the band of frequencies between 1.3
gigahertz (GHz) and 10 GHz, inclusive, excluding the band of
frequencies between 3.1 GHz and 3.45 GHz and the band of
frequencies between 5.925 GHz and 7.125 GHz.

PART 2--ARTIFICIAL INTELLIGENCE AND INFORMATION TECHNOLOGY
MODERNIZATION

Section 43201. Artificial intelligence and information technology
modernization initiative

Subsection (a) would appropriate $500,000,000 to the
Department of Commerce for fiscal year 2025, to remain
available through September 30, 2035, for the purpose of
modernizing and securing federal information technology systems
through the deployment of commercial artificial intelligence,
automation technologies, and the replacement of antiquated
business systems.
Subsection (b) states that the Secretary of Commerce shall
use these funds to support the replacement and modernization of
legacy business systems with state-of-the-art commercial
artificial intelligence systems and automated decision systems,
the adoption of artificial intelligence models that increase
operational efficiency and service delivery, and improve the
cybersecurity posture of Federal information technology systems
through modernized architecture, automated threat detection,
and integrated artificial intelligence solutions.
Subsection (c) states that no state or political
subdivision may enforce any law or regulation regulating
artificial intelligence models, artificial intelligence
systems, or automated decision systems during the 10-year
period beginning on the date of the enactment of this Act.
Subsection (d) provides definitions for key terms used in
the Act, including ``artificial intelligence'', ``artificial
intelligence model'', ``artificial intelligence system'', and
``automated decision system''.

SUBTITLE D--HEALTH

PART 1--MEDICAID

Subpart A--Reducing Fraud and Improving Enrollment Processes

Section 44101. Moratorium on implementation of rule relating to
eligibility and enrollment in Medicare Savings Programs

This section requires the Department of Health and Human
Services (HHS) to delay implementation, administration, or
enforcement of the final rule titled ``Streamlining Medicaid;
Medicare Savings Program Eligibility Determination and
Enrollment'' until January 1, 2035.

Section 44102. Moratorium on implementation of rule relating to
eligibility and enrollment for Medicaid, CHIP, and the Basic
Health Program

This section requires HHS to delay implementation,
administration, or enforcement of the final rule titled
``Medicaid Program; Streamlining the Medicaid, Children's
Health Insurance Program, and Basic Health Program Application,
Eligibility Determination, Enrollment, and Renewal Processes''
until January 1, 2035.

Section 44103. Ensuring appropriate address verification under the
Medicaid and CHIP programs

This section requires states to establish processes to
regularly obtain beneficiary address information from reliable
data sources, including by requiring state Medicaid programs to
collect address information provided by beneficiaries to
managed care entities (where applicable). In addition, this
section requires HHS to establish a system to prevent
individuals from being simultaneously enrolled in multiple
State Medicaid programs by no later than October 1, 2029.
States would be required to submit to the system the Social
Security Number of the individual enrolled under the State plan
to identify when Social Security Numbers for individuals
enrolled in Medicaid are identified concurrently in two or more
States at the same time.

Section 44104. Modifying certain state requirements for ensuring
deceased individuals do not remain enrolled

This section requires state Medicaid programs to check the
Social Security Administration's Death Master File on at least
a quarterly basis to determine whether Medicaid enrollees are
deceased and to disenroll individuals who are determined to be
deceased from Medicaid coverage.

Section 44105. Medicaid provider screening requirements

This section requires states to conduct monthly checks of
databases or similar systems to determine whether HHS or
another state has already terminated a provider or supplier
from participating in Medicaid and to also disenroll them from
the state's Medicaid program.

Section 44106. Additional Medicaid provider screening requirements

This section codifies the requirement that state Medicaid
programs check, as part of the provider enrollment and re-
enrollment process and on a quarterly basis thereafter, the
Social Security Administration's Death Master File to determine
whether providers are deceased and enrolled in the state's
Medicaid program.

Section 44107. Removing good faith waiver for payment reduction related
to certain erroneous excess payments under Medicaid

This section requires HHS to reduce federal financial
participation (FFP) to States for errors identified through the
ratio of a State's erroneous excess payments for medical
assistance, by the Office of the Inspector General, or by the
Secretary are directly attributable to payments to ineligible
individuals or for ineligible services.

Section 44108. Increasing frequency of eligibility redeterminations for
certain individuals

This section requires States to conduct eligibility
determinations for Expansion population adults every six
months. Current law currently requires such determinations to
occur on every twelve months.

Section 44109. Revising home equity limit for determining eligibility
for long-term care services under the Medicaid program

This section establishes a ceiling of $1,000,000 for
permissible home equity values for individuals when determining
allowable assets for Medicaid beneficiaries that are eligible
for long-term care services. This section also prohibits the
use of asset disregards from being applied to waive home equity
limits.

Section 44110. Prohibiting federal financial participation under
Medicaid and CHIP for individuals without verified citizenship,
nationality, or satisfactory immigration status

This section prohibits FFP in Medicaid for individuals
whose citizenship, nationality, or immigration status has not
been verified, including during reasonable opportunity periods
when an individual has not yet verified citizenship,
nationality, or immigration status. Current law permits states
to enroll individuals in coverage immediately and then provide
90-day reasonable opportunities that allow individuals to
immediately begin receiving coverage and then wait up to 90
days before verifying citizenship or immigration status, all
while receiving FFP during this period. This policy permits
states, at the state's option, to provide coverage during a
reasonable opportunity period in which an individual may not
yet have provided evidence of citizenship, nationality, or
immigration status, so long as the state does not request FFP
until citizenship, nationality, or immigration status have been
verified.

Section 44111. Reducing expansion FMAP for certain states providing
payments for health care furnished to certain individuals

This section reduces by ten percent the Federal Medical
Assistance Percentage (FMAP) for Medicaid Expansion States who
use their Medicaid infrastructure to provide health care
coverage for illegal immigrants under Medicaid or another
state-based program.

Subpart B--Preventing Wasteful Spending

Section 44121. Moratorium on implementation of rule relating to
staffing standards for long-term care facilities under the
Medicare and Medicaid programs

This section requires HHS to delay implementation,
administration, or enforcement of the final rule titled
``Medicare and Medicaid Programs; Minimum Staffing Standards
for Long-Term Care Facilities and Medicaid Institutional
Payment Transparency Reporting'' until January 1, 2035.

Section 44122. Modifying retroactive coverage under the Medicaid and
CHIP programs

This section limits retroactive coverage in Medicaid to one
month prior to an individual's application date. Current law
provides retroactive coverage for up to three months before an
individual's application date.

Section 44123. Ensuring accurate payments to pharmacies under Medicaid

This section requires participation by retail and
applicable non-retail pharmacies in the National Average Drug
Acquisition Cost (NADAC) survey. The NADAC survey measures
pharmacy acquisition costs and is often used in the Medicaid
program to inform reimbursement to pharmacies.

Section 44124. Preventing the use of abusive spread pricing in Medicaid

This section bans ``spread pricing'' in the Medicaid
program, which occurs when pharmacy benefit managers retain a
portion of the amount paid to them (a ``spread'') for
prescription drugs.

Section 44125. Prohibiting federal Medicaid and CHIP funding for gender
transition procedures for minors

This section prohibits FFP for specified gender transition
procedures to individuals under the age of 18.

Section 44126. Federal payments to prohibited entities

This section prohibits Medicaid funds to be paid to
providers that are nonprofit organizations, that are essential
community providers that are primarily engaged in family
planning services or reproductive services, provide for
abortions other than for Hyde Amendment exceptions, and which
received $1,000,000 or more (to either the provider or the
provider's affiliates) in payments from Medicaid payments in
2024.

Subpart C--Stopping Abusive Financing Practices

Section 44131. Sunsetting eligibility for increased FMAP for new
expansion states

This section sunsets the temporary five percent enhanced
FMAP afforded to states under the American Rescue Plan Act that
opt to expand Medicaid. This provision would apply
prospectively, not affecting states currently receiving an
enhanced federal match under this authority.

Section 44132. Moratorium on new or increased provider taxes

This section freezes, at current rates, states' provider
taxes in effect as of the date of enactment of this legislation
and prohibits states from establishing new provider taxes.

Section 44133. Revising the payment limit for certain state directed
payments

This section directs HHS to revise current regulations to
limit state directed payments for services furnished on or
after the enactment of this legislation from exceeding the
total published Medicare payment rate. This section would not
affect total payment rates for state directed payments approved
prior to this legislation's enactment.

Section 44134. Requirements regarding waiver of uniform tax requirement
for Medicaid provider tax

This section modifies the criteria HHS must consider when
determining whether certain health care-related taxes are
generally redistributive. Under this section, a tax would not
be considered generally redistributive if, within a permissible
class, the tax rate imposed on the taxpayer or tax rate group
explicitly defined by its relatively lower volume or percentage
of Medicaid taxable units is lower than the tax rate imposed on
any other taxpayer or tax rate group explicitly defined by its
relatively higher volume or percentage of Medicaid taxable
units. The tax would also not be considered generally
redistributive if, within a permissible class, the tax rate
imposed on any taxpayer or tax rate group based upon its
Medicaid taxable units is higher than the tax rate imposed on
any taxpayer or tax rate group based upon its non-Medicaid
taxable unit.
If a State has a health care-related tax waiver that meets
at least one of these criteria as of the date of enactment of
this legislation, the waiver must be modified to comply with
these requirements. This section provides a transition period
for non-compliant programs, after which a State whose health
care-related taxes do not adhere to all federal requirements
would be penalized by the sum of those revenues received by
State.

Section 44135. Requiring budget neutrality for Medicaid demonstration
projects under section 1115

This section provides budget neutrality requirements for
demonstration projects under section 1115 of the Social
Security Act. HHS would be required to certify that the total
expenditures for FFP do not exceed what would otherwise have
been spent under Title XIX absent the demonstration project.
HHS must also develop methodologies for applying savings
generated under a project as allowable costs to be spent in a
project's extension.

Subpart D--Increasing Personal Accountability

Section 44141. Requirement for states to establish Medicaid community
engagement requirements for certain individuals

This section requires states to establish community
engagement requirements for able-bodied adults without
dependents. An individual can meet the community engagement
requirements during a month by working at least 80 hours,
completing at least 80 hours of community service,
participating in a work program for at least 80 hours,
enrolling in an educational program for at least 80 hours, or a
combination of these activities for at least 80 hours.
The requirements of this section would not apply to the
following individuals: pregnant women, individuals under the
age of 19 or over the age of 64, foster youth and former foster
youth under the age of 26, members of a Tribes, individuals who
are considered medically frail (which includes, but is not
limited to, individuals who are blind or disabled, who have a
chronic substance use disorder, who have a serious and complex
medical condition, or who have a condition, as defined by the
State and approved by the Secretary, as meeting the definition
of medically frail), individuals who are already in compliance
with the work requirements under the Temporary Assistance for
Needy Families (TANF) program or Supplemental Nutrition
Assistance Program (SNAP), individuals who are a parent or
caregiver of a dependent child or an individual with a
disability, or are incarcerated or recently released from
incarceration within the past 90 days. This section also
provides short-term hardship waivers for natural disasters and
for counties where the unemployment rate is greater than eight
percent or greater than 150 percent of the national average.
Compliance with community engagement requirements would be
verified by states no less frequently than for the month
preceding an individual's enrollment in Medicaid and in a month
preceding the individual's eligibility redetermination and
verified as part of an individual's overall eligibility
determination or redetermination. States would be required to
provide regular, advanced notice and outreach to make
individuals aware of the requirements, would be required to
streamline and simplify processes to verify compliance to
reduce burdens on individuals, and to establish due process
procedures for individuals before denying coverage or removing
individuals from coverage.

Section 44142. Modifying cost sharing requirements for certain
expansion individuals under the Medicaid program

This section requires states to impose cost sharing on
Medicaid Expansion adults with incomes over 100 percent of the
federal poverty level (FPL). This cost-sharing may not exceed
$35 per service--rather than the current $100 per service
limit. Cost sharing may not exceed five percent of the
individual's income, which is the current out-of-pocket limit
for Medicaid beneficiaries. This section would not permit cost-
sharing on primary care, prenatal care, pediatric care, or
emergency room care (except for non-emergency care provided in
an emergency room).

PART 2--AFFORDABLE CARE ACT

Section 44201. Addressing waste, fraud, and abuse in the ACA exchanges

This section would institute eligibility and income
verification processes for Patient Protection and Affordable
Care Act (ACA) enrollees. In addition, it would roll back
income-based special enrollment periods in the federally-
facilitated and state ACA exchanges. This section would also
make technical changes to health plans offered via the ACA
exchanges. It would institute ACA reenrollment guardrails for
enrollees in zero-dollar premium health plans. Additionally,
this section would prohibit gender transition procedures from
being included as an essential health benefit (EHB), and it
would amend the definition of ``lawfully present'' for the
purposes of qualified health plan enrollment. This section
would also permit issuers to require enrollees to satisfy debt
for past-due premiums as a prerequisite for effectuating new
health coverage. The provisions within this section would take
effect for plan years beginning on or after January 1, 2026.

PART 3--IMPROVING AMERICANS' ACCESS TO CARE

Section 44301. Expanding and clarifying the exclusion for orphan drugs
under the drug price negotiation program

This section makes technical corrections to current law by
permitting product sponsors to have one or more orphan drug
indication in order to be exempt from the Drug Price
Negotiation Program in statute. Current law limits exemptions
from the Drug Price Negotiation Program to one rare disease
indication. This section also revises the start of the timeline
in which a manufacturer would be eligible for negotiation until
an orphan drug receives its first non-orphan indication.

Section 44302. Streamlined enrollment process for eligible out-of-state
providers under Medicaid and CHIP

For purposes of improving access to necessary out-of-state
care for children enrolled in Medicaid and the Children's
Health Insurance Program (CHIP), this section requires states
to establish a process through which qualifying pediatric out-
of-state providers may enroll as participating providers
without undergoing additional screening requirements.

Section 44303. Delaying DSH reductions

This section delays the Medicaid Disproportionate Share
Hospital (DSH) reductions, currently $8 billion reductions per
year that are set to take effect for fiscal years 2026 through
2028, to instead take effect for fiscal years 2029 through
2031. This section also extends funding for Tennessee's DSH
program, which is set to expire at the end of this fiscal year,
through fiscal year 2028.

Section 44304. Modifying update to the conversion factor under the
physician fee schedule under the Medicare program

This section amends current law by replacing the split
physician fee schedule conversion factor set to take effect on
January 1, 2026, with a new single conversion factor based on a
percentage of medical inflation, or the Medicare Economic Index
(MEI).

Section 44305. Modernizing and ensuring PBM accountability

This section requires Pharmacy Benefit Managers (PBMs) in
Medicare Part D to transparently share information relating to
business practices with Medicare Part D Prescription Drug Plan
Sponsors, including information relating to formulary decisions
and prescription drug coverage that benefits affiliated
pharmacies. The policy also prohibits PBM compensation based on
a drug's list price, limiting compensation to fair market bona-
fide service fees. Lastly, the legislation requires the Centers
for Medicare and Medicaid Services to define ``reasonable and
relevant'' contracting terms for the purposes of enforcing
Medicare Part D's ``any willing pharmacy'' requirements.

TITLE V--COMMITTEE ON FINANCIAL SERVICES

Section-by-Section Analysis of the Legislation

Section 50001. Green and Resilient Retrofit Program for Multifamily
Family Housing

Section 50001 rescinds the unobligated balance of amounts
remaining under section 300002(a) of the Inflation Reduction
Act.

Section 50002. Public Company Accounting Oversight Board

Section 50002 eliminates the Public Company Accounting
Oversight Boards (PCAOB) authority to independently collect and
spend accounting support fees and instead directs that such
fees be remitted to the U.S. Treasury. The Securities and
Exchange Commission (SEC) would continue these responsibilities
and further fee collection would be discontinued.

Section 50003. Bureau of Consumer Financial Protection

Section 50003 modifies the Consumer Financial Protection
Boards authority to draw funds from the Federal Reserve to a
maximum of 5 percent of the Federal Reserves total operating
expenses for fiscal year 2009 for FY 2025 and adjusting it for
inflation thereafter.
This section also restricts the Consumer Financial
Protection Board from holding an unobligated balance of greater
than 5 percent of the revised transfer amount from the Federal
Reserve and it requires any funds exceeding that percentage be
transferred to the general fund of the U.S. Treasury.

Section 50004. Consumer Financial Civil Penalty Fund

Section 50004 requires the Consumer Financial Protection
Bureau to return to the general fund of the U.S. Treasury any
civil penalties remaining in the Consumer Financial Civil
Penalty Fund after payment to direct victims.
This section also removes the use of the Consumer Financial
Civil Penalty Fund for consumer education and financial
literacy.

Section 50005. Financial Research Fund

Section 50005 caps assessments collected by the Office of
Financial Research, limiting them to the average actual
budgetary expenses of the Financial Stability Oversight Council
over the preceding three fiscal years and requires excess funds
to be transferred to the general fund of the U.S. Treasury.
This section also prohibits the Office of Financial
Research from collecting assessments that would cause the
Financial Research Fund to exceed this cap.

TITLE VI--COMMITTEE ON HOMELAND SECURITY

Section-by-Section Analysis of the Legislation

Section 60001. Border Barrier System Construction, Invasive Species,
and Border Security Facilities Improvements

This section appropriates $46,500,000,000 to the
Commissioner of U.S. Customs and Border Protection (CBP) for
construction, installation, or improvements of primary,
waterborne, and secondary barriers, as well as technology
upgrades such as, but not limited to, lighting, surveillance
systems, smart access roads, and fiber optic cables to support
enhanced communication and situational awareness across the
border.
For nearly three decades, the use of physical barriers has
been a core component of CBPs comprehensive border security
strategy. Since the initial construction of border barriers in
the San Diego Sector in 1991, U.S. Border Patrol agents have
consistently advocated for barrier infrastructure, due to its
proven effectiveness in enhancing domain awareness and agent
safety.
The Committee believes that physical barriers serve as a
critical force-multiplier by delaying illegal entries and
giving frontline agents valuable time to detect, assess, and
respond to migration events.
This section also appropriates $50,000,000 to CBP for the
eradication and removal of carrizo cane and salt cedar plants.
These invasive, dense, and fast-growing plants pose a
significant tactical challenge for Border Patrol agents along
the Rio Grande River as they can create major blind spots,
severely limiting agents ability to detect and respond to
illegal crossings. The Committee believes that by eradication
of these invasive species along key sections of the Rio Grande
River will help improve and enhance visibility and ensure agent
safety by restoring line-of-sight capabilities and increasing
early detection of illicit activity.
Finally, this section will appropriate $5,000,000,000 for
CBP to lease, acquire, upgrade, and/or expand U.S. Border
Patrol, Air and Marine Operations, and Office of Field
Operations facilities. CBP personnel operate on the front lines
every day, yet many are forced to work out of facilities that
are overcrowded, structurally inadequate, and technologically
outdated. The Committee believes that investing in CBPs
physical infrastructure is not just about modernization, its
about mission effectiveness and safety.

Section 60002. U.S. Customs and Border Protection Personnel and Fleet
Vehicles

This section appropriates $4,100,000,000 to CBP for the
hiring and training additional Border Patrol agents, Office of
Field Operations officers, Air and Marine agents, rehired
annuitants, and CBP support staff. Under the previous
administration, agents and officers faced extreme operational
pressure, mental health concerns, and an overwhelming sense of
mission fatigue. The Committee believes that increasing the
number of frontline personnel will help to alleviate the burden
on current agents and officers and help restore morale.
This section also appropriates $2,052,630,000 to CBP for
annual retention bonuses or signing bonuses to eligible Border
Patrol agents, Office of Field Operations officers, and Air and
Marine agents. CBP is currently facing a staffing crisis that
threatens the agencys ability to meet its core national
security mission. As the demands on frontline personnel
continue to grow, CBP is struggling to recruit and retain the
skilled workforce necessary to meet these demands. In some of
the most critical geographic areas, persistent staffing
shortages have left agents overextended and vulnerable to
burnout. The Committee believes that the CBP mission depends on
a resilient and dedicated workforce. The Committee strongly
supports investments in annual retention and signing bonuses to
secure the personnel needed to protect our borders, uphold the
rule of law, and safeguard our national security for years to
come.
This section also appropriates $813,000,000 for CBP to
lease or acquire additional patrol units. CBP operates one of
the largest law enforcement vehicle fleets in the federal
government, with thousands of vehicles deployed across some of
the most challenging and remote terrain in the country. These
vehicles are essential tools serving as mobile command centers,
transportation platforms, and first-response units that enable
agents to carry out their mission of securing the border.
Unfortunately, the agencys current fleet is rapidly aging. Many
vehicles in operation have exceeded their recommended service
life, leading to increased maintenance costs, higher rates of
mechanical failure, and reduced reliability in the field. This
not only jeopardizes agent and officer safety but also hinders
mission readiness and response times during critical
operations.
This section also appropriates, to the Director of the
Federal Law Enforcement Training Center, $285,000,000 to
support the training of newly hired federal law enforcement
personnel employed by the Department of Homeland Security, and
$465,000,000 for the procurement, construction, and
improvements to Federal Law Enforcement Training Center (FLETC)
facilities.
FLETC provides training for federal law enforcement
personnel across four campuses located in New Mexico, Georgia,
South Carolina, and Maryland. In addition to serving over 125
federal partner agencies, FLETC also supports state, local,
tribal, and international law enforcement organizations with
specialized training resources. FLETC plays a vital role in
both the initial training and ongoing professional development
of DHS law enforcement personnel. The Committee believes
funding in this section is essential as CBP and U.S.
Immigration and Customs Enforcement seek to recruit, train, and
deploy additional personnel to meet mission demands.
Finally, this section also appropriates $600,000,000 to CBP
for marketing, recruiting, applicant sourcing and vetting, and
operational mobility programs for border security personnel.
The increase in law enforcement personnel is only possible with
investments to increase hiring capabilities. This can include
every step from recruitment to medical and fitness assessments,
entrance exams, and training professionals. In addition to
these efforts to expand CBPs hiring capacity, the funding
supports significant recruitment incentives to increase the
pool of candidates in the application and assessment process.

Section 60003. U.S. Customs and Border Protection Technology, National
Vetting Center, and Other Efforts to Enhance Border Security

This section appropriates $1,076,317,000 to CBP to procure
and integrate new Non-Intrusive Inspection (NII) equipment and
associated civil works, artificial intelligence, integration,
and machine learning, as well as other mission support, to
combat the entry of illicit narcotics along the southwest,
northern, and maritime borders. At our ports of entry, CBP
employs NII technology to detect and interdict illicit drugs,
including fentanyl, as well as concealed currency, contraband,
and individuals being smuggled into the country. While CBP has
made huge strides in interdiction efforts, its current
screening capacity at ports of entry remains alarmingly
limited. The Committee believes that these gaps leave our
southwest, northern, and maritime borders vulnerable to
exploitation by transnational criminal organizations
trafficking fentanyl and other deadly substances into our
communities.
This section also appropriates $2,766,000,000 to CBP to
upgrade and procure border surveillance technologies along the
southwest, northern, and maritime borders. As threats to our
national security grow more complex, CBP must have the tools it
needs to detect, monitor, and respond to illicit activity
across all sectors of the border. The Committee believes
investing in advanced surveillance technology along the
southwest, northern, and maritime borders is essential to
maintaining domain awareness and ensuring the safety of our
frontline personnel. Technology in this section includes, but
is not limited to, ground detection sensors, integrated
surveillance towers, tunnel detection capability, unmanned
aircraft systems (UAS), and enhanced communications equipment.
This section also appropriates $673,000,000 to CBP for
necessary expenses, including the deployment of technology,
relating to the biometric entry and exit system under section
7208 of the Intelligence Reform and Terrorism Prevention Act of
2004 (8 U.S.C. 1365b). Investing in the expansion of CBP's
entry/exit system is a critical step toward strengthening
America's national security, enforcing immigration laws, and
modernizing the travel experience at air, land, and seaports of
entry. As the volume of international travel continues to rise
and global threats evolve, traditional identity verification
methods are no longer sufficient to meet today's operational
demands. Unfortunately, full implementation of the exit system
remains incomplete. Biometric entry and exit expansion will not
only enhance CBP's operational effectiveness and efficiency,
but it will also provide law enforcement and intelligence
partners with timely and accurate information to help identify
fraud and persons who overstay their visas.
This section also appropriates $1,234,000,000 to CBP for
Air and Marine Operations (AMO) upgrades and procurement of new
platforms for rapid air and marine response capabilities.
Through the deployment of advanced aircraft and marine vessels
outfitted with cutting-edge technology, this will enable AMO to
expand their reach allowing for continuous detection,
monitoring, and tracking of potential threats approaching or
operating within U.S. borders This section appropriates
$16,000,000 to CBP for necessary expenses related to U.S.
Customs and Border Protection's National Vetting Center (NVC)
to support screening, vetting activities, and expansion of the
criminal history database of foreign nationals. As
transnational criminal networks grow more sophisticated, the
Committee believes that CBP must be equipped with the tools and
data necessary to identify threats swiftly and accurately.
Expanding the NVC is essential to enhancing national security
and protecting communities by assisting frontline agents and
officers to make informed, real-time decisions during border
encounters.
This section appropriates $500,000,000 to the Secretary of
Homeland Security (Secretary) for targeted communication
campaigns designed to combat drug trafficking, fentanyl and its
precursor chemicals, and counter adversarial messaging
operations. Cartels increasingly exploit social media platforms
such as TikTok and Snapchat to recruit associates and
facilitate trafficking activities. Given the escalating threats
posed by transnational criminal organizations, targeted
communication plans are crucial in deterring these illicit
activities and mitigating the cartel's media influence. These
information campaigns can play a vital role in protecting
American lives, dismantling criminal networks, and safeguarding
the nation by effectively warning potential drug traffickers of
the severe repercussions they will face.
Finally, this section appropriates $1,000,000 to the
Secretary to support commemorative events honoring meritorious
contributions and achievements related to border security,
including events recognizing victims of crimes. Examples of
such events include Line-of-Duty death memorials, Department or
agency anniversaries, and commendation ceremonies. Funding in
this section can be used for venue and setup, program
materials, commemoratives (e.g., plaques, flags, awards); and
personnel and services (e.g., honor guard, officiants,
security).

Section 60004. State and Local Law Enforcement Presidential Residence
Protection

This section appropriates $300,000,000 to the Administrator
of the Federal Emergency Management Agency (FEMA), for the
reimbursement of law enforcement personnel costs for protection
activities directly and demonstrably associated with any
residence of the President that is designated pursuant to
section 3 of the Presidential Protection Assistance Act of 1976
(Public Law 94-524) to be secured by the United States Secret
Service.
Continued support of the Presidential Residence Protection
Assistance grant is essential for the continued safety of the
President. This grant provides reimbursement to state and local
law enforcement agencies for operational overtime costs
incurred while protecting any non-governmental residence of the
President of the United States as designated or identified to
be secured by the U.S. Secret Service.
With President Trump maintaining regular travel, proper
security measures need to be maintained, particularly following
the two highly publicized assassination attempts in 2024.
Assistance from state and local law enforcement agencies is
oftentimes necessary to ensure protection of the President's
residences given limited U.S Secret Service resources. This
funding would build upon past congressional appropriations and
ensure that the Department of Homeland Security has the
necessary funding to reimburse and utilize state and local law
enforcement.

Section 60005. State Homeland Security Grant Program

This section appropriates funds to FEMA to be administered
under the State Homeland Security Grant Program authorized
under section 2004 of the Homeland Security Act of 2002 (6
U.S.C. 605), to enhance State, local, and Tribal security
through grants, contracts, cooperative agreements, and other
activities. Appropriations in this section include:
$500,000,000 for State and local capabilities to detect,
identify, track, or monitor threats from unmanned aircraft
systems (UAS) (as such term is defined in section 44801 of
title 49, United States Code); $625,000,000 for security,
planning, and other costs related to the 2026 FIFA World Cup;
$1,000,000,000 for security, planning, and other costs related
to the 2028 Olympics and Paralympics; and $450,000,000 for the
Operation Stonegarden Grant Program.
The Committee believes it is essential to continue to
pursue efforts to enhance counter-UAS capabilities and
authorities for federal, State, and local law enforcement. As
the capabilities and availability of commercially available
drone technology have made significant advances in recent
years, the emerging homeland security threat from such
technology in the wrong hands has likewise increased.
Terrorists, criminal organizations, and foreign actors can use
drones to exploit vulnerabilities across a wide range of
environments and targets for espionage or terrorist acts.
Suspicious drone incursions have occurred at military
installations, sporting events, airports, critical energy
facilities, and across the Southwest border at an alarming
rate. This is a critical concern in communities nationwide,
particularly for high-profile public events and critical
infrastructure. $500,000,000 in appropriations for this grant
program will support law enforcement efforts across the United
States in developing their ability to detect, identify, track,
or monitor UAS threats.
In 2026, the FIFA Would Cup will be held in eleven cities
across the United States. FIFA anticipates that at least
5,000,000 fans will travel to the United States for the World
Cup. Attendees will include multiple heads of state and other
foreign dignitaries. The Committee recognizes the national
security implications of hosting an international sporting
event of this size.
On March 7, 2025, President Trump signed an Executive Order
Establishing the White House Task Force on the FIFA World Cup
2026, to facilitate coordination with executive departments and
agencies ``to assist in the planning, organization, and
execution of the events surrounding the 2025 FIFA Club World
Cup and 2026 FIFA World Cup.'' To support President Trump's
priority of the safety and security of events held on American
soil, the Committee believes an appropriation of $625,000,000
for grants related to this event will enhance planning and
security related to the 2026 FIFA World Cup. These funds will
be made available through FEMA's State Homeland Security Grant
Program, which assists State, local, and Tribal efforts to
build, sustain, and deliver the capabilities necessary to
prevent, prepare for, protect against, and respond to acts of
terrorism.
Two years following the FIFA World Cup, the 2028 Summer
Olympics and 2028 Summer Paralympics will be held in the
greater Los Angeles area. The Committee believes an
appropriation of $1,000,000,000 for grants to be made available
for security, planning, and other costs related to the 2028
Olympics and Paralympic Games, made available through FEMA's
State Homeland Security Grant Program, will have a vital impact
on the security of our nation in preparation for and throughout
the Olympic Games and Paralympic Games.
Already in 2024, the Department of Homeland Security
designated the Olympic and Paralympic Games a National Special
Security Event (NSSE), the furthest in advance that a NSSE has
ever been granted. This designation is based in part on the
event's significance, size, and anticipated attendance,
allowing for significant resources from the federal government,
as well as from state and local partners, to be utilized in a
comprehensive security plan. The U.S. Secret Service is
designated as the lead federal agency responsible for
coordinating, planning, exercising, and implementing security
for NSSEs through the Presidential Threat Protection Act of
2000.
Operation Stonegarden is part of FEMA's Homeland Security
Grant Program, which provides funding to state, local, tribal,
and territorial (SLTT) law enforcement agencies that are
located along the borders of the United States to improve
overall border security. Over the last four years, the United
States faced a historic border crisis with communities and
local law enforcement along the Southwest border bearing the
brunt of the hardship due to the chaos brought on by failed
border policies.
Operation Stonegarden is an essential part in the overall
advancement of security along our borders. An addition of
$450,000,000 in funding for this grant program will allow the
Department of Homeland Security to further enhance its
relationship with law enforcement, implementing a layered
approach to secure our land and maritime borders from
traffickers and smugglers. This grant program provides
cooperation and coordination among U.S. Customs and Border
Protection's U.S. Border Patrol and federal, state, local,
tribal, and territorial law enforcement agencies by providing
funding to support joint efforts to secure the United States'
borders, especially in states bordering Mexico and Canada, as
well as in states and territories with international water
borders.

TITLE VII--COMMITTEE ON THE JUDICIARY

Section-by-Section

SUBTITLE A--IMMIGRATION MATTERS

Part 1--Immigration Fees

Sec. 70001. Applicability of immigration laws

This section states that, notwithstanding any other
provision of law, the bill's fees shall apply. It also
clarifies that any terms in the bill are defined as in the
Immigration and Nationality Act (INA) and provides that any
statutory references are to the INA.

Sec. 70002. Asylum fee

This section requires a $1,000 fee for any alien who
applies for asylum. The section directs 50 percent of the fees
received from applications filed in immigration court to the
Executive Office for Immigration Review (EOIR) and 50 percent
of the fees received from applications filed with U.S.
Citizenship and Immigration Services (USCIS) to USCIS. The
remaining fees collected will be directed to the Treasury for
deficit reduction.

Sec. 70003. Employment authorization document fees

(a) Asylum applicants. This section requires a $550
employment authorization application fee for any asylum
applicant who seeks employment authorization while the alien's
asylum application is pending. The section directs 25 percent
of the fees received from such applications to USCIS, with a
portion devoted to detecting and preventing immigration benefit
fraud. The remaining fees collected will be directed to the
Treasury for deficit reduction.
(b) Parole. This section requires a $550 employment
authorization application fee for any alien paroled into the
country who seeks employment authorization. The section directs
all fees collected to the Treasury for deficit reduction.
(c) Temporary Protected Status. This section requires a
$550 employment authorization application fee for any alien
granted Temporary Protected Status (TPS) who seeks employment
authorization. The section directs all fees collected to the
Treasury for deficit reduction.

Sec. 70004. Parole fee

This section requires a $1,000 fee for any alien who is
paroled into the U.S. other than in limited circumstances (such
as medical emergencies, funerals, etc.) in accordance with the
``case-by-case'' limitation in the current statute. Fees
collected under this section will be directed to the Treasury
for deficit reduction.

Sec. 70005. Special immigrant juvenile fee.

This section requires an alien who files an application for
Special Immigrant Juvenile (SIJ) status to pay a $500 fee if
reunification with one parent or legal guardian is possible
despite abuse, abandonment, neglect, or other similar activity
by the other parent. Fees collected under this section will be
directed to the Treasury for deficit reduction.

Sec. 70006. Temporary Protected Status fee

This section requires a $500 fee for an alien who files an
application for TPS and who has not been admitted to the U.S.
or who entered the U.S. on a temporary visa but who failed to
comply with the terms of the visa, including by not complying
with the period of authorized stay. Fees collected under this
section will be directed to the Treasury for deficit reduction.

Sec. 70007. Unaccompanied alien child sponsor fee

This section requires the sponsor of an unaccompanied alien
child (UAC) to pay a fee, prior to the release of the UAC to
the sponsor, as partial reimbursement for the cost of
processing and housing, feeding, educating, transporting, and
otherwise caring for the UAC from the time the UAC entered U.S.
government custody to the time at which the sponsor takes
custody of the UAC. A portion of the amount raised by the fee
will be directed back to the agency to fund background checks
for potential sponsors and adult members of potential sponsors'
households. The remaining fees collected will be directed to
the Treasury for deficit reduction.

Sec. 70008. Visa integrity fee

This section requires the State Department to assess a $250
fee on aliens who travel to the U.S. pursuant to a nonimmigrant
visa. Aliens can be reimbursed under certain circumstances: The
fee may be reimbursed (1) if the alien demonstrates compliance
with the terms of that the alien's visa, including by complying
with the period of authorized stay, (2) if the alien did not
utilize the visa for admission to the U.S., or (3) if the alien
filed to extend, change, or adjust such status within the
nonimmigrant visa's period of validity. Fees collected under
this section will be directed to the Treasury for deficit
reduction.

Sec. 70009. Form I-94 fee

This section imposes a fee of $24 on the Form I-94. This
fee is in addition to the current $6 fee, increasing the total
fee for the Form I-94 from $6 to $30. The Form I-94 acts as the
arrival and departure record for certain categories of aliens
traveling temporarily to the U.S. An increased portion of the
funds will be redirected to the agency for cost recovery. In
addition, a portion of each fee will be directed to the
Treasury for deficit reduction.

Sec. 70010. Yearly asylum fee

This section requires a $100 fee in each calendar year that
an alien's asylum application remains pending. The section
directs all fees collected to the Treasury for deficit
reduction.

Sec. 70011. Fee for continuances granted in immigration court
proceedings

This section requires a $100 fee for any alien who seeks
and is granted a continuance in immigration court, unless the
continuance is granted based on exceptional circumstances. The
section directs all fees collected to the Treasury for deficit
reduction.

Sec. 70012. Fee relating to renewal and extension of employment
authorization for parolees

This section requires a $550 fee for any alien paroled into
the country who seeks a renewal or extension of employment
authorization. The section sets the employment authorization
validity period at no more than six months and directs all fees
collected to the Treasury for deficit reduction.

Sec. 70013. Fee relating to termination, renewal, and extension of
employment authorization for asylum applicants

This section requires a $550 fee for any asylum applicant
who seeks a renewal or extension of employment authorization.
The section sets the employment authorization validity period
at no more than six months and clarifies that employment
authorization terminates: (1) immediately following the denial
of an asylum application by an asylum officer, unless the case
is referred to an immigration judge; (2) thirty days after the
date on which an immigration judge denies an asylum
application, unless the alien files a timely appeal with the
Board of Immigration Appeals (BIA); and (3) immediately
following the denial of an alien's appeal by the BIA. The
section directs all fees collected to the Treasury for deficit
reduction.

Sec. 70014. Fee relating to renewal and extension of employment
authorization for aliens granted Temporary Protected Status

This section requires a $550 fee for any alien granted TPS
who seeks a renewal or extension of employment authorization.
The section sets the employment authorization validity period
at no more than six months and directs all fees collected to
the Treasury for deficit reduction.

Sec. 70015. Diversity immigrant visa fees

(a) Fee for filing a diversity immigrant visa application.
This section requires a $400 diversity immigrant visa
application fee for any alien who is selected through the
diversity visa lottery and who is authorized to apply for a
diversity immigrant visa. The section directs 10 percent of the
fees received to the Department of State to offset program
costs associated with the diversity visa program, including
fraud detection and prevention; 10 percent to ICE for
detention, immigration enforcement, and removal operations; and
the remaining fees received to the Treasury for deficit
reduction.
(b) Fee for aliens who register for the diversity immigrant
visa program. This section requires a $250 fee for any alien
who registers for the diversity immigrant visa lottery. The
section directs 10 percent of the fees received to the
Department of State to offset costs of the diversity immigrant
visa program, including fraud detection and prevention; 10
percent to ICE for detention, immigration enforcement, and
removal operations; and the remaining fees received to the
Treasury for deficit reduction.

Sec. 70016. EOIR fees

(a) Fee for filing an application to adjust status to that
of a lawful permanent resident. This section requires a fee of
$1,500 for any alien whose application for adjustment of status
is adjudicated by an immigration judge. The section directs no
more than 50 percent of the fees received to EOIR and the
remaining fees to the Treasury for deficit reduction.
(b) Fee for filing an application for waiver of grounds of
inadmissibility. This section requires a fee of $1,050 for any
alien who files with an immigration court an application for
waiver of grounds of inadmissibility or whose application for
such a waiver is adjudicated by an immigration judge. The
section directs no more than 25 percent of the fees received to
EOIR and the remaining fees to the Treasury for deficit
reduction.
(c) Fee for filing an application for Temporary Protected
Status. This section requires a fee of $500 for any alien who
files with an immigration court an application for TPS or whose
application for TPS is adjudicated by an immigration judge. The
section directs no more than 25 percent of the fees received to
EOIR and the remaining fees to the Treasury for deficit
reduction.
(d) Fee for filing an appeal from a decision of an
immigration judge. This section requires a fee of $900 for any
alien who files an appeal from a decision of an immigration
judge. The section directs no more than 25 percent of the fees
received to EOIR and the remaining fees to the Treasury for
deficit reduction.
(e) Fee for filing an appeal from a decision of an officer
of the Department of Homeland Security. This section requires a
fee of $900 for any alien who files an appeal from a decision
of an officer of the Department of Homeland Security (DHS). The
section directs no more than 25 percent of the fees received to
EOIR and the remaining fees to the Treasury for deficit
reduction.
(f) Fee for filing an appeal from a decision of an
adjudicating official in a practitioner disciplinary case. This
section requires a fee of $1,325 for any practitioner who files
an appeal from a decision of an adjudicating official in a
practitioner disciplinary case. The section directs no more
than 25 percent of the fees received to EOIR and the remaining
fees to the Treasury for deficit reduction.
(g) Fee for filing a motion to reopen or a motion to
reconsider. This section requires a fee of $900 on any alien
who files a motion to reopen or motion to reconsider a decision
of an immigration judge or the BIA. The section clarifies that
such a fee does not apply to motions to reopen a removal order
entered in absentia if the motion is based on the alien (1)
failing to receive proper notice of the proceeding or (2)
failing to attend the proceeding because the alien was in state
or federal custody and the failure to appear was through no
fault of the alien. The section directs no more than 25 percent
of the fees received to EOIR and the remaining fees to the
Treasury for deficit reduction.
(h) Fee for filing an application for suspension of
deportation. This section requires a fee of $600 for any alien
who files with an immigration court an application for
suspension of deportation. The section directs no more than 25
percent of the fees received to EOIR and the remaining fees to
the Treasury for deficit reduction.
(i) Fee for filing an application for cancellation of
removal for certain permanent residents. This section requires
a fee of $600 for any alien who files an application for
cancellation of removal for certain permanent residents. The
section directs no more than 25 percent of the fees received to
EOIR and the remaining fees to the Treasury for deficit
reduction.
(j) Fee for filing an application for cancellation of
removal and adjustment of status for certain nonpermanent
residents. This section requires a fee of $1,500 for any alien
who files an application for cancellation of removal and
adjustment of status for certain nonpermanent residents. The
section directs no more than 25 percent of the fees received to
EOIR and the remaining fees to the Treasury for deficit
reduction.

Sec. 70017. ESTA fee

This section increases the fee for the Electronic System
for Travel Authorization (ESTA), which is required to be used
by aliens who travel to the U.S. via the Visa Waiver Program,
from $21 to $40. Currently, $4 of the fee goes to the agency
for cost recovery and $17 goes to the Travel Promotion Fund.
This section would change that allocation such that an
increased portion of each fee collected is directed to the
agency to achieve cost recovery. This section also limits the
portion directed to the Travel Promotion Fund to $20,000,000
annually. In addition, a portion of each fee collected is
directed to the Treasury for deficit reduction. Finally, this
section extends CBP's authority to charge ESTA fees until 2034.

Sec. 70018. Immigration user fees

Currently, air and sea passengers arriving from a foreign
location on a commercial aircraft/sea vessel pay this fee. This
section increases the current $7 fee to $10 and eliminates a
partial exemption for certain commercial sea passengers. Per
fee, $9 is directed to the agency for cost recovery and $1 is
directed to the Treasury for deficit reduction.

Sec. 70019. EVUS fee

The Electronic Visa Update System (EVUS) provides a
mechanism through which information updates can be obtained
from aliens holding a U.S. nonimmigrant visa of a designated
category in a passport issued by an identified country,
generally Chinese nationals on B-1, B-2, and B-1/B-2 visas.
EVUS requires travelers with such visas to provide updated
biographic and travel information to CBP via a publicly
accessible website prior to initial travel on the visa and then
at least every two years from the date of visa issuance for the
duration of visa validity. This section establishes in statute
an EVUS fee of $30. While most of the funds are allocated to
the agency for cost recovery, a portion of the funds raised are
allocated to the Treasury for deficit reduction.

Sec. 70020. Fee for sponsor of unaccompanied alien child who fails to
appear in immigration court

This section requires the sponsor of a UAC to pay a $5,000
fee prior to the release of such UAC to the sponsor. The
sponsor may receive reimbursement for the fee if the sponsor
demonstrates that (1) the UAC was not ordered removed in
absentia or (2) the in absentia order is rescinded.

Sec. 70021. Fee for aliens ordered removed in absentia

This section requires a $5,000 fee for any alien who (1) is
ordered removed in absentia after failing to appear at an
immigration court hearing and (2) is subsequently arrested by
ICE. This section includes an exception for cases in which an
in absentia order is rescinded.

Sec. 70022. Customs and Border Protection inadmissible alien
apprehension fee

This section requires a $5,000 fee for any inadmissible
alien who is apprehended between ports of entry by CBP.

Sec. 70023. Amendment to authority to apply for asylum

This section amends the INA to require fees for asylum
applications and employment authorization applications for
asylum applicants. The section also removes the limitation that
any such fees cannot exceed the costs of adjudicating such
applications.

Part 2--Use of Funds

Sec. 70100. Executive Office for Immigration Review

This section provides $1.25 billion in funding to EOIR,
which houses the nation's immigration courts, for (1) hiring
support staff necessary to support immigration judges; (2)
hiring immigration judges; and (3) expanding courtroom capacity
and infrastructure.

Sec. 70101. Adult alien detention capacity and family residential
centers

This section provides $45 billion in funding to ICE to
increase adult alien detention capacity and family residential
center capacity. The section clarifies that (1) family units of
aliens may be detained at family residential centers and (2)
the Department of Homeland Security can house aliens, including
alien children, at family residential centers regardless of
whether a specific facility is licensed by the state or
political subdivision of the state in which the facility is
located. To efficiently utilize the funding provided, this
section also allows the DHS Secretary, in the Secretary's sole
discretion, to set the detention standards for adult alien
detention capacity.

Sec. 70102. Retention and signing bonuses for U.S. Immigration and
Customs Enforcement personnel

This section provides $858 million in funding for $10,000
hiring and retention bonuses for ICE personnel to carry out
immigration enforcement, including ICE officers, Homeland
Security Investigations (HSI) agents, and attorneys.

Sec. 70103. Hiring of additional U.S. Immigration and Customs
Enforcement personnel

This section provides $8 billion in funding for additional
ICE Enforcement and Removal Operations (ERO) officers, HSI
agents, and support personnel to carry out immigration
enforcement.

Sec. 70104. U.S. Immigration and Customs Enforcement hiring capability

This section provides $600 million in funding to ICE to
facilitate the recruitment, hiring, and onboarding of
additional ICE personnel to carry out immigration enforcement.

Sec. 70105. Transportation and removal operations

This section provides $14.4 billion in funding for ICE
transportation and removal operations, including amounts
necessary for ground transportation, air charter flights,
escorted commercial flights, transportation of unaccompanied
alien children, and for other departures.

Sec. 70106. Information technology investments

This section provides $700 million in funding for ICE to
invest in information technology to support enforcement and
removal operations.

Sec. 70107. Facilities upgrades

This section provides $550 million in funding to ICE for
ICE facility upgrades to support enforcement and removal
operations.

Sec. 70108. Fleet modernization

This section provides $250 million in funding to ICE for
ICE fleet modernization to support enforcement and removal
operations.

Sec. 70109. Promoting family unity

This section provides $20 million in funding to DHS to fund
short-term detention space for adult aliens who are charged
with illegal entry so that the aliens can be detained with the
alien minors who entered the United States with them.

Sec. 70110. Funding section 287(g) of the Immigration and Nationality
Act

This section provides $650 million in funding for ICE to
enter into and implement 287(g) agreements with state and local
law enforcement agencies whereby such agencies help enforce
federal immigration laws to the extent allowed by current law.

Sec. 70111. Compensation for incarceration of criminal aliens

This section provides $950 million in funding for a program
similar to the State Criminal Alien Assistance Program (SCAAP)
to reimburse states and localities for the cost of
incarcerating certain criminal aliens so long as the states and
localities are not sanctuary jurisdictions.

Sec. 70112. Office of the Principal Legal Advisor

This section provides $1.32 billion in funding to the
Office of the Principal Legal Advisor to hire additional
attorneys to represent the Department of Homeland Security in
removal proceedings and necessary support staff.

Sec. 70113. Return of aliens arriving from contiguous territory

This section provides $500 million in funding to the
Department of Homeland Security to fund the return of aliens to
the contiguous country from which they entered the U.S. while
the aliens' removal proceedings remain pending (Remain in
Mexico).

Sec. 70114. State and local participation in homeland security efforts

This section provides $787 million in funding to ICE for
the purpose of ending the presence of criminal gangs and
transnational criminal organizations throughout the United
States, combating human smuggling and trafficking networks,
supporting immigration enforcement activities, and providing
reimbursement for state and local participation in such
efforts.

Sec. 70115. Unaccompanied alien children capacity

This section provides $3 billion in funding to increase
capacity at the Office of Refugee Resettlement for UACs
encountered at the border and transferred from the custody of
CBP.

Sec. 70116. Department of Homeland Security criminal and gang checks
for unaccompanied alien children

This section provides $20 million in funding for the DHS
portion of a pilot program to ensure DHS and the Department of
Health and Human Services (HHS) check UACs who are 12 years and
older for gang-related tattoos and contact the consulate or
embassy of UACs' home countries to determine if UACs have a
criminal history.

Sec. 70117. Department of Health and Human Services criminal and gang
checks for unaccompanied alien children

This section provides $20 million in funding for the HHS
portion of a pilot program to ensure DHS and HHS check UACs who
are 12 years and older for gang-related tattoos and contact the
consulate or embassy of UACs' home countries to determine if
UACs have a criminal history.

Sec. 70118. Information about sponsors and adult residents of sponsor
households

This section provides $50 million in funding for a pilot
program through which HHS will provide DHS information
regarding the UAC sponsor and all adult residents of the
sponsor's household prior to HHS releasing the UAC to such
sponsor. Information collected will include names, social
security numbers, dates of birth, immigration status, contact
information, and background and criminal records checks results
for the sponsor and all adult residents of the sponsor's
household. The information will also include the location of
the residence. At a minimum, the background and criminal
records checks will include an investigation of the public
records sex offender registry, a public records background
check, and a national criminal history check based on
fingerprints.

Sec. 70119. Repatriation of unaccompanied alien children

This section provides $100 million in funding to DHS to
allow UACs encountered at the border who are not victims of
severe forms of trafficking and do not have a fear of returning
to their country of origin to withdraw their application for
admission and be repatriated to their home country.

Sec. 70120. United States Secret Service

This section provides $1.17 billion to the U.S. Secret
Service with funding for protective functions and other
necessary security operations.

Sec. 70121. Combatting drug trafficking and illegal drug use

This section provides $500 million in funding to the
Department of Justice to combat drug trafficking, including the
trafficking of fentanyl and its precursor chemicals, and
illegal drug use.

Sec. 70122. Investigating and prosecuting immigration related matters

This section provides $600 million in funding to the
Department of Justice to investigate and prosecute immigration-
related matters, including gang-related crimes involving
aliens, child trafficking and smuggling involving aliens,
voting by aliens, violations of the Alien Registration Act, and
violations of or fraud relating to title IV of the Personal
Responsibility and Work Opportunity Act of 1996.

Sec. 70123. Expedited removal for criminal aliens

This section provides $75 million in funding to DHS to
expand expedited removal proceedings under current law to apply
to certain criminal aliens, regardless of the period that such
aliens have been physically present in the United States.

Sec. 70124. Removal of aliens without further hearing

Current law allows for streamlined proceedings for certain
arriving aliens who are suspected of being inadmissible for
national security reasons or terrorism grounds. This section
provides $25 million in funding to DHS to expand the
application of that provision to allow for such proceedings for
arriving aliens who are suspected of being inadmissible for
criminality.

Subtitle B--Regulatory Matters

Sec. 70200. Review of Agency Rulemaking

This section provides $10,000,000 to each of the Office of
Management and Budget and the Comptroller General of the United
States to augment its activities pertaining to rulemaking. This
section also requires Congress to approve major rules that
increase revenue prior to them coming into effect.

Sec. 70201. Congressional Review Act Compliance

This section provides $10,000,000 to the Office of
Management and Budget to be used in conducting analysis of the
direct and reasonably foreseeable indirect costs of compliance
with certain regulations.

Subtitle C--Other Matters

Sec. 70300. Limitation on Donations Made Pursuant to Settlement
Agreements to Which the United States is a Party

This section prohibits the Department of Justice from
entering into or enforcing a settlement agreement that directs
the settling party to provide funds to a third party other than
for restitution or to remedy actual harm caused by the settling
party.

Sec. 70301. Solicitation of Orders Defined

This section clarifies the tax treatment of certain
interstate commercial activity regarding the solicitation of
orders.

Sec. 70302. Restriction of Funds

This section prohibits federal courts from using
appropriated funds to enforce a contempt citation when the
purported contemptuous conduct is noncompliance with a
temporary restraining order or preliminary injunction where
security was not given as required by Federal Rule of Civil
Procedure 65.

SECTION-BY-SECTION ANALYSIS

TITLE VIII--COMMITTEE ON NATURAL RESOURCES

Subtitle A--Energy and Mineral Resources

PART I--OIL AND GAS

Sec. 80101. Onshore Oil and Gas Lease Sales

Reinstates quarterly onshore oil and gas lease
sales for WY, NM, CO, UT, MT, ND, OK, NV, AK, and all other
states where land is available for oil and gas leasing under
the Mineral Leasing Act.
Requires the Secretary of the Interior (Secretary)
to offer land for leasing if the Secretary determines the land
is open to oil and gas leasing under an approved land use plan
within 18 months of the date of receipt of an expression of
interest.
Stipulates that revisions of an approved
land use plan shall not prevent or delay leasing under
this section if all the other requirements are met.
Makes Applications for Permit to Drill (APDs)
valid for a single, non-renewable four-year period.
The Congressional Budget Office (CBO) estimates
Sections 80101, 80102, 80103, 80104, and 80105 will
collectively generate up to $12 billion in new revenue and
savings for the federal government.

Sec. 80102. Noncompetitive Leasing

Requires that lands which do not receive bids
during an oil and gas lease sale, or where the highest bid is
less than the national minimum, must be offered within 30 days
for noncompetitive leasing.

Sec. 80103. Permit Fees

Requires the Secretary to approve applications for
the commingling of production from two or more sources, such as
oil and gas leases or communitized areas, if a fee is paid.
Mandates the Secretary to develop regulations to
allow oil and gas activity to occur through a permit-by-rule
process if a fee is paid.

Sec. 80104. Permitting Fee for Non-Federal Land

Establishes that the Secretary shall not require a
permit to drill for an oil and gas lease under the Mineral
Leasing Act if the lessee pays a fee of $5,000 and the federal
government owns less than 50 percent of the minerals in the oil
and gas drilling unit and does not own the surface estate where
drilling will take place.

Sec. 80105. Reinstate Reasonable Royalty Rates

Reinstates the 12.5 percent royalty rate on
offshore production, reducing it back to pre-Inflation
Reduction Act of 2022 (IRA) levels.
Reinstates the 12.5 percent royalty rate on
onshore production, reducing it back to pre-IRA levels.

PART II--GEOTHERMAL

Sec. 80111. Geothermal Leasing

Requires the Secretary to hold geothermal lease
sales yearly and to hold replacement sales in the event that a
lease sale is delayed or cancelled.
CBO estimates Sections 80111 and 80112 will
collectively generate up to $23 million in new revenue and
savings for the federal government.

Sec. 80112. Geothermal Royalties

Stipulates that geothermal facilities on the same
geothermal lease are treated as separate facilities with
respect to royalty payment.

PART III--ALASKA

Sec. 80121. Coastal Plain Oil and Gas Leasing

Reissues the energy leases revoked by the Biden
administration and mandates the Secretary conduct four lease
sales under the Coastal Plain Oil and Gas Leasing Program in
the Arctic National Wildlife Refuge (ANWR) in Alaska within the
next ten years.
Mandates that the revenues from leases authorized
by the Act be split evenly between the state and the federal
government until 2035, when the state would start receiving 90
percent.
CBO estimates this section will generate up to
$950 million in new revenue and savings for the federal
government.

Sec. 80122. National Petroleum Reserve-Alaska

Formalizes the National Petroleum Reserve-Alaska
(NPR-A) oil and gas program and expeditiously resumes leasing
for energy production in the NPR-A. In resuming this program,
this section requires that the Secretary hold lease sales at
least every other year and offer at least 4,000,000 acres per
lease sale in the NPR-A.
Mandates that the revenues from leases authorized
by the Act be split evenly between the state and the federal
government until 2035, when the state would start receiving 90
percent.
CBO estimates this section will generate up to
$550 million in new revenue and savings for the federal
government.

PART IV--MINING

Sec. 80131. Superior National Forest Lands in Minnesota

Rescinds Public Land Order (PLO) No. 7917, which
withdrew federal lands in Northern Minnesota from mineral
entry. Reinstates, for 20 years, the leases cancelled by the
Biden administration in the Superior National Forest.
Stipulates terms and conditions for the leases.
CBO estimates this section will generate up to $80
million in new revenue and savings for the federal government.

Sec. 80132. Ambler Road in Alaska

Establishes a $500,000 per year rental fee for a
surface transportation access road from the Ambler Mining
District to the Dalton Highway.
Stipulates that the timely construction and
operation of the road are in the national interest.
Rescinds the Biden administration's record of
decision (ROD) and replaces it with the 2020 ROD, which
includes a preferred alternative that allows for road
construction.
CBO estimates this section will generate up to $5
million in new revenue and savings for the federal government.

PART V--COAL

Sec. 80141. Coal Leasing

Mandates coal lease sales and stipulates the
requirements for such lease sales.
CBO estimates Sections 80141, 80142, 80143, and
80302 will collectively generate up to $237 million in new
revenue and savings for the federal government.

Sec. 80142. Future Coal Leasing

Rescinds Secretarial Order 3338, which put a
moratorium on new coal leasing and prevents similar action in
the future.

Sec. 80143. Coal Royalty

Reduces the royalty rate from 12.5 percent to 7
percent on all coal leases, new and active.

Sec. 80144. Authorization to Mine Federal Minerals

Authorizes the mining of all federal coal reserves
leased under Federal Coal Lease MTM 97988 in accordance with
the Bull Mountains Mining Plan Modification.
CBO estimates this section will generate up to $42
million in new revenue and savings for the federal government.

PART V--NEPA

Sec. 80151. Project Sponsor Opt-In Fees for Environmental Reviews

Allows a project sponsor to pay a fee equal to 125
percent of the anticipated costs of expected agency activities
to prepare an environmental impact statement (EIS) or
environmental assessment (EA). If the project sponsor pays the
fee, they will receive their EIS in one year and their EA in
six months.
The EIS or EA would not be subject to judicial
review under the National Environmental Policy Act of 1969
(NEPA).
CBO estimates this section will generate up to
$1.07 billion in new revenue and savings for the federal
government.

Sec. 80152. Rescission Relating to Environmental and Climate Data
Collection

Rescinds IRA funding for the Council on
Environmental Quality (CEQ).
CBO estimates this section will generate up to $25
million in savings for the federal government.

PART VII--MISCELLANEOUS

Sec. 80161. Protest Fees

Establishes a filing fee for protests of oil and
gas lease sales.
Stipulates the amount that must be paid based on
the page length of the protest and the number of oil and gas
parcels included in the protest.
CBO estimates this section will generate up to $10
million in new revenue and savings for the federal government.

PART VIII--OFFSHORE OIL AND GAS LEASING

Sec. 80171. Mamdatory Offshore Oil and Gas Lease Sales

Mandates a series of offshore oil and gas lease
sales to generate federal revenue through bonus bids, rentals,
and royalties over specified periods.
Gulf of America: Requires the
Secretary to hold at least 30 lease sales in
the Gulf of America over 15 years (2025-2040)
beginning in August 2025, with locations tied
to the 2017-2022 Outer Continental Shelf (OCS)
Program, and a minimum of 80 million acres per
sale, using terms from Lease Sale 254.
Cook Inlet Planning Area:
Mandates six lease sales in the Cook Inlet each
of which shall include at least 1 million
acres. Mandates that the revenues from leases
authorized by the Act be split evenly between
the state and the federal government until
2035, when the state would start receiving 90
percent.
Ensures these sales supplement the 2024-2029 OCS
Program, increasing revenue potential.
Establishes a process for state Governors to
nominate adjacent OCS areas for inclusion, potentially
expanding leasable acreage.
CBO estimates this section will generate up to
$4.65 billion in new revenue and savings for the federal
government.

Sec. 80172. Offshore Commingling

Requires the Secretary to approve downhole
commingling applications from multiple reservoirs in a single
wellbore in the Gulf of America OCS unless conclusive evidence
shows the practice would be unsafe or reduce recovery.
Increases federal revenue by boosting oil and gas
production efficiency, resulting in additional royalty payments
to the federal government.
CBO estimates this section will generate up to
$1.66 billion in new revenue and savings for the federal
government.

Sec. 80173. Limitations on Amount of Distributed Qualified Outer
Continental Shelf Revenues

Raises the cap on the distribution of OCS revenues
from $500 million to $650 million for FY 2026 through FY 2035
under the Gulf of Mexico Energy Security Act of 2006 (GOMESA).
CBO estimates this section will spend $1.2 billion
over 10 years.

PART IX--RENEWABLE ENERGY

Sec. 80181. Renewable Energy Fees on Federal Lands

Codifies annual acreage rent and capacity fees for
wind and solar energy projects on federal lands.
Removes the Secretary's authority to reduce
acreage rent and capacity fees.
CBO estimates Sections 80181 and 80182 will
generate up to $300 million in new revenue and savings for the
federal government.

Sec. 80182. Renewable Energy Revenue Sharing

Creates a revenue sharing mechanism for renewable
energy produced on public lands.
Directs 25 percent to the state hosting the
production, 25 percent to the county hosting production, and 50
percent to the federal government, deposited into the General
Fund of the Treasury.

Subtitle B--Water, Wildlife, and Fisheries

Sec. 80201. Rescission of Funds for Investing in Coastal Communities
and Climate Resilience

Rescinds the remaining funds available for the
Investing in Coastal Communities and Climate Resilience'
section of the IRA.
CBO estimates this section will generate up to
$100 million in savings for the federal government.

Sec. 80202. Rescission of Funds for Facilities of National Oceanic and
Atmospheric Administration and National Marine Sanctuaries

Rescinds the remaining funds available for the
Facilities of the National Oceanic and Atmospheric
Administration and National Marine Sanctuaries' section of the
IRA.
CBO estimates this section will generate up to $29
million in savings for the federal government.

Sec. 80203. Surface Water Storage Enhancement

Provides $2 billion for construction and
associated activities that increase the capacity of existing
Bureau of Reclamation surface water storage facilities.

Sec. 80204. Water Conveyance Enhancement

Provides $500 million for construction and
associated activities that increase the capacity of existing
Bureau of Reclamation conveyance facilities.

Subtitle C--Federal Lands

Sec. 80301. Prohibition on the Implementation of the Rock Springs Field
Office, Wyoming Resource Management Plan

Prohibits the Bureau of Land Management (BLM) from
implementing, administering, or enforcing the Record of
Decision and Approved Resource Management Plan (RMP) for the
Rock Springs Field Office in Wyoming, finalized by the Biden
administration.
CBO estimates this section will generate up to
$200 million in new revenue and savings for the federal
government.

Sec. 80302. Prohibition on the Implementation of the Buffalo Field
Office, Wyoming, Resource Management Plan

Prohibits the BLM from implementing,
administering, or enforcing the Record of Decision and Approved
RMP Amendment for the Buffalo Field Office in Wyoming,
finalized by the Biden administration.
CBO estimates Sections 80141, 80142, 80143, and
80302 will collectively generate up to $237 million in new
revenue and savings for the federal government.

Sec. 80303. Prohibition on the Implementation of the Miles City Field
Office, Montana, Resource Management Plan

Prohibits the BLM from implementing,
administering, or enforcing the Record of Decision and Approved
RMP Amendment for the Miles City Field Office in Montana,
finalized by the Biden administration.
CBO estimates this section will generate up to $15
million in new revenue and savings for the federal government.

Sec. 80304. Prohibition on the Implementation of the North Dakota
Resource Management Plan

Prohibits the BLM from implementing,
administering, or enforcing the ROD and Approved RMP for North
Dakota, finalized by the Biden administration.
CBO estimates this section will generate up to $5
million in new revenue and savings for the federal government.

Sec. 80305. Prohibition on the Implementation of the Colorado River
Valley Field Office and Grand Junction Field Office Resource
Management Plans

Prohibits the BLM from implementing,
administering, or enforcing the RODs and Approved RMPs for the
Colorado River Valley Field Office and Grand Junction Field
Office in Colorado, finalized by the Biden administration.
CBO estimates this section will generate up to $80
million in new revenue and savings for the federal government.

Sec. 80306. Rescission of Forest Service Funds

Rescinds the remaining funds made available to the
U.S. Forest Service (USFS) in the IRA for the Biden
administration's Old-Growth Initiative.
CBO estimates this section will generate up to $8
million in savings for the federal government.

Sec. 80307. Rescission of National Park Service and Bureau of Land
Management Funds

Rescinds the remaining funds made available to the
National Park Service (NPS) and BLM in the IRA for a
``conservation and resilience'' slush fund.
CBO estimates this section will generate up to $7
million in savings for the federal government.

Sec. 80308. Rescission of Bureau of Land Management and National Park
Service Funds

Rescinds the remaining funds made available to the
NPS and the BLM in the IRA for a ``conservation and ecosystem
restoration'' slush fund.
CBO estimates this section will generate up to $5
million in savings for the federal government.

Sec. 80309. Rescission of National Park Service Funds

Rescinds the remaining funds made available to the
NPS in the IRA to hire new federal employees.
CBO estimates this section will generate up to
$267 million in savings for the federal government.

Sec. 80310. Celebrating America's 250th Anniversary

Provides $40 million to the Secretary of the
Interior to establish and maintain a statuary park named the
National Garden of American Heroes.
Provides $150 million to the Secretary of the
Interior for events, celebrations, and activities related to
the 250th anniversary of America's founding in 2026.

Sec. 80311. Long-Term Contracts for the Forest Serivce

On forests created from the public domain,
requires the USFS to enter into at least one 20-year contract
for timber harvesting per region annually for fiscal year (FY)
2025 through FY 2029.
Sets standard terms and conditions for the
contract, including special provisions for cancellation
ceilings.
Requires all contract funds to be deposited into
the General Fund of the Treasury.
CBO estimates this section will generate up to
$110 million in new revenue and savings for the federal
government.

Sec. 80312. Long-Term Contracts for the Bureau of Land Management

Requires the BLM to enter into no less than one
20-year contract for timber harvesting annually between FY 2025
through FY 2029.
Sets standard terms and conditions for the
contract, including special provisions for cancellation
ceilings.
Requires all contract funds to be deposited into
the General Fund of the Treasury.
CBO estimates this section will generate up to $40
million in new revenue and savings for the federal government.

Sec. 80313. Timber Production for the Forest Service

Directs the Secretary of Agriculture, within one
year of this section's enactment, to authorize timber harvests
on National Forest System lands that equal or exceed a volume
25 percent higher than the volume harvested during fiscal year
2024.
Stipulates that such harvests must be in
accordance with the allowable sale quantity or probable sale
quantity of timber applicable to a certain area of federal
lands.
Specifies that this provision applies to forests
created from the public domain and does not apply to wilderness
areas, roadless areas, or areas where timber harvesting is
prohibited by statute.

Sec. 80314. Timber Production for the Bureau of Land Management

Directs the Secretary of the Interior, within one
year of this section's enactment, to authorize timber harvests
on public lands under the jurisdiction of the BLM that equal or
exceed a volume 25 percent higher than the volume harvested
during fiscal year 2024.
Stipulates that such harvests must be in
accordance with the applicable RMP.
Specifies that this provision does not apply to
wilderness areas or areas where timber harvesting is prohibited
by statute.
CBO estimates this section will generate up to $8
million in new revenue and savings for the federal government.

Sec. 80315. Bureau of Land Management Land in Nevada

Directs the sale of certain BLM lands in Lyon
County, Nevada, to the City of Fernley, which must pay all
costs associated with the conveyances.
Directs the sale of certain BLM lands in Clark
County, Nevada, including those identified for disposal by the
BLM. Ensures compliance with local planning and zoning laws.
Allows for additional disposal related to affordable housing.
Directs the sale of certain BLM lands in Washoe
County, Nevada, including those identified for disposal.
Establishes procedures to evaluate additional land for
disposal, including land for affordable housing. Ensures
compliance with local planning and zoning laws.
Consolidates checkerboard land ownership in
Pershing County, Nevada. Stipulates the selection of parcels
between the BLM and Pershing County. Provides for the methods
of sale and authorizes equal-value land exchanges.
Stipulates conditions for the method of sale, mass
appraisal procedures, conveyance costs, and the map and legal
description of land to be sold.
Clarifies that no NPS lands are conveyed or
affected by this section.
Directs proceeds from all sales in this section to
be deposited into the General Fund of the Treasury.

Sec. 80316. Forest Service Land in Nevada

Directs the sale of certain USFS lands in Washoe
County, Nevada.
Stipulates the selection of parcels between USFS
and Washoe County and ensures compliance with local planning
and zoning laws.
Allows for the sale of additional USFS land for
affordable housing.
Stipulates conditions for the method of sale, mass
appraisal procedures, conveyance costs, and the map and legal
description of land to be sold.
Clarifies that no NPS lands are conveyed or
affected by this section.
Directs the proceeds from all sales in this
section to be deposited into the General Fund of the Treasury.

Sec. 80317. Federal Land in Utah

Directs the sale of certain BLM lands in Beaver
and Washington Counties in Utah. The land will be conveyed to
Beaver County, Washington County, the City of St. George, or
the Washington County Water Conservancy District.
Stipulates conditions for the method of sale, mass
appraisal procedures, conveyance costs, and the map and legal
description of land to be sold.
Clarifies that no NPS lands are conveyed or
affected by this section.
Directs the proceeds from all sales in this
section to be deposited into the General Fund of the Treasury.

TITLE IX--COMMITTEE ON OVERSIGHT AND
GOVERNMENT REFORM

Section-by-Section Analysis

Section 90001. Increase in FERS Employee Contribution Requirements

This section amends 5 U.S.C. 8422(a)(3) to raise
contributions for Federal Employees Retirement System (FERS)
and FERS Revised Annuity Employees (FERS-RAE) annuity
participants to align with FERS-RAE annuity participants
beginning January 1, 2026 and going into full effect on January
1, 2027.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Hired/Entered FERS Before FERS-RAE, Hired/Entered FERS FERS-FRAE Hired/Entered FERS
Current Effective Employee Contribution Rates 2013 in 2013 After 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
Employee...................................................... 7 9.3 10.6
Congressional employee........................................ 7.5 9.3 10.6
Member........................................................ 7.5 9.3 10.6
Law enforcement officer, firefighter, member of the Capitol 7.5 9.8 11.1
Police, member of the Supreme Court Police, or air traffic
controller...................................................
Nuclear materials courier..................................... 7.5 9.8 11.1
Customs and border protection officer......................... 7.5 9.8 11.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------
Hired/Entered FERS Before FERS-RAE, Hired/Entered FERS FERS-FRAE, Hired/Entered
2026 Rates 2013 in 2013 FERS After 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
Employee...................................................... 8.8 9.95 10.6
Congressional employee........................................ 9.3 9.95 10.6
Member........................................................ 9.3 9.95 10.6
Law enforcement officer, firefighter, member of the Capitol 7.5 9.8 11.1
Police, member of the Supreme Court Police, or air traffic
controller...................................................
Nuclear materials courier..................................... 7.5 9.8 11.1
Customs and border protection officer......................... 7.5 9.8 11.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------
Hired/Entered FERS Before FERS-RAE, Hired/Entered FERS FERS-FRAE, Hired/Entered
Proposed 2027 and beyond Rates 2013 in 2013 FERS After 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
Employee...................................................... 10.6 10.6 10.6
Congressional employee........................................ 11.1 10.6 10.6
Member........................................................ 11.1 10.6 10.6
Law enforcement officer, firefighter, member of the Capitol 7.5 9.8 11.1
Police, member of the Supreme Court Police, or air traffic
controller...................................................
Nuclear materials courier..................................... 7.5 9.8 11.1
Customs and border protection officer......................... 7.5 9.8 11.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

Section 90002. Elimination of FERS Annuity Supplement

Subsection (a) amends 5 U.S.C. 8421(a) to
eliminate the FERS annuity supplemental retirement benefits for
all FERS annuitants except those mandatorily separated from
service under 5 U.S.C. 8425.
Subsection (b) prevents the amendments made by
this section from applying to those entitled to an annuity
supplement under 5 U.S.C. 8421 prior to the date of enactment.

Section 90003. High-5 Average Pay for Calculating CSRS and FERS Pension

Subsection (a) amends 5 U.S.C. 8331(4) to provide
that defined benefit calculations for federal employees
retiring under the Civil Service Retirement System (CSRS) on or
after January 1, 2027, be based on the five consecutive highest
earning years (a change from the highest three consecutive
highest earning years). This change does not apply to groups
identified in 5 U.S.C. 8336(c) or (e) and 5 U.S.C. 8341(d) or
(e)(1) (federal law enforcement officers, U.S Supreme Court and
Capitol Police Officers, firefighters, nuclear materials
couriers, air traffic controllers, and customs and border
protection officers).
Subsection (b) amends 5 U.S.C. 8401(3) to provide
that defined benefit calculations for federal employees
retiring under the Federal Employee Retirement System (FERS) on
or after January 1, 2027, be based on the five consecutive
highest earning years (a change from the highest three
consecutive highest earning years). This change does not apply
to groups identified in 5 U.S.C. 8336(c) or (e) and 5 U.S.C.
8341(d) or (e)(1) (federal law enforcement officers, U.S
Supreme Court and Capitol Police Officers, firefighters,
nuclear materials couriers, air traffic controllers, and
customs and border protection officers).
Subsection (c) makes conforming amendments to 5
U.S.C. 8311 note to reflect the changes made by this provision.

Section 90004. Election for At-Will Employment and Lower FERS
Contributions for New Federal Civil Service Hires

Subsection (a) adds a new section Sec. 3330g
(Election for at-will employment and lower FERS contributions.)
to 5 U.S.C. Chapter 33 (Examination, Selection, and Placement.)
to provide that an individual appointed to a covered position
shall choose to permanently elect to be employed on an ``at-
will basis'' or not. The FERS employee contribution rate for an
individual who does not make such an election to be treated as
an ``at-will'' employee shall be increased by 5%.
Subsection (b) provides for a conforming amendment
to 5 U.S.C. 8422(a) to reflect the FERS contribution rate for
an individual who does not elect to be employed on an ``at-will
basis.''
Subsection (c) prevents the amendments made by
this section from applying to those appointed to positions in
the civil service prior to the date of enactment.

Section 90005. Filing Fee for Merit Systems Protection Board Claims and
Appeals

Subsection (a) provides that the Merit Systems
Protection Board (MSPB) shall collect filing fees from
claimants for appeal with the Board. The filing fee shall
amount to the filing fee for civil actions, suits, or district
court proceedings. The filing fee shall not be required for
certain Special Council actions nor claims or appeals
associated with certain prohibited personnel practices. The fee
shall be paid on the date of the respective filing and returned
if the filer prevails in their respective claim or appeal. The
filing fee associated with a claim to which the individual is
not the prevailing party or appeal is exhausted or expired
shall be deposited as a miscellaneous Treasury receipt.
Subsection (b) provides that filing fees shall
apply to any claim or appeal filed with the MSPB three months
following the date of enactment.

Section 90006. FEHB Protection

Subsection (a) requires the Office of Personnel
Management (OPM) to issue regulations and implement a process
to verify the addition of an enrollee's family member to a
health benefits plan under the Federal Employee Health Benefit
Program (FEHBP). This subsection also requires OPM to commence
a 5-year government-wide audit to verify the eligibility of
family members covered under an FEHBP enrollment and requires
the disenrollment or removal of any individual found to be
ineligible from FEHBP coverage.
Subsection (b) amends 5 U.S.C. 8909 (Employees
Health Benefits Fund.) to direct $473,267,927 in funding
through 2034 (and 2.2% annual increase thereafter) for OPM to
develop, maintain, and conduct oversight over the enrollment
and eligibility of FEHBP systems. This subsection also directs
$80,000,000 to OPM to conduct the audit required under
subsection (a) and further directs a total of $5,090,278
starting in fiscal year 2026 (and 2.2% annual increase
thereafter--approximately $50,057,934 total over the ten year
period) for the OPM inspector general to audit the enrollment
and eligibility in the FEHBP.

TITLE X--COMMITTEE ON TRANSPORTATION AND INFRSTRUCTURE

Section-by-Section Analysis of the Committee Print

Sec. 100001. Coast Guard Assets Necessary to Secure the Maritime Border
and Interdict Migrants and Drugs

This section provides $21.2 billion to the United States
Coast Guard (Coast Guard or the Service) for the acquisition,
sustainment, improvement, and operations of Coast Guard assets
necessary to provide presence, surveillance, and security of
the maritime border. Specifically this section makes the
following funds available for obligation through September 30,
2029: $571.5 million for fixed wing aircraft; $1.283 billion
for rotary wing aircraft; $140 million for long-range unmanned
aircraft and base stations; $4.3 billion for Offshore Patrol
Cutters; $1 billion for Fast Response Cutters; $4.3 billion for
Polar Security Cutters; $4.978 billion for Arctic Security
Cutters and domestic icebreakers; $3.154 billion for shoreside
infrastructure, of which $400 million is for hangars,
maintenance, and crew facilities for fixed wing aircraft and
rotary wing aircraft, $2.33 billion is for homeports for
Offshore Patrol Cutters, Fast Response Cutters, Arctic Security
Cutters, Polar Security Cutters, and National Security Cutters,
and $425 million for design, engineering, construction
management of, and program management for enlisted boot camp
recapitalization, including barracks' replacement and a multi-
use training center; $1.3 billion for aviation, cutter, and
shoreside facility depot maintenance, of which $500 million is
for a floating dry dock; and $180 million for maritime domain
awareness, of which $75 million is for autonomous surface
assets.
This section waives certain acquisitions requirements under
chapter 11 of title 14, United States Code, related to
acquisition, procurement, and construction for programs funded
with appropriations under this section. Additionally, this
section allows the use of a vessel construction manager for the
construction of a floating drydock, Arctic Security Cutters, or
domestic icebreakers. It also limits design, planning and
engineering to 15 percent of the amount appropriated.
Before spending funds appropriated by this section, the
Coast Guard is required to submit overdue reports on Coast
Guard acquisition, provide an expenditure plan, and notify the
Congressional committees of jurisdiction before taking actions
impacting estimated acquisition costs or timelines. Finally,
the President is required to notify the Congressional
Committees of jurisdiction before exercising an exception under
section 1151(b) of title 14, United States Code.

Sec. 100002. Changes to Mandatory Benefits Programs to Allow Selected
Reserve Orders for Preplanned Missions to Secure Maritime
Borders and Interdict Persons and Drugs

This section gives the Commandant of the Coast Guard the
authority to order any member of the Selected Reserve to active
duty for no more than 365 consecutive days to conduct
preplanned missions.
Under current law, the Coast Guard has authority to call up
reservists to respond to emergencies. In contrast, the
Department of Defense has the authority to call up the
reservists of the other five armed forces both to respond to
emergencies and to conduct preplanned activities. This section
provides the Coast Guard parity with the other armed forces.

Sec. 100003. Vessel Tonnage Duties

This section increases vessel tonnage duties imposed on
vessels that enter the United States from a foreign port or
place or depart from and return to a United States port or
place after a ``voyage to nowhere.'' Current tonnage duty rates
were established in 1909 and were temporarily increased in
fiscal years (FYs) 2006 through 2010. This section returns the
tonnage duty level to the amount that was imposed in FYs 2006
through 2010.

Sec. 100004. Registration Fee on Motor Vehicles

This section directs the Administrator of the Federal
Highway Administration (FHWA) to impose the following Federal
annual motor vehicle registration fees: $250 for an electric
vehicle and $100 for a hybrid vehicle. This section also
requires each fee to be increased annually for inflation.
Covered motor vehicles include vehicles intended for roadway
use but exclude commercial motor vehicles and covered farm
vehicles. This section requires that the collection of fees for
electric vehicles and hybrid vehicles begins no later than the
end of FY 2026 and that these fees terminate in FY 2035.
This section instructs state departments of transportation
to collect the fees and remit the balance of the fees collected
monthly to the FHWA Administrator. If a state fails to remit
collected fees required under this section, FHWA will withhold
Federal highway formula funding at an amount equal to 125
percent of the fees that were required to be remitted.
Additionally, this section provides $104 million for states
to establish the registration fee process, providing that a
state may receive not more than $2 million. A state found to be
in compliance with this section is permitted to retain up to
one percent of total fees collected by that state for
administrative expenses.
This section requires the FHWA Administrator to issue any
necessary regulations and guidance to carry out this section.
This section also requires that the Administrator report to
Congress on the status of implementation.

Sec. 100005. Deposit of Registration Fee on Motor Vehicles

This section provides that amounts accrued pursuant to 23
U.S.C. 180 (the fees on motor vehicles created in section
100004 of this Committee Print) are deposited into the Highway
Trust Fund.

Sec. 100006. Motor Carrier Data

This section provides $5 million to the Administrator of
the Federal Motor Carrier Safety Administration (FMCSA) to
establish a public website that details whether each motor
carrier, as defined in section 13102, of title 49 United States
Code, meets FMCSA operating requirements. Additionally, this
section establishes an annual $100 fee for accessing the
website. This section also details that a broker, freight
forwarder, or household goods freight forwarder who relies on
the website's determinations of whether motor carriers have met
FMCSA requirements has made reasonable and prudent
determinations when engaging that motor carrier.

Sec. 100007. IRA Rescissions

This section permanently rescinds unobligated balances for
seven programs created under the Inflation Reduction Act:
alternative fuel and low-emission aviation technology program,
neighborhood access and equity grant program, Federal building
assistance, use of low-carbon materials for Federal building
assistance, General Services Administration emerging
technologies, environmental review implementation funds, and
low-carbon transportation materials grants.

Sec. 100008. Air Traffic Control Staffing and Modernization

This section appropriates $12.5 billion to the
Administrator of the Federal Aviation Administration (FAA) for
the acquisition, sustainment, improvement, and operation of
facilities and equipment necessary to improve or maintain
aviation safety, as well as supporting the personnel related to
those facilities. Specifically, the section makes the following
funds available for obligation until September 30, 2029: $2.16
billion for air traffic control tower and terminal radar
approach control facility replacement, of which at least $240
million will be available for Contract Tower Program air
traffic control tower replacement and airport sponsor-owned air
traffic control tower replacement; $3 billion for radar systems
replacement; $4.75 billion for telecommunications
infrastructure replacement; $500 million for runway safety
projects, airport surface surveillance projects, and to carry
out section 347 of the FAA Reauthorization Act of 2024 related
to surface safety risk mitigation; $550 million for unstaffed
infrastructure sustainment and replacement; $300 million to
carry out section 619 of the FAA Reauthorization Act of 2024
related to NextGen programs; $260 million to carry out the Don
Young Alaska Aviation Safety Initiative; and $1 billion for air
traffic controller recruitment, retention, training, and
advanced training technologies. Additionally, this section
requires the FAA Administrator to provide a quarterly report on
how these funds have been expended.

Sec. 100009. John F. Kennedy Center for the Performing Arts
Appropriations

This section appropriates nearly $241.8 million, which will
remain available for obligation until September 30, 2029, for
expenses related to capital repair and restoration of the John
F. Kennedy Center for the Performing Arts (Kennedy Center). The
section also appropriates $7.7 million, which is available for
obligation until September 30, 2026, for the operation,
maintenance, and security at the Kennedy Center. Additionally,
the section appropriates $7.2 million, available until
September 30, 2029, for administrative expenses.

TITLE XI--COMMITTEE ON WAYS AND MEANS

``THE ONE, BIG, BEAUTIFUL BILL''

Page
TITLE XI--COMMITTEE ON WAYS AND MEANS............................ 2023
Subtitle A--Make American Families and Workers Thrive Again...... 2023
Part 1--Permanently Preventing Tax Hikes on American Families
and Workers................................................ 2023
Sec. 110001. Extension of modication of rates............ 2023
Sec. 110002. Extension of increased standard deduction
and temporary enhancement.............................. 2024
Sec. 110003. Termination of deduction for personal
exemptions............................................. 2024
Sec. 110004. Extension of increased child tax credit and
temporary enhancement.................................. 2024
Sec. 110005. Extension of deduction for qualified
business income and permanent enhancement.............. 2025
Sec. 110006. Extension of increased estate and gift tax
exemption amounts and permanent enhancement............ 2026
Sec. 110007. Extension of increased alternative minimum
tax exemption and phase-out thresholds................. 2026
Sec. 110008. Extension of limitation on deduction for
qualified residence interest........................... 2026
Sec. 110009. Extension of limitation on casualty loss
deduction.............................................. 2026
Sec. 110010. Termination of miscellaneous itemized
deduction.............................................. 2026
Sec. 110011. Limitation on tax benefit of itemized
deductions............................................. 2027
Sec. 110012. Termination of qualified bicycle commuting
reimbursement exclusion................................ 2027
Sec. 110013. Extension of limitation on exclusion and
deduction for moving expenses.......................... 2027
Sec. 110014. Extension of limitation on wagering losses.. 2027
Sec. 110015. Extension of increased limitation on
contributions to ABLE accounts and permanent
enhancement............................................ 2028
Sec. 110016. Extension of savers credit allowed for ABLE
contributions.......................................... 2028
Sec. 110017. Extension of rollovers from qualified
tuition programs to ABLE accounts permitted............ 2028
Sec. 110018. Extension of treatment of certain
individuals performing services in the Sinai Peninsula
and enhancement to include additional areas............ 2028
Sec. 110019. Extension of exclusion from gross income of
student loans discharged on account of death or
disability............................................. 2028
Part 2--Additional Tax Relief for American Families and
Workers.................................................... 2029
Sec. 110101. No tax on tips.............................. 2029
Sec. 110102. No tax on overtime.......................... 2029
Sec. 110103. Enhanced deduction for seniors.............. 2029
Sec. 110104. No tax on car loan interes.................. 2030
Sec. 110105. Enhancement of employer-provided child care
credit................................................. 2030
Sec. 110106. Extension and enhancement of paid family and
medical leave credit................................... 2031
Sec. 110107. Enhancement of adoption credit.............. 2031
Sec. 110108. Recognizing Indian tribal governments for
purposes of determining whether a child has special
needs for purposes of the adoption credit.............. 2031
Sec. 110109. Tax credit for contributions of individuals
to scholarship granting organizations.................. 2032
Sec. 110110. Additional elementary, secondary, and home
school expenses treated as qualified higher education
expenses for purposes of 529 accounts.................. 2032
Sec. 110111. Certain postsecondary credentialing expenses
treated as qualified higher education expenses for
purposes of 529 accounts............................... 2032
Sec. 110112. Reinstatement of partial deduction for
charitable contributions of individuals who do not
elect to itemize....................................... 2033
Sec. 110113. Exclusion for certain employer payments of
student loans under educational assistance programs
made permanent and adjusted for inlation............... 2033
Sec. 110114. Extension of rules for treatment of certain
disaster-related personal casualty losses.............. 2033
Sec. 110115. MAGA accounts............................... 2033
Sec. 110116. MAGA accounts contribution pilot program.... 2034
Part 3--Investing in Health of American Families and Workers. 2035
Sec. 110201. Treatment of health reimbursement
arrangements integrated with individual market coverage 2035
Sec. 110202. Participants in CHOICE arrangement eligible
for purchase of Exchange insurance under cafeteria plan 2035
Sec. 110203. Employer credit for CHOICE arrangement...... 2035
Sec. 110204. Individuals entitled to Part A of Medicare
by reason of age allowed to contribute to health
savings accounts....................................... 2035
Sec. 110205. Treatment of direct primary care service
arrangements........................................... 2036
Sec. 110206. Allowance of bronze and catastrophic plans
in connection with health savings accounts............. 2036
Sec. 110207. On-site employee clinics.................... 2036
Sec. 110208. Certain amounts paid for physical activity,
fitness, and exercise treated as amounts paid for
medical care........................................... 2036
Sec. 110209. Allow both spouses to make catch-up
contributions to the same health savings account....... 2036
Sec. 110210. FSA and HRA terminations or conversions to
fund HSAs.............................................. 2037
Sec. 110211. Special rule for certain medical expenses
incurred before establishment of health savings account 2037
Sec. 110212. Contributions permitted if spouse has health
fiexible spending arrangement.......................... 2037
Sec. 110213. Increase in health savings account
contribution limitation for certain individuals........ 2037
Sec. 110214. Regulations................................. 2037
Subtitle B--Make Rural America and Main Street Grow Again........ 2038
Part 1--Extension of Tax Cuts and Jobs Act Reforms for Rural
America and Main Street.................................... 2038
Sec. 111001. Extension of special depreciation allowance
for certain property................................... 2038
Sec. 111002. Deduction of domestic research and
experimental expenditures.............................. 2038
Sec. 111003. Modified calculation of adjusted taxable
income for purposes of business interest deduction..... 2038
Sec. 111004. Extension of deduction for foreign-derived
intangible income and global intangible low-taxed
income................................................. 2039
Sec. 111005. Extension of base erosion minimum tax amount 2039
Part 2--Additional Tax Relief for Rural America and Main
Street..................................................... 2039
Sec. 111101. Special depreciation allowance for qualified
production property.................................... 2039
Sec. 111102. Renewal and enhancement of opportunity zones 2040
Sec. 111103. Increased dollar limitations for expensing
of certain depreciable business assets................. 2042
Sec. 111104. Repeal of revision to de minim is rules for
third party network transactions....................... 2042
Sec. 111105. Increase in threshold for requiring
information reporting with respect to certain payees... 2043
Sec. 111106. Repeal of excise tax on indoor tanning
services............................................... 2043
Sec. 111107. Exclusion of interest on loans secured by
rural or agricultural real property.................... 2043
Sec. 111108. Treatment of certain qualified sound
recording productions.................................. 2044
Sec. 111109. Modifications to low-income housing credit.. 2044
Sec. 111110. Increased gross receipts threshold for small
manufacturing businesses............................... 2044
Sec. 111111. Global intangible low-taxed income
determined without regard to certain income derived
from services performed in the Virgin Islands.......... 2045
Sec. 111112. Extension and modification of clean fuel
production credit...................................... 2045
Part 3--Investing in the Health of Rural America and Main
Street..................................................... 2046
Sec. 111201. Expanding the definition of rural emergency
hospital under the Medicare program.................... 2046
Subtitle C--Make America Win Again............................... 2046
Part 1--Working Families Over Elites......................... 2046
Sec. 112001. Termination of previously-owned clean
vehicle credit......................................... 2046
Sec. 112002. Termination of clean vehicle credit......... 2046
Sec. 112003. Termination of qualified commercial clean
vehicles credit........................................ 2047
Sec. 112004. Termination of alternative fuel vehicle
refueling property credit.............................. 2047
Sec. 112005. Termination of energy efficient home
improvement credit..................................... 2047
Sec. 112006. Termination of residential clean energy
credit................................................. 2047
Sec. 112007. Termination of new energy efficient home
credit................................................. 2047
Sec. 112008. Phase-out and restrictions on clean
electricity production credit.......................... 2048
Sec. 112009. Phase-out and restrictions on clean
electricity investment credit.......................... 2049
Sec. 112010. Repeal of transferability of clean fuel
production credit...................................... 2050
Sec. 112011. Restrictions on carbon oxide sequestration
credit................................................. 2050
Sec. 112012. Phase-out and restrictions on zero-emission
nuclear power production credit........................ 2050
Sec. 112013. Termination of clean hydrogen production
credit................................................. 2051
Sec. 112014. Phase-out and restrictions on advanced
manufacturing production credit........................ 2051
Sec. 112015. Phase-out of credit for certain energy
property............................................... 2052
Sec. 112016. Income from hydrogen storage, carbon capture
added to qualifying income of certain publicly traded
partnerships treated as corporations................... 2052
Sec. 112017. Limitation on amortization of certain sports
franchises............................................. 2053
Sec. 112018. Limitation on individual deductions for
certain State and local taxes, etc..................... 2053
Sec. 112019. Excessive employee renumeration from
controlled group members and allocation of deduction... 2054
Sec. 112020. Expanding application of tax on excess
compensation within tax-exempt organizations........... 2054
Sec. 112021. Modification of excise tax on investment
income of certain private colleges and universities.... 2054
Sec. 112022. Increase in rate of tax on net investment
income of certain private foundations.................. 2055
Sec. 112023. Certain purchases of employee-owned stock
disregarded for purposes of foundation tax on excess
business holdings...................................... 2055
Sec. 112024. Unrelated business taxable income increased
by amount of certain fringe benefit expenses for which
deduction is disallowed................................ 2056
Sec. 112025. Name and logo royalties treated as unrelated
business taxable income................................ 2056
Sec. 112026. Exclusion of research income limited to
publicly available research............................ 2056
Sec. 112027. Limitation on excess business losses of
noncorporate taxpayers................................. 2056
Sec. 112028. 1-percent floor on deduction of charitable
contributions made by corporations..................... 2057
Sec. 112029. Enforcement of remedies against unfair
foreign taxes.......................................... 2057
Sec. 112030. Reduction of excise tax on firearms
silencers.............................................. 2057
Sec. 112031. Modifications to de minimis entry privilege
for commercial shipments............................... 2058
Sec. 112032. Limitation on drawback of taxes paid with
respect to substituted merchandise..................... 2058
Part 2--Removing Taxpayer Benefits for Illegal Immigrants.... 2058
Sec. 112101. Permitting premium tax credit only for
certain individuals.................................... 2058
Sec. 112102. Certain aliens treated as ineligible for
premium tax credit..................................... 2058
Sec. 112103. Disallowing premium tax credit during
periods of Medicaid ineligibility due to alien status.. 2058
Sec. 112104. Limiting Medicare coverage of certain
individuals............................................ 2059
Sec. 112105. Excise tax on remittance transfers.......... 2059
Sec. 112106. Social Security number requirement for
American opportunity and lifetime learning credits..... 2059
Part 3--Preventing Fraud, Waste, and Abuse................... 2060
Sec. 112201. Requiring Exchange verification of
eligibility for health plan............................ 2060
Sec. 112202. Disallowing premium tax credit in case of
certain coverage enrolled in during special enrollment
period................................................. 2060
Sec. 112203. Eliminating limitation on recapture of
advance payment of premium tax credit.................. 2060
Sec. 112204. Implementing artificial intelligence tools
for purposes of reducing and recouping improper
payments under Medicare................................ 2060
Sec. 112205. Enforcement provisions with respect to
COVID-related employee retention credits............... 2060
Sec. 112206. Earned income tax credit reforms............ 2061
Sec. 112207. Task force on the termination of Direct File 2062
Sec. 112208. Postponement of tax deadlines for hostages
and individuals wrongfully detained abroad............. 2062
Sec. 112209. Termination of tax-exempt status of
terrorist supporting organizations..................... 2062
Sec. 112210. Increase in penalties for unauthorized
disclosures of taxpayer information.................... 2063
Sec. 112211. Restriction on regulation of contingency
fees with respect to tax returns, etc.................. 2063
Subtitle D--Increase in Debt Limit........................... 2063
Sec. 113001. Modification of limitation on the public
debt................................................... 2063

Title XI--COMMITTEE ON WAYS AND MEANS

Section-by-Section

SUBTITLE A--MAKE AMERICAN FAMILIES AND WORKERS THRIVE AGAIN

PART I--PERMANENTLY PREVENTING TAX HIKES ON AMERICAN FAMILIES AND
WORKERS

Sec. 110001. Extension of modification of rates

Current Law: Under current law, the modified federal income
tax bracket schedule and lower tax rates are set to expire
after December 31, 2025.
Provision: This provision makes permanent the modified
federal income tax bracket schedule and lower tax rates created
by the Tax Cuts and Jobs Act. The provision also adds an
additional year of inflation adjustment to all brackets except
for the top bracket (37 percent).

----------------------------------------------------------------------------------------------------------------
Tax Rates & Brackets (2026)
-----------------------------------------------------------------------------------------------------------------
Bracket Current Law Provision
----------------------------------------------------------------------------------------------------------------
1................................................. 10.0% 10.0%
2................................................. 15.0% 12.0%
3................................................. 25.0% 22.0%
4................................................. 28.0% 24.0%
5................................................. 33.0% 32.0%
6................................................. 35.0% 35.0%
7................................................. 39.6% 37.0%
----------------------------------------------------------------------------------------------------------------

Sec. 110002. Extension of increased standard deduction and temporary
enhancement

Current Law: Under current law, the increased standard
deduction is set to expire after December 31, 2025.
Provision: This provision makes permanent the nearly
doubled standard deduction created by the Tax Cuts and Jobs
Act. The provision further increases the standard deduction by
including an extra year of inflation adjustment. Additionally,
for tax years 2025 through 2028, this provision increases the
standard deduction by an additional $1,000 for a single filer,
$1,500 for head of household, and $2,000 for married filing
jointly. The impact of these modifications to the standard
deduction for 2026, according to filing status, is summarized
below.

----------------------------------------------------------------------------------------------------------------
Standard Deduction (2026)
-----------------------------------------------------------------------------------------------------------------
Filing Status Current Law Provision
----------------------------------------------------------------------------------------------------------------
Single............................................ $ 8,300 $16,300
Head of Household................................. $12,150 $24,500
Married Filing Jointly............................ $16,600 $32,600
----------------------------------------------------------------------------------------------------------------

Sec. 110003. Termination of deduction for personal exemptions

Current Law: Under current law, the deduction for personal
exemptions is set to return after December 31, 2025.
Provision: This provision permanently repeals the deduction
for personal exemptions.

Sec. 110004. Extension of increased child tax credit and temporary
enhancement

Current Law: Under current law, the child tax credit will
return to pre-2017 levels after December 31, 2025. This means
that the credit amount will drop from $2,000 to $1,000 per
child, the child Social Security number (SSN) requirement will
be eliminated, and fewer American families will qualify for the
credit as the income phase-out levels return to much lower
thresholds. Additionally, the $500 nonrefundable credit for
non-child dependents will expire after December 31, 2025.
Provision: This provision makes permanent the doubled child
tax credit of $2,000 per child, maintains the increased income
phase-out thresholds, and maintains the nonrefundable, non-
child dependent credit. Additionally, this provision
permanently indexes the credit amount for inflation beginning
after 2026 (rounded down to the nearest $100) and leaves the
refundable credit unchanged.
Furthermore, the requirement of the child's SSN for
purposes of claiming the credit is maintained and expanded upon
to require the taxpayer's SSN and, for joint filers, the
spouse's SSN in order to claim the credit. The SSNs provided
must be considered work-eligible in order to claim the credit.
Additionally, this provision increases the child tax credit
to $2,500 per child for tax years 2025 through 2028.
Finally, this provision allows for the election to treat
income from a 501(d) organization as earned income for purposes
of the CTC.

Sec. 110005. Extension of deduction for qualified business income and
permanent enhancement

Current Law: Under current law, an individual generally may
deduct 20 percent of qualified business income from a
partnership, S corporation, or sole proprietorship, as well as
20 percent of certain real estate investment trust dividends
and publicly traded partnership income. The deduction is
limited to 20 percent of taxable income minus net capital gain.
Special rules apply to taxpayers with taxable income in
excess of the ``threshold amount,'' which, for tax year 2025,
is $394,600 for married taxpayers filing jointly and $197,300
for all other taxpayers. The threshold amount is indexed
annually for inflation. For taxpayers with taxable income in
excess of the threshold amount, the deduction for qualified
business income is limited based on (1) the W-2 wages and
capital investment of each relevant business (the ``wage and
investment limitation''), and (2) whether each relevant
business is a specified service trade or business (the ``SSTB
limitation''). Both limitations phase in over a fixed range of
taxable income ($100,000 for married taxpayers filing jointly
and $50,000 for all other taxpayers). Due to the structure of
these phase-ins, some taxpayers are subject to marginal tax
rates close to 70 percent.
The deduction for qualified business income is set to
expire for taxable years beginning after December 31, 2025.
Provision: This provision makes the deduction for qualified
business income permanent. For taxable years beginning after
December 31, 2025, this provision also increases the deduction
percentage from 20 percent to 23 percent.
This provision also modifies the phase-in of the wage and
investment limitation and the SSTB limitation. Under this
provision, instead of phasing in over a fixed range of taxable
income, these limitations phase in at a fixed rate.
Specifically, for each dollar of taxable income over the
threshold amount, a taxpayer's deduction for qualified business
income is reduced by 75 cents until both limitations are fully
phased in. This change prevents taxpayers from being subject to
marginal tax rates close to 70 percent.
Additionally, this provision modifies the calculation of
the threshold amount by adding an additional year of inflation
adjustment.
This provision also makes certain income of business
development companies (as defined in the Investment Company Act
of 1940) eligible for the qualified business income deduction.

Sec. 110006. Extension of increased estate and gift tax exemption
amounts and permanent enhancement

Current Law: Under current law, the increased estate and
lifetime gift tax exemption amount is set to expire after
December 31, 2025.
Provision: This provision permanently extends the estate
and lifetime gift tax exemption, increases the exemption amount
to $15 million for single filers ($30 million for married
filing jointly) in 2026, and indexes the exemption amount for
inflation going forward.

Sec. 110007. Extension of increased alternative minimum tax exemption
and phase-out thresholds

Current Law: Under current law, the increased individual
alternative minimum tax exemption amounts and exemption phase-
out thresholds are set to expire for taxable years beginning
after December 31, 2025.
Provision: This provision permanently extends the increased
individual alternative minimum tax exemption amounts and
exemption phase-out thresholds.

Sec. 110008. Extension of limitation on deduction for qualified
residence interest

Current Law: Under current law, the deduction for qualified
residence interest, also known as the home mortgage interest
deduction, is set to increase from the first $750,000 in home
mortgage acquisition debt to $1 million after December 31,
2025.
Provision: This provision permanently lowers the deduction
for qualified residence interest to the first $750,000 in home
mortgage acquisition debt.

Sec. 110009. Extension of limitation on casualty loss deduction

Current Law: Under current law, the itemized deduction for
uncompensated personal casualty losses resulting from a fire,
storm, shipwreck, other casualty, or theft is set to return
after December 31, 2025.
Provision: This provision permanently allows for the
itemized deduction for only personal casualty losses resulting
from federally declared disasters.

Sec. 110010. Termination of miscellaneous itemized deduction

Current Law: Under current law, individuals will be
permitted to deduct certain miscellaneous itemized deductions
in taxable years beginning after December 31, 2025.
Provision: This provision permanently eliminates
miscellaneous itemized deductions.

Sec. 110011. Limitation on tax benefit of itemized deductions

Current Law: Under current law, in tax years beginning
after December 21, 2025 certain individual taxpayers will be
subject to an overall limitation on itemized deductions known
as the ``Pease limitation.'' In 2026, the Pease limitation is
expected to apply to taxpayers with adjusted gross income above
the following thresholds: $339,850 for single filers, $373,850
for head of household filers, and $407,850 for married joint
filers. A taxpayer subject to the Pease limitation is generally
required to reduce itemized deductions by three percent of the
amount by which the taxpayer's adjusted gross income exceeds
the applicable income threshold.
Additionally, the value of a taxpayer's itemized deductions
depends on the taxpayer's marginal income tax rate. For
instance, generally, for a taxpayer in the 37 percent
individual income tax bracket, each dollar of itemized
deductions has a value of $0.37.
Provision: This provision permanently repeals the Pease
limitation and replaces it with a new overall limitation on
itemized deductions. This provision caps the value of each
dollar of itemized deductions at $0.35, in most cases, and
applies only to taxpayers in the highest individual income tax
bracket. This new limitation is effective for taxable years
beginning after December 31, 2025.

Sec. 110012. Termination of qualified bicycle commuting reimbursement
exclusion

Current Law: Under current law, the $20 per month qualified
bicycle commuting reimbursement exclusion received by an
employee from an employer is set to return for taxable years
beginning after December 31, 2025.
Provision: This provision permanently eliminates the
qualified bicycle commuting reimbursement exclusion.

Sec. 110013. Extension of limitation on exclusion and deduction for
moving expenses

Current Law: Under current law, both the exclusion for
qualified moving expenses reimbursement and the deduction for
moving expenses are set to return for taxable years beginning
after December 31, 2025.
Provision: This provision permanently eliminates both the
exclusion for qualified moving expenses reimbursement and the
deduction for moving expenses, except for active-duty members
of the Armed Forces.

Sec. 110014. Extension of limitation on wagering losses

Current Law: Under current law, taxpayers can claim a
deduction for wagering losses to the extent of wagering
winnings. Other deductions connected to wagering may also be
claimed regardless of wagering winnings.
Provision: This provision permanently requires that all
deductions for expenses incurred in relation to wagering also
be limited to the extent of wagering winnings.

Sec. 110015. Extension of increased limitation on contributions to ABLE
accounts and permanent enhancement

Current Law: Under current law, the additional contribution
limit to Achieving a Better Life Experience (ABLE) accounts,
which is equal to the lesser of (1) the applicable federal
poverty level for a one-person household in the prior year, or
(2) the beneficiary's compensation for the year, is set to
expire on December 31, 2025.
Provision: This provision permanently allows the additional
contributions to ABLE accounts. The provision also provides an
additional year of inflation adjustment for the base amount of
the limit.

Sec. 110016. Extension of savers credit allowed for ABLE contributions

Current Law: Under current law, eligibility for the Saver's
Credit for designated beneficiaries who make qualified
contributions to their Achieving a Better Life Experience
(ABLE) accounts is set to expire on December 31, 2025.
Provision: This provision permanently allows designated
beneficiaries who make qualified contributions to their ABLE
account to qualify for the Saver's Credit.

Sec. 110017. Extension of rollovers from qualified tuition programs to
ABLE accounts permitted

Current Law: Under current law, the ability to make tax-
free rollovers of amounts from Section 529 qualified tuition
programs to qualified Achieving a Better Life Experience (ABLE)
programs is set to expire on December 31, 2025.
Provision: This provision permanently allows tax-free
rollovers of amounts in Section 529 qualified tuition programs
to qualified ABLE programs.

Sec. 110018. Extension of treatment of certain individuals performing
services in the Sinai Peninsula and enhancement to include
additional areas

Current Law: Under current law, the Sinai Peninsula will no
longer be considered a qualified hazardous duty area for tax
purposes after December 31, 2025.
Provision: This provision permanently lists the Sinai
Peninsula, in addition to Kenya, Mali, Burkina Faso, and Chad,
as a qualified hazardous duty area for tax purposes.

Sec. 110019. Extension of exclusion from gross income of student loans
discharged on account of death or disability

Current Law: Under current law, any income resulting from
the discharge of student debt on account of death or total
disability of the student is excluded from taxable income. This
treatment of discharge income due to death or disability is set
to expire after December 31, 2025.
Provision: This provision permanently extends the exclusion
from a taxpayer's income of any income resulting from the
discharge of student debt on account of death or total
disability of the student. This provision also adds Social
Security number requirements for the taxpayer in order to be
able to claim such exclusion.

PART 2--ADDITIONAL TAX RELIEF FOR AMERICAN FAMILIES AND WORKERS

Sec. 110101. No tax on tips

Current Law: Not applicable.
Provision: This provision creates an above-the-line
deduction for qualified tips received by an individual in an
occupation which traditionally and customarily receives tips
during a given taxable year. In order to be considered a
qualified tip, the tip amount must be paid voluntarily, is not
subject to negotiation, and is determined by the payor. The
deduction is allowed for both employees receiving a W-2 and
independent contractors receiving a 1099-K, 1099-NEC, or
reported by the taxpayer on Form 4317. Qualified tips must be
received voluntarily by an individual in an occupation that
traditionally and customarily receives tips on or before
December 31, 2024, as provided by the Secretary of the
Treasury. Furthermore, qualified tips do not include any amount
received in the course of a specified service trade or business
as defined in Internal Revenue Code (IRC) section 199A(d)(2)).
Additionally, highly compensated employees or workers with
earned income exceeding the dollar amount in elect under IRC
section 414(q)(1)(B)(i) are ineligible to receive the
deduction. A work-eligible Social Security number is required
in order to claim the deduction. The deduction is allowed from
tax years 2025 through 2028.

FICA Tip Tax Credit

Current Law: Under current law, the Federal Insurance
Contribution Act (FICA) tip tax credit is limited to cash tips
received for providing, serving, or delivering food or
beverages.
Provision: This provision expands the FICA tip tax credit
for a portion of the employer-paid Social Security taxes for
employee cash tips to include beauty service establishments.
The credit applies to tips received in connection with
providing beauty services to a customer or client if tipping
employees who provide the service is customary. Beauty services
include barbering and hair care, nail care, esthetics, and body
and spa treatments.

Sec. 110102. No tax on overtime

Current Law: Not applicable.
Provision: This provision creates an above-the-line
deduction for overtime premium pay during a given taxable year.
Qualified overtime compensation means 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. Additionally, taxpayers who are highly compensated
employees or with earned income exceeding the dollar amount in
elect under IRC section 414(q)(1)(B)(i) are ineligible to
receive the deduction. A work-eligible Social Security number
is required in order to claim the deduction. The deduction is
allowed from tax years 2025 through 2028.

Sec. 110103. Enhanced deduction for seniors

Current Law: Not applicable.
Provision: This provision provides a deduction for seniors
(age 65 or older) of $4,000 per eligible filer with a modified
adjusted gross income that does not exceed $75,000 for single
filers ($150,000 for married filing jointly). The senior
deduction is available to both itemizers and non-itemizers. The
deduction is allowed for tax years 2025 through 2028.

Sec. 110104. No tax on car loan interest

Current Law: Not applicable.
Provision: This provision creates an above-the-line
deduction of up to $10,000 for qualified passenger vehicle loan
interest during a given taxable year. The deduction phases out
starting when the taxpayer's modified adjusted gross income
exceeds $100,000 ($200,000 in the case of a joint return). For
purposes of the deduction, an applicable passenger vehicle of
which interest can be deducted is (1) manufactured primarily
for use on public streets, roads, and highways; (2) which has
at least two wheels; (3) which is a car, minivan, van, sport
utility vehicle, pickup truck, or motorcycle; and (4) the final
assembly of which occurs in the U.S. For the purposes of the
deduction, an applicable passenger vehicle also includes all-
terrain vehicles and recreational vehicles which the final
assembly of which occurs in the U.S. The deduction is allowed
from tax years 2025 through 2028.

Sec. 110105. Enhancement of employer-provided child care credit

Current Law: Under current law, the employer-provided child
care credit (section 45F) provides businesses a nonrefundable
tax credit of up to $150,000 per year on up to 25 percent of
qualified child care expenses provided to employees. Therefore,
an employer must spend at least $600,000 on child care related
expenses to receive the full credit. The credit has remained
unchanged since its creation in 1986.
Provision: This provision permanently increases the
employer-provided child care credit, creates a separate credit
amount for qualified small businesses, and indexes the maximum
credit amounts for inflation.
Specifically, this provision increases the maximum credit
from $150,000 to $500,000 and the percentage of qualified child
care expenses covered from 25 percent to 40 percent. Therefore,
a business must spend at least $1.25 million on child care
related expenses to receive the full credit. Additionally,
section 45F is further strengthened for small businesses by
increasing the maximum credit to $600,000 and the percent of
qualified child care expenses covered to 50 percent. Therefore,
a small business must spend at least $1.2 million on child care
related expenses to receive the full credit. An eligible small
business is one that meets the gross receipts test under
Internal Revenue Code section 448(c) for a five-year period.
Additionally, this provision allows for small businesses to
pool their resources to provide child care to their employees
and for businesses to use a third-party intermediary to
facilitate child care services on their behalf.

----------------------------------------------------------------------------------------------------------------
Employer-Provided Child Care Tax Credit (Section 45F)
-----------------------------------------------------------------------------------------------------------------
Provision Current Law Provision
----------------------------------------------------------------------------------------------------------------
Maximum Credit.................................... $150,000 $500,000
Maximum Credit (Small Businesses)................. n/a $600,000
% of Expenses Covered............................. 25% 40%
% of Expenses Covered (Small Businesses).......... n/a 50%
Small Business Pooling............................ NO YES
Intermediaries.................................... NO YES
----------------------------------------------------------------------------------------------------------------

Sec. 110106. Extension and enhancement of paid family and medical leave
credit

Current Law: Under current law, the paid family and medical
leave (PFML) tax credit, created by the Tax Cuts and Jobs Act,
provides businesses with a nonrefundable tax credit ranging
from 12.5 percent to 25 percent of the wages paid to employees
on leave.
For an employer to claim the credit they must (1) provide
at least two weeks of PFML to all eligible employees annually,
(2) have a written policy in elect, and (3) pay at least 50
percent of normal wages to employees during their leave.
Employers can claim up to 12 weeks of paid leave benefits. An
eligible employee is a full- or part-time employee that has (1)
worked for the employer for at least one year and (2) earns no
more than 60 percent of the ``highly compensated employee''
limit ($96,000 in 2025).
The PFML credit is set to expire after December 31, 2025.
Provision: This provision makes permanent the PFML tax
credit and makes three modifications. First, it expands the
credit allowing employers to claim the credit for a portion of
paid family leave (PFL) insurance premiums. PFL insurance is a
newer offering that is primarily utilized by smaller businesses
to offer paid leave benefits to their employees and is
available in a growing number of states. Second, it makes the
credit available in all states. Third, it lowers the minimum
employee work requirement from 1-year to 6-months.

Sec. 110107. Enhancement of adoption credit

Current Law: Under current law, for the 2024 tax year, the
adoption tax credit is capped at $16,810 for qualified adoption
expenses when adopting an eligible child. The credit begins to
phase out for adjusted gross incomes (AGIs) over $252,150 and
completely phases out at AGIs over $292,150. Both the credit
and AGI limits are indexed for inflation. The credit is
nonrefundable; however, any unused credit can be carried
forward for up to five years.
Provision: This provision makes the adoption tax credit
partially refundable up to $5,000 (indexed for inflation)
beginning in tax years starting after December 31, 2024. The
refundable portion of the credit cannot be carried forward.

Sec. 110108. Recognizing Indian tribal governments for purposes of
determining whether a child has special needs for purposes of
the adoption credit

Current Law: Under current law, state governments are able
to determine whether a child has ``special needs'' for purposes
of the adoption tax credit. A child is considered to be special
needs if they are difficult to place in a home (i.e. are older,
have a disability or health condition, or are part of a sibling
group). When a child is deemed special needs by a state
government, the adoptive family becomes eligible for the full
adoption tax credit.
Provision: This provision provides parity to Indian tribal
governments, giving them the same ability as state governments
to determine whether a child has special needs for the purposes
of the adoption tax credit.

Sec. 110109. Tax credit for contributions of individuals to scholarship
granting organizations

Current Law: Not applicable.
Provision: This provision creates a new tax credit for
individuals beginning in calendar year 2026 for charitable
contributions to tax-exempt organizations that provide
scholarships to elementary and secondary school students. Such
students who benefit from the scholarships must be members of a
household with incomes not greater 300 percent of the area
median gross income and be eligible to enroll in a public
elementary or secondary school. Under this provision, the tax
credit program runs through calendar year 2029.

Sec. 110110. Additional elementary, secondary, and home school expenses
treated as qualified higher education expenses for purposes of
529 accounts

Current Law: Under current law, 529 savings plans are tax-
advantaged accounts designed to fund education expenses, with
federal law allowing tax-free withdrawals for the following
qualified expenses: tuition (including up to $10,000 annually
for K-12 education), fees, books, supplies, equipment required
for enrollment, room and board (for students enrolled at least
half-time), computers, software, internet access, special needs
services, and costs for registered apprenticeship programs.
Provision: This provision allows tax-exempt distributions
from 529 savings plans to be used for additional educational
expenses in connection with enrollment or attendance at an
elementary, secondary, or home school, including:
curriculum and curricular materials,
books or other instructional materials,
online educational materials,
tutoring or educational classes outside the
home,
testing fees,
fees for dual enrollment in an institution
of higher education, and
educational therapies for students with
disabilities.

Sec. 110111. Certain postsecondary credentialing expenses treated as
qualified higher education expenses for purposes of 529
accounts

Current Law: Under current law, 529 savings plans are tax-
advantaged accounts designed to fund education expenses, with
federal law allowing tax-free withdrawals for the following
qualified expenses: tuition (including up to $10,000 annually
for K-12 education), fees, books, supplies, equipment required
for enrollment, room and board (for students enrolled at least
half-time), computers, software, internet access, special needs
services, and costs for registered apprenticeship programs.
Provision: This provision allows tax-exempt distributions
from 529 savings plans to be used for additional qualified
higher education expenses, including ``qualified postsecondary
credentialing expenses'' in connection with ``recognized
postsecondary credential programs'' and ``recognized
postsecondary credentials''.

Sec. 110112. Reinstatement of partial deduction for charitable
contributions of individuals who do not elect to itemize

Current Law: Under current law, only taxpayers who itemize
are able to deduct their charitable contributions.
Provision: This provision creates a temporary deduction for
non-itemizing taxpayers up to $150 for single filers ($300 for
married filing jointly) for charitable cash contributions for
tax years 2025 through 2028. The charitable contribution must
be made to a qualified charity and cannot be made to Donor-
Advised Funds or supporting organizations.

Sec. 110113. Exclusion for certain employer payments of student loans
under educational assistance programs made permanent and
adjusted for inflation

Current Law: Under current law, the first $5,250 of
employer-provided educational assistance is excluded from an
employee's gross income. Employer-provided education assistance
includes the payment, by an employer, of an employee's
educational expenses (including, but not limited to, tuition,
fees, and similar payments, books, supplies, and equipment).
This also includes an employee's qualified student loan
payments in the case of payments made before January 1, 2026.
Provision: This provision makes permanent the exclusion
from gross income for qualified education loan payments under
IRC section 127(c)(1)(B). This section also indexes for
inflation the maximum exclusion from gross income for
educational assistance programs under IRC section 127(a)(2).

Sec. 110114. Extension of rules for treatment of certain disaster-
related personal casualty losses

Current Law: Under current law, taxpayers may claim
disaster-related personal casualty losses, without having to
itemize, for disasters occurring through February 10, 2025.
Provision: This provision extends this tax treatment of
disaster-related personal casualty losses through the date of
enactment.

Sec. 110115. MAGA accounts

Current Law: Not applicable.
Provision: This provision creates Money Accounts for Growth
and Advancement (the ``MAGA accounts''), a new kind of savings
account designed to incentivizing education, entrepreneurship,
and homeownership while promoting financial security. The
accounts are administered by a bank or similar financial
institution and the overall program is overseen by the
Department of Treasury.
Starting January 1, 2026, parents of any child under the
age of eight years old may open a MAGA account for their child.
These accounts allowable for children born before January 1,
2024, are eligible to receive contributions from parents,
relatives, and other taxable entities as well as non-profit and
government entities facilitated by the Treasury Department. To
be eligible to open an account, the child must be a U.S.
citizen and at least one parent must provide their SSN. The SSN
provided must be considered work-eligible in order to open an
account. MAGA account funds must be invested in a diversified
fund that tracks an established index of U.S. equities.

Contributions

Taxable entities may contribute up to $5,000 annually of
after-tax dollars to a MAGA account. The $5,000 contribution
limit is indexed for inflation.
Contributions provided to MAGA accounts from tax exempt
entities, such as private foundations, are not subject to the
$5,000 annual limit. These contributions from unrelated third
parties must be provided to all children within a qualified
group (i.e. all children in a state, specific school district
or educational institution, etc.). No additional contributions
of any kind shall be made to MAGA accounts after the
beneficiary has attained age 18.

Distributions

MAGA account holders may not take distributions until age
18. Account holders may access up to 50 percent of funds for
higher education, training programs, small business loans, or
first-time home purchases. At age 25, accountholders may
withdraw any amount up to the full balance of the account for
these limited purposes. At age 30, account holders have access
to the full balance of the account for any purpose.
Distributions taken for qualified purposes are taxed as
long-term capital gains, while distributions for any other
purposes are taxed as ordinary income.

Sec. 110116. MAGA accounts contribution pilot program

Current: Not applicable.
Provision: This provision builds off of the previous
section and creates a newborn pilot program for MAGA accounts.
For U.S. citizens born between January 1, 2024, and
December 31, 2028, the federal government will contribute
$1,000 per child into every eligible account. For newborns,
MAGA accounts may be opened by parents or guardians. To be
eligible to open an account and receive the $1,000
contributions, the child must be a U.S. citizen and both
parents must provide their Social Security numbers (SSNs). The
SSNs provided must be considered work-eligible in order to
claim the credit.
If the Secretary of Treasury determines that an eligible
individual does not have an account opened for them by the
first tax return where the child is claimed as a qualifying
child, the Secretary shall establish an account on the child's
behalf, taking into account, to the extent possible, the
parents preferred custodian and investment fund. Parents will
be provided the option to opt out of the account.

PART 3--INVESTING IN HEALTH OF AMERICAN FAMILIES AND WORKERS

Sec. 110201. Treatment of health reimbursement arrangements integrated
with individual market coverage

Current Law: Under current law, employees with a health
reimbursement arrangement (HRA) offered by their employer can
use this tax-advantaged arrangement on certain medical
expenses. Final regulations from 2019 expanded the use of HRAs,
allowing employers to offer ``Individual Coverage HRAs'' which,
in addition to existing medical expenses, can also now be used
to purchase qualified health insurance on the individual market
without violating group health plan requirements.
Provision: This provision codifies the final 2019
regulations permitting Individual Coverage HRAs and renames the
policy as Custom Health Option and Individual Care Expense
(CHOICE) arrangements.

Sec. 110202. Participants in CHOICE arrangement eligible for purchase
of Exchange insurance under cafeteria plan

Current Law: Generally, employers cannot reimburse
employees for health plan premiums purchased through an
Exchange if any of the premium could be paid through salary
reduction. This rule makes it impossible for employers to offer
an Individual Coverage HRA while also allowing the same
employees to use a cafeteria arrangement to pay for the balance
of the plan's premium.
Provision: This provision permits employees enrolled in a
CHOICE arrangement to use a salary reduction to pay for health
plan premiums purchased through an Exchange.

Sec. 110203. Employer credit for CHOICE arrangement

Current Law: Not applicable.
Provision: This provision creates a two-year tax credit for
small businesses with fewer than 50 employees offering coverage
through CHOICE arrangements for the first time. The general
business credit amount is $100 per employee, per month in the
first year and $50 per employee, per month in the second year.

Sec. 110204. Individuals entitled to Part A of Medicare by reason of
age allowed to contribute to health savings accounts

Current Law: Individuals entitled to Medicare Part A are
ineligible to contribute to a health savings account (HSA) even
if they are still enrolled in a private high-deductible health
plan (HDHP).
Provision: This provision allows working seniors who are
eligible for Medicare Part A, but enrolled in an HDHP, to
continue contributing to an HSA. The current guardrails that
apply to individuals that are under 65 and are contributing to
HSAs would continue to apply to this population, including a
penalty on non-qualified medical expenses purchases.

Sec. 110205. Treatment of direct primary care service arrangements

Current Law: The Internal Revenue Service (IRS) has
indicated it views certain direct primary care (DPC)
arrangements as a separate and additional form of health
insurance coverage, therefore incompatible with HSAs which can
only be offered alongside an HDHP.
Provision: This provision allows individuals with HDHPs to
also enroll in DPC arrangements (and maintain their HSA) and
allows HSA funds to be used to pay for DPC services. HSA
distributions for DPC services cannot exceed $150 per month for
individuals or $300 per month for family arrangements, adjusted
annually for inflation.

Sec. 110206. Allowance of bronze and catastrophic plans in connection
with health savings accounts

Current Law: Under current law, some bronze and all
catastrophic health insurance plans have maximum out-of-pocket
costs that exceed IRS-defined limits for HDHPs disqualifying
HSA compatibility.
Provision: This provision allows all bronze and
catastrophic health insurance plans on the Exchange to be
eligible plans for the purpose of making HSA contributions.

Sec. 110207. On-site employee clinics

Current Law: Current law does not allow individuals to
contribute to an HSA if they utilize certain discounted health
services at a health clinic at their worksite because the IRS
views such services as a significant medical benefit, therefore
incompatible with HSAs.
Provision: This provision allows individuals who utilize
discounted health care services at a health clinic at their
worksite to contribute to an HSA.

Sec. 110208. Certain amounts paid for physical activity, fitness, and
exercise treated as amounts paid for medical care

Current Law: Sports and fitness expenses, such as fitness
facility membership fees, are not treated as HSA qualified
medical expenses.
Provision: This provision allows individuals to use their
HSA for physical fitness memberships and instructional physical
activity up to $500 per year for an individual and $1,000 per
year for a family with up to one-twelfth of such expenses
allowed per month.

Sec. 110209. Allow both spouses to make catch-up contributions to the
same health savings account

Current Law: Under current law, if both spouses are HSA-
eligible and age 55 or older, they must open separate HSA
accounts to make their respective ``catch-up'' contributions
(an extra $1,000 annually).
Provision: This provision would allow both spouses to
deposit their catch-up contributions into one account.

Sec. 110210. FSA and HRA terminations or conversions to fund HSAs

Current Law: Under current law, individuals cannot transfer
flexible spending arrangement (FSA) or health reimbursement
arrangement (HRA) balances into an HSA.
Provision: This section allows employees, at the employer's
discretion, to convert FSA and HRA balances into an HSA
contribution upon enrolling in an HDHP-HSA. The conversion
amount is capped at the annual FSA contribution limit ($3,300
in 2025).

Sec. 110211. Special rule for certain medical expenses incurred before
establishment of health savings account

Current Law: Under current law, HSA funds can only be used
for the purchase of a qualified medical expense (QME) after the
HSA is established.
Provision: This provision would allow medical services
incurred within 60 days before the establishment of an account
to be eligible QMEs.

Sec. 110212. Contributions permitted if spouse has health flexible
spending arrangement

Current Law: Under current law, individuals are not
eligible for an HSA if their spouse is enrolled in a flexible
spending arrangement (FSA).
Provision: This provision would allow individuals to be
eligible for an HSA even if the individual's spouse is enrolled
in an FSA.

Sec. 110213. Increase in health savings account contribution limitation
for certain individuals

Current Law: Under current law, statutory HSA contribution
limits are indexed every year for inflation. In 2025, annual
HSA contribution limits are $4,300 for self-only coverage and
$8,550 for family coverage.
Provision: This provision allows individuals who make less
than $75,000 annually (or $150,000 in the case of families) to
contribute an additional $4,300 (or $8,550 in the case of
families) each year to their HSA, indexed for inflation. Such
additional amounts are phased out for individuals making
$100,000 annually (or $200,000 for families).

Sec. 110214. Regulations

Current Law: Not applicable.
Provision: This provision allows the Secretaries of the
Treasury and Health and Human Services to prescribe rules and
guidance as appropriate to enact the policies in this Part.

Subtitle B--Make Rural America and Main Street Grow Again

PART 1--EXTENSION OF TAX CUTS AND JOBS ACT REFORMS FOR RURAL AMERICA
AND MAIN STREET

Sec. 111001. Extension of special depreciation allowance for certain
property

Current Law: Under current law, taxpayers are generally
required to deduct the cost of property used in a trade or
business over a period of time. However, in the case of certain
``qualified property'' (including most equipment and
machinery), a taxpayer is permitted to deduct a percentage of
the cost in the first year that the property is placed in
service (``immediate expensing''). For qualified property
placed in service in 2025, a taxpayer is generally permitted to
immediately expense 40 percent of the cost. For qualified
property placed in service in 2026, a taxpayer is generally
permitted to immediately expense 20 percent of the cost.
Provision: This provision allows taxpayers to immediately
expense 100 percent of the cost of qualified property acquired
on or after January 20, 2025, and before January 1, 2030.

Sec. 111002. Deduction of domestic research and experimental
expenditures

Current Law: Under current law, taxpayers are required to
deduct research or experimental expenditures over a five-year
period. Research or experimental expenditures that are
attributable to research conducted outside the U.S. are
required to be deducted over a 15-year period.
Provision: This provision allows taxpayers to immediately
deduct domestic research or experimental expenditures paid or
incurred in taxable years beginning after December 31, 2024,
and before January 1, 2030.
This provision includes rules to coordinate the immediate
deductibility of domestic research or experimental expenditures
with the research credit, rules clarifying the treatment of
foreign research or experimental expenditures, and other
coordinating changes.

Sec. 111003. Modified calculation of adjusted taxable income for
purposes of business interest deduction

Current Law: Under current law, the deduction for business
interest expense for a taxable year is generally limited to the
sum of (1) the taxpayer's business interest income for the
taxable year, (2) 30 percent of the taxpayer's ``adjusted
taxable income'' for the taxable year, and (3) the taxpayer's
``floor plan financing interest'' for the taxable year.
``Adjusted taxable income'' corresponds with the financial
accounting concept of earnings before interest and taxes
(EBIT).
``Floor plan financing interest'' refers to interest paid
or accrued on indebtedness used to finance the acquisition of
motor vehicles held for sale or lease to retail customers and
secured by the inventory so acquired. A ``motor vehicle'' means
a motor vehicle that is: (1) any self-propelled vehicle
designed for transporting person or property on a public
street, highway, or road; (2) a boat; or (3) farm machinery or
equipment.
Provision: This provision increases the cap on the
deductibility of business interest expense for taxable years
beginning after December 31, 2024, and before January 1, 2030.
Specifically, it provides that ``adjusted taxable income'' is
computed without taking into account deductions for
depreciation, amortization, or depletion. As a result,
``adjusted taxable income'' corresponds with the financial
accounting concept of earnings before interest, taxes,
depreciation, and amortization (EBITDA).
This provision also permanently modifies the definition of
``motor vehicle'' to include certain trailers and campers
designed to be towed by or affixed to a motor vehicle. This
change allows interest on floor plan financing for such
trailers and campers to be deducted.

Sec. 111004. Extension of deduction for foreign-derived intangible
income and global intangible low-taxed income

Current Law: Under current law, a U.S. corporation is
allowed a deduction of 37.5 percent for its foreign-derived
intangible income and a 50 percent deduction for its inclusions
with respect to global intangible low-taxed income. These
deductions will be reduced to 21.875 percent and 37.5 percent,
respectively, for taxable years beginning after December 31,
2025.
Provision: This provision permanently increases the
deduction amount for foreign-derived intangible income from
21.875 percent to 37.5 percent and increases the deduction for
global intangible low-taxed income from 37.5 percent to 50
percent for taxable years beginning after December 31, 2025.

Sec. 111005. Extension of base erosion minimum tax amount

Current Law: Under current law, the base erosion anti-abuse
tax imposes a 10 percent minimum tax on corporations with
annual gross receipts in excess of $500 million and base
erosion payments above a certain threshold. For taxable years
beginning after December 31, 2025, the 10 percent rate will
increase to 12.5 percent and credits computing the tax will no
longer be allowed.
Provision: This provision permanently reduces the rate from
12.5 percent to 10 percent beginning January 1, 2026. The
provision also permanently retains the current treatment of tax
credits for taxable years beginning after December 31, 2025.

PART 2--ADDITIONAL TAX RELIEF FOR RURAL AMERICA AND MAIN STREET

Sec. 111101. Special depreciation allowance for qualified production
property.

Current Law: Under current law, taxpayers are generally
required to deduct the cost of nonresidential real property
over a 39-year period.
Provision: This provision allows taxpayers to immediately
deduct 100 percent of the cost of certain new factories,
certain improvements to existing factories, and certain other
structures.
Specifically, this provision allows taxpayers to deduct 100
percent of the adjusted basis of qualified production property
in the year such property is placed in service. ``Qualified
production property'' is defined as the portion of any
nonresidential real property that meets the following
requirements (among others):
1. The property must be used by the taxpayer as an
integral part of a qualified production activity;
2. The property must be placed in service in the U.S.
or a U.S. territory;
3. The original use of the property must begin with
the taxpayer;
4. The construction of the property must begin after
December 31, 2024, and before January 1, 2030;
5. The property must be placed in service before
January 1, 2034; and
6. The taxpayer must have elected to claim an
immediate deduction with respect to such portion of the
property.
A ``qualified production activity'' generally means the
manufacturing, production, or refining of tangible personal
property. An activity generally does not count as a qualified
production activity unless it results in a substantial
transformation of the property comprising a product. The term
``production'' is limited to agricultural production and
chemical production.
Some of the requirements described above are relaxed in the
case of a taxpayer that acquires a property that was not used
for productive activities during the period between January 1,
2021, and May 12, 2025. This special rule could apply, for
instance, to a taxpayer that acquires and rehabilitates a
factory that was abandoned in 2020.
Any portion of a property that is used for offices,
administrative services, lodging, parking, sales activities,
research activities, software engineering activities, or
certain other functions is ineligible for this benefit.
Recapture rules apply in certain cases where, during the
10-year period after qualified production property is placed in
service, the use of the property changes.

Sec. 111102. Renewal and enhancement of opportunity zones

Current Law: Under current law, opportunity zones (OZs)
exist as a temporary policy that have been used as an economic
development tool to revitalize distressed communities across
the country. Created in the Tax Cuts and Jobs Act, OZs are
census tracts that meet the definition of ``low-income
community'' and that were nominated by state governors and
certified by the U.S. Department of Treasury as eligible areas
for qualified investments to be made in exchange for certain
tax benefits. The program was created as temporary policy,
existing over a 10-year window as an initial ``round'' of OZ
development.

Definitions

Low-Income Community (LIC): A census tract that has a
poverty rate of at least 20 percent or a median family income
that does not exceed 80 percent of the area median income.
Qualified Opportunity Fund (QOF): An investment vehicle
with the specific purpose of investing in OZs. All qualifying
investments must be made through QOFs in order to be eligible
for the tax benefits.

Designation

In each state, governors were able to nominate up to 25
percent of eligible tracts as OZs. If a state had less than 100
eligible tracts, then up to 25 eligible tracts were allowed to
be designated. Additionally, under certain circumstances, a
contiguous tract that is not a LIC was able to be designated
along with the LIC that was designated as an OZ.

Tax Benefits

The OZ program operates over a 10-year window and provides
investors with three tax benefits for investing their
unrealized capital gains into eligible distressed communities:
1. A temporary deferral on taxes for capital gains
rolled over from a non-OZ investment into a QOF to be
invested into an OZ. The taxes are not realized until
2026 or when the asset is sold/disposed of, whichever
comes first.
2. A step-up in basis on their previously earned
capital gains that were invested in a QOF. Investments
held for five years receive a 10 percent step-up in
basis and investments held for seven years receive an
additional five percent step-up in basis (for a total
15 percent).
3. For investments held for at least 10 years,
taxpayers receive a permanent exclusion of taxable
income on the gains resulting from the original
investment.
The initial OZ round is set to expire after December 31,
2026.
Provision: This provision creates a second round of OZs,
making adjustments and improvements to the previous policy.
Specifically, the definition of ``low-income community'' is
narrowed to census tracts that have a poverty rate of at least
20 percent or a median family income that does not exceed 70
percent of the area median income. Additionally, a guardrail is
added to ensure that the term ``low-income community'' does not
include any census tract where the median family income is 125
percent or greater of the area median family income.
This provision maintains the OZ designation process from
the Tax Cuts and Jobs Act and adds that at least 33 percent of
designated OZs must be comprised entirely of a rural area. In
the case that there are fewer than 33 percent of rural
qualified OZs, all eligible rural areas must be designated. A
rural area is defined in the Consolidated Farm and Rural
Development Act. Additionally, this provision makes contiguous
tracts ineligible for OZ designation.
Furthermore, this provision simplifies the investment
incentives and creates ``rural qualified opportunity funds''
(RQOFs). Investments made in a QOF receive a single step-up in
basis of 10 percent when held for at least five years. In rural
areas, investments must be made into a RQOF and will receive a
30 percent step-up in basis when held for at least five years.
Additionally, taxpayers may choose to invest up to $10,000 of
post-tax ordinary income into a QOF or RQOF, and a special rule
is created that lowers the ``substantial improvement''
threshold of existing structures from 100 percent to 50 percent
in rural areas.
Lastly, this provision adds reporting requirements for the
OZ program.
This second round of OZs will begin on January 1, 2027, and
end on December 31, 2033.

Sec. 111103. Increased dollar limitations for expensing of certain
depreciable business assets

Current Law: Under current law (IRC section 179) a taxpayer
may elect to expense the cost of qualifying property, rather
than to recover such costs through tax depreciation deductions,
subject to limitation. Under current law, the maximum amount a
taxpayer may expense is $1 million of the cost of qualifying
property placed in service for the taxable year. The $1 million
amount is reduced by the amount by which the cost of such
property placed in service during the taxable year exceeds $2.5
million. The $1 million and $2.5 million amounts are adjusted
for inflation for taxable years beginning after 2018, and are
$1.25 million and $3.13 million in 2025, respectively. In
general, qualifying property is defined as depreciable tangible
personal property, off-the-shelf computer software, and
qualified real property that is purchased for use in the active
conduct of a trade or business.
Provision: This provision increases the maximum amount a
taxpayer may expense under IRC section 179 to $2.5 million,
reduced by the amount by which the cost of qualifying property
exceeds $4 million. The $2.5 million and $4 million amounts are
adjusted for inflation for taxable years beginning after 2025.
The proposal applies to property placed in service in taxable
years beginning after December 31, 2024.

Sec. 111104. Repeal of revision to de minimis rules for third party
network transactions

Current Law: Under current law, third-party settlement
organizations issue Form 1099-K to participating payees
receiving gross payments exceeding $600 for goods or services,
regardless of the number of transactions. A third-party
settlement organization is the central organization that has
the contractual obligation to make payments to participating
payees (generally, a merchant or business) in a third-party
payment network. The change in reporting thresholds was
supposed to take effect following the American Rescue Plan of
2021 (ARPA). However, due to delays in implementation, for the
2024 tax year, third-party settlement organizations must issue
a Form 1099-K for payees receiving gross payments exceeding
$5,000 for goods or services, regardless of the number of
transactions. This threshold decreases to $2,500 for 2025 and
is set to drop to $600 for 2026 and beyond, as originally
mandated by ARPA, though the IRS has repeatedly delayed full
implementation.
Provision: This provision modifies requirements for third-
party settlement organizations to eliminate their reporting
requirement with respect to the transactions of their
participating payees unless they have earned more than $20,000
on more than 200 separate transactions in an applicable tax
period. This reverses the ARPA provision that lowered the
reporting threshold to $600 with no minimum on the number of
transactions.

Sec. 111105. Increase in threshold for requiring information reporting
with respect to certain payees

Current Law: Under current law, the reporting threshold for
payments by a business for services performed by an independent
contractor or subcontractor and for certain other payments is
generally $600. In some cases, the reporting threshold is based
on payments made during the taxable year.
Provision: This provision generally increases the threshold
to $2,000 and adjusts it for inflation for taxable year
beginning after December 31, 2024. The new threshold is based
on payments during the calendar year. This provision applies to
payments made after December 31, 2024.

Sec. 111106. Repeal of excise tax on indoor tanning services

Current Law: Under current law, there is a 10 percent
excise tax on amounts paid for indoor tanning services. Indoor
tanning services include any services employing any electronic
product designed to incorporate one or more ultraviolet lamps,
intended for irradiation of an individual by ultraviolet
radiation (wavelengths between 200 and 400 nanometers) to
induce skin tanning.
Provision: This provision repeals the excise tax on indoor
tanning services effective on the date of enactment.

Sec. 111107. Exclusion of interest on loans secured by rural or
agricultural real property

Current Law: Not applicable.
Provision: This provision allows for a partial exclusion of
interest on certain loans secured by rural or agricultural real
estate. Specifically, it allows for the exclusion of 25 percent
of interest received by a qualified lender on any qualified
real estate loan.
A ``qualified lender'' means (1) any bank or savings
association the deposits of which are insured under the Federal
Deposit Insurance Act, (2) any state- or federally-regulated
insurance company, (3) certain U.S. bank subsidiaries, (4)
certain U.S. insurance subsidiaries, and (5) with respect to
certain loans, any federally chartered instrumentality of the
U.S. established under Section 8.1(a) of the Farm Credit Act of
1971.
A ``qualified real estate loan'' means any loan that meets
the following requirements: (1) the loan is secured by rural or
agricultural real estate, or by a leasehold mortgage (with a
status as a lien) on rural or agricultural real estate, (2) the
loan is not made to certain foreign entities of concern, and
(3) the loan is made after the date of enactment and before
January 1, 2029.
``Rural or agricultural real estate'' means (1) any real
property which is substantially used for the production of one
or more agricultural products, (2) any real property which is
substantially used in the trade or business of fishing or
seafood processing, or (3) certain aquaculture facilities. This
term does not include any property not located in the U.S. or a
U.S. territory.

Sec. 111108. Treatment of certain qualified sound recording productions

Current Law: Under current law, under IRC section 168(k),
taxpayers are generally permitted to expense a percentage of
qualified property in the taxable year that the property is
placed in service. Additionally, under IRC section 181,
taxpayers are permitted to expense the certain costs of film,
television, and live theatrical productions in the taxable year
such costs are incurred, in the case of productions commencing
before January 1, 2026.
Provision: This provision will increase taxpayers' ability
to expense certain costs of producing sound recordings.
Specifically, it would make qualified sound recording
productions placed in service before January 1, 2029, eligible
for expensing under IRC section 168(k). It would also allow
taxpayers to expense up to $150,000 (per taxable year) of costs
of qualified sound recording productions under IRC section 181.
A ``qualified sound recording production'' is a sound recording
produced and recorded in the U.S.

Sec. 111109. Modifications to low-income housing credit

Current Law: Under current law, to receive the Low-Income
Housing Tax Credit (LIHTC), a building must either receive a
credit allocation from the state housing finance authority or
be bond-financed. For the credit, Congress sets the per capita
allocation amount on a yearly basis. For 2023, each state
received a $2.75 per capita allocation. For projects that are
bond-financed, at least 50 percent of the aggregate basis of
the building and land must be financed with bonds that are
subject to a state's private activity bond volume cap.
Additionally, projects can receive a basis boost if they are in
``Difficult Development Areas'' (DDAs). Generally, DDAs are
areas with poverty rates of 25 percent or more or where 50
percent of households have incomes below 60 percent of the area
median income.
Provision: This provision makes three changes to the LIHTC
program. First, for calendar years 2026 through 2029, the ``9%
LIHTC'' is restored to its 2021 level with a 12.5 percent
allocation increase. Second, for the ``4% LIHTC'', this
provision lowers the bond-financing threshold to 25 percent for
projects financed by bonds with an issue date before 2030.
Last, this provision designates Indian and rural areas as DDAs.

Sec. 111110. Increased gross receipts threshold for small manufacturing
businesses

Current Law: Under current law, in general, taxpayers with
average annual gross receipts below $25 million (over the prior
three taxable years) are permitted to use the cash method of
accounting, are exempt from the cap on business interest
deductibility, are exempt from the requirement to account for
inventories, and are exempt from certain capitalization rules.
The $25 million threshold is indexed for inflation and, in
2025, is $31 million.
Provision: This provision increases the gross receipts
threshold described above for manufacturing taxpayers from $25
million to $80 million. This change applies to taxable years
beginning after December 31, 2025. The $80 million threshold is
indexed for inflation and, in 2026, will be approximately $100
million.
To qualify as a ``manufacturing taxpayer'' a business
generally must derive substantially all of its gross receipts
(over the prior three taxable years) from the lease, rental,
license, sale, exchange, or other disposition of tangible
personal property produced or manufactured by the business.

Sec. 111111. Global intangible low-taxed income determined without
regard to certain income derived from services performed in the
Virgin Islands

Current Law: The global intangible low tax income of U.S.
shareholders is included in the income of U.S. persons in the
years it is earned. That is the income in excess of a 10
percent deemed income return on qualified businesses assets.
Corporations are then allowed a 50 percent ``GILTI'' deduction
so that active income earned offshore is subject to a minimum
rate of tax between 10.5 percent and 13.125 percent. A
corporation that is organized in a territory is generally
treated as a foreign corporation for federal tax purposes.
Provision: This provision would exempt certain income
earned in the U.S. Virgin Islands from being considered tested
income for the purposes of certain individuals GILTI
calculations.

Sec. 111112. Extension and modification of clean fuel production credit

Current Law: Under current law, taxpayers may claim a
credit for the production of transportation fuel, including
aviation fuel, to the extent it meets certain greenhouse gas
emission standards. The value of the credit is an applicable
amount per gallon multiplied by an emissions factor. The
applicable amounts are $0.20 per gallon for transportation fuel
that is not sustainable aviation fuel (nonaviation fuel) and
$0.35 per gallon for sustainable aviation fuel, multiplied by
five if the taxpayer meets prevailing wage and apprenticeship
requirements or exceptions. This credit applies for fuel sold
before January 1, 2028.
Provision: This provision makes certain modifications to
the clean fuel production credit. The provision requires the
credit is only available to fuel produced from feedstocks
produced or grown in the U.S. The provision excludes indirect
land use changes for the purposes of lifecycle greenhouse gas
emissions. This provision extends the credit through December
31, 2031. It requires the Secretary of the Treasury to
establish distinct emission rates for specific manure
feedstocks. The provision eliminates transferability for fuel
produced after December 31, 2027. The provision eliminates
transferability for fuel produced after December 31, 2027.
This provision restricts access to the credit for certain
prohibited foreign entities. Specifically:
1. No credit is allowed for taxable years beginning
after enactment if the taxpayer is a specified foreign
entity.
2. No credit is allowed for taxable years that begin
two years after enactment for a foreign-influenced
entity.

PART 3--INVESTING IN THE HEALTH OF RURAL AMERICA AND MAIN STREET

Sec. 111201. Expanding the definition of rural emergency hospital under
the Medicare program

Current Law: Under current law, only certain hospitals that
were enrolled in Medicare as of December 27, 2020, are eligible
to convert to the Rural Emergency Hospital (REH) designation.
Provision: This provision establishes a ``look-back'' from
January 1, 2014, to December 26, 2020, such that qualifying
rural hospitals open during that time, but have since closed,
may reopen under the REH designation. Such hospitals that are
located less than 35 miles from the nearest hospital, Critical
Access Hospital (CAH), or REH are not eligible for the five
percent increase on outpatient payments. Such facilities that
are located less than 10 miles from the nearest hospital, CAH,
or REH are not eligible for the REH facility fee.

SUBTITLE C--MAKE AMERICA WIN AGAIN

PART 1--WORKING FAMILIES OVER ELITES

Sec. 112001. Termination of previously-owned clean vehicle credit

Current Law: Under current law, taxpayers may claim a tax
credit for previously-owned clean vehicles. The credit is worth
the lesser of $4,000 or 30 percent of the sale price and is
limited to incomes of $75,000 for single filers, $112,500 for
head of household filers, and $150,000 for joint filers. The
credit is set to expire December 31, 2032.
Provision: This provision accelerates the expiration to
December 31, 2025.

Sec. 112002. Termination of clean vehicle credit

Current Law: Under current law, taxpayers may claim a tax
credit of up to $7,500 for clean new vehicles placed in service
in a given taxable year. The maximum credit is comprised of two
equal parts: the first $3,750 credit value is determined based
on the critical mineral sourcing of the vehicle's battery and
the second $3,750 credit value is determined based on the
sourcing of the battery components. The credit is limited to
incomes of $150,000 for single filers, $225,000 for head of
household filers, and $300,000 for joint filers. The credit is
available to vans with a Manufacturer's Suggested Retail Price
(MSRP) of $80,000, SUVs with a MSRP of $80,000, pickup trucks
with a MSRP of $80,000, and other vehicles with a MSRP of
$55,000. The credit is set to expire December 31, 2032.
Provision: This provision accelerates the expiration to
December 31, 2025. This provision also implements a special
rule for taxable year 2026 that only allows vehicles produced
by manufacturers that have not sold 200,000 new clean vehicles
as of December 31, 2025, to qualify for the credit.

Sec. 112003. Termination of qualified commercial clean vehicles credit

Current Law: Under current law, taxpayers may claim a tax
credit for commercial clean vehicles placed in service in a
taxable year. For vehicles weighing less than 14,000 pounds the
credit value is $7,500 and for other vehicles the credit value
is $40,000. The credit is set to expire December 31, 2032.
Provision: This provision accelerates the expiration to
December 31, 2025. This provision also implements a special
rule allowing vehicles acquired pursuant to a written binding
contract entered into before May 12, 2025 to qualify for the
credit.

Sec. 112004. Termination of alternative fuel vehicle refueling property
credit

Current Law: Under current law, taxpayers may claim a tax
credit for advanced refueling property placed in service in a
given taxable year. The credit value is 30 percent of the cost
of the property not exceeding $100,000. The credit expires
December 31, 2032.
Provision: This provision accelerates the expiration to
December 31, 2025.

Sec. 112005. Termination of energy efficient home improvement credit

Current Law: Under current law, taxpayers may claim a tax
credit for household energy efficient improvements. The value
of the credit is 30 percent of qualified energy efficient
improvements, residential energy property, or home energy
audits not exceeding $1,200 annually ($2,000 if for heat pumps
and biomass stoves). The credit expires December 31, 2032.
Provision: This provision accelerates the expiration to
December 31, 2025.

Sec. 112006. Termination of residential clean energy credit

Current Law: Under current law, taxpayers may claim a
credit for residential expenditures for solar electric
property, solar water heating property, fuel cell property,
small wind energy property, geothermal heat pump property, and
battery storage property. The value of the credit is 30 percent
of the expenditures through December 31, 2032, 26 percent of
expenditures in taxable year 2033, and 22 percent expenditures
in taxable year 2034.
Provision: This provision accelerates the expiration to
December 31, 2025.

Sec. 112007. Termination of new energy efficient home credit

Current Law: Under current law, contractors may claim a
credit for homes built that meet certain Energy Star standards.
Homes that are considered Zero Energy Ready are eligible for a
$5,000 credit and homes certified at a lower energy efficient
level are eligible for a credit of either $2,500 or $1,000. The
credit expires December 31, 2032.
Provision: This provision accelerates the expiration to
December 31, 2025. This provision includes a special rule
allowing homes that have commenced construction before May 12,
2025 to qualify for the credit if they are acquired by December
31, 2026.

Sec. 112008. Phase-out and restrictions on clean electricity production
credit

Current Law: Under current law, taxpayers may claim a
credit for electricity produced and sold by a qualifying
facility. For the purposes of this section, a ``qualified
facility'' is one that is determined to have greenhouse gas
emissions less than zero. The value of the credit is 0.3 cents
per kilowatt-hour (kWh) generally or 1.5 cents per kWh if a
taxpayer meets prevailing wage and apprenticeship requirements
or exceptions in constructing, repairing, or altering the
qualified facility. The credit applies for 10 years after a
qualified facility is placed in service. To the extent a
taxpayer does not have the tax liability to absorb a credit,
the credits are eligible to be transferred to an unrelated
taxpayer. This credit currently has no expiration.
Provision: This provision phases out the clean electricity
production credit. There is a 20 percent credit reduction for
facilities placed in service in calendar year 2029, a 40
percent reduction for facilities placed in service in calendar
year 2030, a 60 percent reduction for facilities placed in
service in calendar year 2031 and zero credit available after
December 31, 2031. Transferability is repealed for facilities
where construction begins two years after the date of enactment
of this bill.
This provision restricts access to the credit for certain
prohibited foreign entities. Specifically:
1. No credit is allowed for a facility that commences
construction a year after enactment of this bill that
includes any material assistance from a prohibited
foreign entity;
2. No credit is allowed for taxable years beginning
after enactment if the taxpayer is a specified foreign
entity;
3. No credit is allowed for tax years that begin two
years after the date of enactment for foreign influence
entities or if the taxpayer makes fixed, determinable,
annual, or periodic (FDAP) amount payments to a
prohibited foreign entity that are more than five
percent of total expenditures related to the credit
generating activity or 15 percent in aggregate.
This provision also includes the definitions of several
terms related to prohibited foreign entities:
Specified Foreign Entity: Foreign entities of concern as
described in the William M. (Mac) Thornberry National Defense
Authorization Act of FY 2021, Chinese Military companies
operating in the U.S., any entity on a list required by the
strategy to enforce prohibition on imported goods made through
forced labor in the Xinjiang Uyghur autonomous region, an
entity listed as ineligible for Department of Defense battery
acquisition in the National Defense Authorization Act of FY
2024, or a foreign-controlled entity.
Foreign-Controlled Entity: The government of a covered
nation (the Democratic People's Republic of North Korea; the
People's Republic of China; the Russian Federation; and the
Islamic Republic of Iran), a person who is a citizen, national
or resident of a covered nation provided the person is not a
U.S. citizen or lawful permanent resident, an entity or
qualified business unit incorporated or organized under the
laws of or having its principal place of business in a covered
nation, or an entity controlled by any of the listed foreign
controlled entities.
Foreign-Influenced Entity: An entity which during the
taxable year--a specified foreign entity has the direct or
indirect authority to appoint a covered officer, a single
foreign entity owns at least 10 percent of such entity, one or
more specified foreign entities own in the aggregate at least
25 percent of such entity, at least 25 percent of the debt of
such entity is held in the aggregate by one or more specified
foreign entities, the entity knowingly makes FDAP payments to a
specified foreign entity an amount equal to 10 percent of the
annual gross receipts of the entity for the previous taxable
year, or makes aggregate FDAP payments to one or more specified
foreign entities of at least 25 percent of the annual FDAP
payments of the entity for such previous tax year.
Material Assistance from a Prohibited Foreign Entity: Any
component, subcomponent, or critical mineral included in such
property is extracted, processed, recycled, manufactured, or
assembled but a prohibited foreign entity, or any design of
such property was based on any copyright or patent held by a
prohibited foreign entity or any know-how or trade secret
provided by a prohibited foreign entity. Not including assembly
parts or constituent materials that are not uniquely designed
for the use in construction of a facility and not exclusively
or predominantly produced by prohibited foreign entities.

Sec. 112009. Phase-out and restrictions on clean electricity investment
credit

Current Law: Under current law, there is a credit for
qualified investment in an electricity facility or energy
storage technology. For the purposes of this section, a
``qualified facility'' is one that is determined to have
greenhouse gas emissions less than zero. The value of the
credit generally is six percent of qualified investment
increased to 30 percent if a taxpayer meets prevailing wage and
apprenticeship requirements or exceptions. To the extent a
taxpayer does not have the tax liability to absorb a credit the
credits are eligible to be transferred to an unrelated
taxpayer. This credit currently has no expiration.
Provision: This provision phases out the clean electricity
investment credit. There is a 20 percent credit reduction for
facilities placed in service in calendar year 2029, a 40
percent reduction for facilities placed in service in calendar
year 2030, a 60 percent reduction for facilities placed in
service in calendar year 2031, and zero credit available after
December 31, 2031. Transferability is repealed for facilities
which construction begins two years after the date of enactment
of this bill. This provision restricts access to the credit for
certain prohibited foreign entities.
This provision restricts access to the credit for certain
prohibited foreign entities. Specifically:
1. No credit is allowed for a facility that commences
construction a year after enactment of this bill that includes
any material assistance from a prohibited foreign entity;
2. No credit is allowed for taxable years beginning after
enactment if the taxpayer is a specified foreign entity;
3. No credit is allowed for tax years that begin two years
after the date of enactment for foreign influence entities or
if the taxpayer makes fixed, determinable, annual, or periodic
(FDAP) amount payments to a prohibited foreign entity that are
more than five percent of total expenditures related to the
credit generating activity or 15 percent in aggregate.

Sec. 112010. Repeal of transferability of clean fuel production credit

Current Law: To the extent a taxpayer does not have the tax
liability to absorb a credit the clean fuel production credits
are eligible to be transferred to an unrelated taxpayer.
Provision: The provision eliminates transferability for
fuel produced after December 31, 2027.

Sec. 112011. Restrictions on carbon oxide sequestration credit

Current Law: Under current law, taxpayers may claim a
credit available per metric ton of qualified carbon oxide
captured and disposed of or used by a taxpayer. In a given tax
year beginning after December 31, 2016 and before January 1,
2027, the value of the credit is $17 per metric ton if the
carbon oxide is utilized as a tertiary injectant and disposed
of in secure geological storage, and $12 per metric ton if the
taxpayer utilizes the carbon oxide by fixing it through
photosynthesis or chemosynthesis, chemically converting it to
securely store it, or for another purpose for which a
commercial market exists and for the 12-year period after the
equipment is placed in service.
For direct air capture facilities placed in service after
December 31, 2022, the value is $36 per metric ton if the
carbon oxide is utilized as a tertiary injectant and disposed
of in secure geological storage, and $26 per metric ton if the
taxpayer utilizes the carbon oxide by fixing it through
photosynthesis or chemosynthesis, chemically converting it to
securely store it, or for another purpose for which a
commercial market exists. The credit amounts are indexed for
inflation beginning after December 31, 2026. To the extent a
taxpayer does not have the tax liability to absorb a credit,
the credits are eligible to be transferred to an unrelated
taxpayer. The credit currently applies to qualified facilities
that commence construction before January 1, 2033.
Provision: This provision repeals transferability for
carbon capture equipment where construction begins two years
after the date of enactment of this bill.
This provision restricts access to the credit for certain
prohibited foreign entities. Specifically:
1. No credit is allowed for taxable years beginning after
enactment if the taxpayer is a specified foreign entity.
2. No credit is allowed for tax years that begin two years
after date of enactment for a foreign-influenced entity.

Sec. 112012. Phase-out and restrictions on zero-emission nuclear power
production credit

Current Law: Under current law, there is a credit available
for electricity produced by existing nuclear power plans. The
value of the credit is 0.3 cents per kilowatt-hour (kWh)
generally or 1.5 cents per kWh if a taxpayer meets prevailing
wage and apprenticeship requirements or exceptions in
constructing, repairing, or altering the qualified facility.
The credit gradually reduces as power prices rise above a $25
per megawatt hour (MWh) index. To the extent a taxpayer does
not have the tax liability to absorb a credit, the credits are
eligible to be transferred to an unrelated taxpayer. The credit
expires December 31, 2032.
Provision: This provision phases out the zero-emission
nuclear power production credit. There is a 20 percent credit
reduction for electricity produced in calendar year 2029, a 40
percent reduction for electricity produced in calendar year
2030, a 60 percent reduction for electricity produced in
calendar year 2031 and no credit available after December 31,
2031. The provision eliminates transferability for fuel
produced after December 31, 2027.
This provision restricts access to the credit for certain
prohibited foreign entities. Specifically:
1. No credit is allowed for taxable years beginning after
enactment if the taxpayer is a specified foreign entity.
2. No credit is allowed for tax years that begin two years
after date of enactment for a foreign-influenced entity.

Sec. 112013. Termination of clean hydrogen production credit

Current Law: Under current law, taxpayers may claim a
credit per kilogram of qualified clean hydrogen produced for
sale or use. The credit applies for the 10-year period from the
date the facility is originally placed in service. The value of
the credit is a percentage of $0.60, ranging from 20 percent to
100 percent depending on the greenhouse gas emissions rate of
the production process. To the extent a taxpayer does not have
the tax liability to absorb a credit, the credits are eligible
to be transferred to an unrelated taxpayer. The credit is
currently available for facilities that commence construction
before January 1, 2033.
Provision: This provision accelerates the expiration to
facilities the construction of which begins after December 31,
2025.

Sec. 112014. Phase-out and restrictions on advanced manufacturing
production credit

Current Law: Under current law, taxpayers may claim a
credit for certain inverters, solar energy components, wind
energy components, and battery components manufactured, and
critical minerals produced. Credit amounts very by component
and are listed in the code section. To the extent a taxpayer
does not have the tax liability to absorb a credit, the credits
are eligible to be transferred to an unrelated taxpayer.
Currently for components sold during calendar year 2030 there
is a 25 percent reduction to the credit, for components sold
during calendar year 2031 a 50 percent reduction, for
components sold during calendar year 2032 a 75 percent
reduction, and no credit allowed after December 31, 2032,
except for the credit for critical mineral production which is
permanent.
Provision: This provision makes modifications to the
advanced manufacturing tax credit and accelerates its
termination. The provision eliminates wind energy components
sold after December 31, 2027, and eliminates the credit for all
other components after December 31, 2031. Transferability is
repealed for components sold after December 31, 2027. This
provision restricts access to the credit for certain prohibited
foreign entities. Specifically:
1. No credit is allowed for ``components manufactured'' a
year after enactment of this bill that includes any material
assistance from a prohibited foreign entity;
2. No credit is allowed for taxable years beginning after
enactment if the taxpayer is a specified foreign entity;
3. No credit is allowed for tax years that begin two years
after the date of enactment for foreign influence entities or
if the taxpayer makes fixed, determinable, annual, or periodic
(FDAP) amount payments to a prohibited foreign entity that are
more than five percent of total expenditures related to the
credit generating activity or 15 percent in aggregate; or
4. is produced subject to a licensing agreement with a
prohibited foreign entity for which the value of such agreement
is in excess of $1,000,000 beginning in tax years two years
after the date of enactment of this bill.

Sec. 112015. Phase-out of credit for certain energy property

Current Law: Under current law, most technologies that were
previously eligible for the IRC section 48 energy tax credit
terminated after December 31, 2024, but geothermal heat pumps
that begin construction before January 1, 2035, are still
eligible for the section 48 investment tax credit.
Provision: This provision aligns the expiration of the
investment tax credit for geothermal heat pumps with the clean
electricity investment tax credit. There is a 20 percent credit
reduction for facilities placed in service in calendar year
2029, a 40 percent reduction for facilities placed in service
in calendar year 2030, a 60 percent reduction for facilities
placed in service in calendar year 2031 and no credit available
after December 31, 2031.
This provision restricts access to the credit for certain
prohibited foreign entities. Specifically:
1. No credit is allowed for taxable years beginning
after enactment if the taxpayer is a specified foreign
entity.
2. No credit is allowed for tax years that begin two
years after date of enactment for a foreign-influenced
entity.

Sec. 112016. Income from hydrogen storage, carbon capture added to
qualifying income of certain publicly traded partnerships
treated as corporations

Current Law: Under current law, publicly traded partnership
rules allow certain enterprises to be treated as partnerships
for tax purposes but also have interests that are regularly
traded on established securities markets or are readily
tradable on a secondary market. To qualify for this treatment
90 percent of gross income must come from qualifying income
sources. One of those sources is the income and gains derived
from exploration, development, mining, or production,
processing, refining, transportation, or the marketing of any
mineral or natural resources, industrial source carbon dioxide,
or the transportation or storage of specified fuels.
Provision: This provision expands the activities that can
be categorized as qualifying income to include the
transportation or storage of liquified hydrogen or compressed
hydrogen, and the generation of electricity or capture of
carbon dioxide at a direct air capture or carbon capture
facility.

Sec. 112017. Limitation on amortization of certain sports franchises

Current Law: Under current law, when a taxpayer acquires
intangible assets held in connection with a trade or business,
the adjusted basis of an ``amortizable section 197 intangible''
can be amortized on a straight-line basis over 15 years. Such
intangibles include goodwill, franchise value, employment
contracts, and several other items.
Provision: This provision limits amortization deductions
for certain sports-related intangibles. Specifically, under
this provision, a taxpayer that acquires a specified sports
franchise intangible would only be permitted under IRC section
197 to amortize 50 percent of the adjusted basis. A ``specified
sports franchise intangible'' is any amortizable section 197
intangible which (1) is a franchise to engage in professional
football, basketball, baseball, hockey, soccer, or other
professional sport, or (2) is acquired in connection with such
a franchise. This change would apply to property acquired after
the date of enactment.

Sec. 112018. Limitation on individual deductions for certain State and
local taxes, etc.

Current Law: Under current law, in the case of an
individual, the itemized deduction for state and local taxes is
capped at $10,000 ($5,000 for a married taxpayer filing a
separate return) (the ``SALT cap''). In general, income taxes
paid or accrued in carrying on a trade or business or an
income-producing activity are subject to the SALT cap. The SALT
cap is set to expire for taxable years beginning after December
31, 2025.
Provision: This provision would increase the SALT cap to
$30,000 ($15,000 for a married taxpayer filing a separate
return). In the case of a taxpayer with modified adjusted gross
income (MAGI) over $400,000 ($200,000 for a married taxpayer
filing a separate return), the cap would phase down by 20
percent of the excess of MAGI over the threshold until it
reaches $10,000 ($5,000 for a married taxpayer filing a
separate return). This provision would extend the SALT cap
permanently for taxable years beginning after December 31,
2025.
This provision also includes several changes to prevent the
avoidance of the SALT cap. Generally, this provision clarifies
and modifies the list of taxes subject to the SALT cap
(``specified taxes''); provides that certain payments that
substitute for specified taxes are also subject to the SALT
cap; requires partnerships and S corporations to treat
specified taxes as separately stated items; imposes an addition
to tax in certain cases where a partnership makes a state or
local tax payment, one or more partners receives a state or
local tax benefit, and the allocation of the tax payment
differs from the allocation of the tax benefit; prevents the
capitalization of specified taxes; and grants the Secretary of
the Treasury regulatory authority to prevent avoidance of the
SALT cap.

Sec. 112019. Excessive employee renumeration from controlled group
members and allocation of deduction

Current Law: Under current law, publicly held corporations
are denied a tax deduction for compensation paid to certain
covered employees (typically the CEO, CFO, and the next three
highest-paid officers) exceeding $1 million per year. The Tax
Cuts and Jobs Act expanded the scope by eliminating the
performance-based compensation exception and including more
entities, like certain publicly traded partnerships, as covered
corporations. The limitation applies to taxable years beginning
after December 31, 2017. ARPA expanded the definition of
``covered employees'' to include the five highest-compensated
employees beyond the CEO, CFO, and three highest-paid officers,
effective for tax years beginning after December 31, 2026.
Unlike the original covered employees, these additional five
are not subject to the ``once covered, always covered'' rule
and are determined annually based on deductible compensation.
Provision: This provision applies aggregation rules for the
purposes of the deduction limitation and allocation of
deduction applied under IRC section 162(m) as it relates to
certain excessive employee remuneration.

Sec. 112020. Expanding application of tax on excess compensation within
tax-exempt organizations.

Current Law: Under current law, IRC section 4960 imposes an
excise tax on excess compensation paid to certain highly
compensated employees by applicable tax-exempt organizations.
The excise tax rate is equal to the corporate tax rate
multiplied by the sum of (1) any remuneration in excess of $1
million paid to a covered employee for a taxable year, and (2)
any excess parachute payment paid to a covered employee.
Provision: This provision strikes the text following
``means any employee (including any former employee) of an
applicable tax-exempt organization'' from the definition of
``Covered Employee'' under IRC section 4960(c)(2). As a result,
a covered employee includes any employee of an applicable tax-
exempt organization that receives remuneration in excess of $1
million.

Sec. 112021. Modification of excise tax on investment income of certain
private colleges and universities

Current Law: Under current law, IRC section 4968 imposes an
excise tax on an applicable educational institution for each
taxable year equal to 1.4 percent of the net investment income
of the institution for the taxable year.
Provision: This provision amends the current excise tax on
net investment income framework for certain private colleges
and universities under IRC section 4968 with a tiered system
based on an institution's student-adjusted endowment (see table
below). For purposes of calculating an institution's student-
adjusted endowment, this section amends such calculation by
excluding students who do not meet the requirements under
Section 484(a)(5) of the Higher Education Act of 1965. This
section also provides an exemption from being considered an
applicable educational institution, provided the institution
meets certain requirements related to being a qualified
religious institution. Additionally, this section includes
student loan interest income and certain royalty income for the
purposes of calculating a school's net investment income.

------------------------------------------------------------------------
Student-Adjusted Endowment Excise Tax Rate
------------------------------------------------------------------------
$500,000-$749,999......................... 1.4% (current rate)
$750,000-$1,249,999....................... 7%
$1,250,000-$1,999,999..................... 14%
$2,000,000+............................... 21%
------------------------------------------------------------------------

Sec. 112022. Increase in rate of tax on net investment income of
certain private foundations

Current Law: Under current law, all private foundations
that are exempt from taxation under IRC section 501(a) are
subject to an excise tax equal to 1.39 percent of the net
investment income of such foundation for the taxable year.
Provision: This provision amends the current excise tax on
net investment income framework for tax-exempt private
foundations under IRC section 4940(a) with a tiered system that
maintains the current excise tax rate for private foundations
with less than $50 million in total assets but applies higher
excise tax rates on private foundations reporting $50 million
or more in total assets (see table below).

------------------------------------------------------------------------
Size of Private Foundation (in assets) Excise Tax Rate
------------------------------------------------------------------------
$0-$49,999,999............................ 1.39% (current rate)
$50,000,000-$249,999,999.................. 2.78%
$250,000,000-$4,999,999,999............... 5%
$5,000,000,000+........................... 10%
------------------------------------------------------------------------

Sec. 112023. Certain purchases of employee-owned stock disregarded for
purposes of foundation tax on excess business holdings

Current Law: Under current law, the combined holdings of
private foundations and all of its disqualified persons are
limited to 20 percent of the voting stock in a business
enterprise that is a corporation. Holdings in excess of the
holding percentage are subject to a 10 percent excise tax,
which is increased to 200 percent if the holdings are not
reduced by the end of the taxable year.
Provision: This provision amends IRC section 4943 and
states that shares of stock repurchased by a company from a
retiring employee who participated in the company's Employee
Stock Ownership Plan are treated as outstanding for purposes of
calculating the share of that company owned by a private
foundation.

Sec. 112024. Unrelated business taxable income increased by amount of
certain fringe benefit expenses for which deduction is
disallowed

Current Law: Under current law, the amount paid or incurred
for any qualified transportation fringe benefit is exempt from
unrelated business taxable income.
Provision: This provision amends IRC section 512 to
increase the unrelated business taxable income of a tax-exempt
organization by including the amount paid or incurred for any
qualified transportation fringe benefit.

Sec. 112025. Name and logo royalties treated as unrelated business
taxable income

Current Law: Under current law, the income from the sale or
licensing by an organization of its name or logo is exempt from
unrelated business taxable income.
Provision: This provision amends IRC sections 512 and 513
to increase the unrelated business taxable income of a tax-
exempt organization by including the income from any sale or
licensing by an organization of its name or logo.

Sec. 112026. Exclusion of research income limited to publicly available
research

Current Law: Under current law, all income from research
performed by a nonprofit organization whose primary purpose is
to carry on research that is freely available to the public,
including income from private research, is exempt from
unrelated business taxable income.
Provision: This provision amends IRC section 512 to
increase the unrelated business taxable income of a tax-exempt
organization by including the income generated from non-public
research for an organization whose tax-exempt purpose is to
provide publicly available research as unrelated business
income.

Sec. 112027. Limitation on excess business losses of noncorporate
taxpayers

Current Law: Under current law, in the case of a
noncorporate taxpayer, for taxable years beginning before
January 1, 2029, no deduction is allowed for an excess business
loss. An ``excess business loss'' is the amount by which the
deductions (excluding net operating losses and qualified
business income deductions) attributable to trades or
businesses of the taxpayer exceed the income from such trades
or businesses plus $313,000 for tax years beginning in 2025
($626,000 for a taxpayer filing jointly with a spouse) and is
adjusted for inflation. A disallowed excess business loss is
generally treated as a net operating loss and may be carried
over and used in another tax year.
Provision: This provision makes the limitation on excess
business losses by noncorporate taxpayers permanent. The
provision also provides that excess business losses disallowed
in taxable years beginning after December 31, 2024, are taken
into account in determining a taxpayer's excess business losses
in subsequent taxable years.

Sec. 112028. 1-percent floor on deduction of charitable contributions
made by corporations

Current Law: Under current law, corporate taxpayers are
generally allowed a deduction for charitable contributions up
to a limitation equal to 10 percent of taxable income.
Provision: This provision establishes a fioor equal to one
percent of taxable income for the deductibility of corporate
charitable contributions. In the case of a corporation with
charitable contributions exceeding the 10 percent limit, the
provision allows taxpayers to add the amount disallowed under
the one percent fioor to the amount carried over to the
subsequent year.

Sec. 112029. Enforcement of remedies against unfair foreign taxes

Current Law: Not applicable.
Provision: This provision provides a response to certain
unfair taxes, which include both discriminatory and
extraterritorial taxes imposed on U.S. persons (or certain
foreign entities owned by U.S. persons) by a foreign
government. The provision applies a delayed effective date to
allow time for negotiations and provides discretion for the
Secretary of the Treasury to expand or narrow the definition of
unfair taxes. The provision requires the Secretary of the
Treasury to provide a list unfair taxes to aid withholding
agents, who are permitted to rely on the published list in
determining appropriate withholding rates and are granted
relief from penalties and interest with respect to errors until
January 1, 2027, if they demonstrate best efforts were made at
compliance.
The provision responds to unfair taxes by increasing the
rate of tax generally applicable to certain taxpayers connected
to the foreign jurisdiction. Affected taxpayers generally
include the foreign government, resident individuals, resident
corporations, resident foreign private foundations, and
entities owned by such persons. The increases apply to certain
income, withholding, and excise taxes imposed on non-residents.
The rate of tax-imposed increases from the rates otherwise
applicable under current law in five percent increments for
each year the unfair tax is imposed, until either the unfair
tax is removed or the tax reaches a maximum amount equal to the
relevant statutory rate plus 20 percent.
The provision also applies to certain domestic entities
that are owned by a tax resident of a foreign jurisdiction that
imposes an unfair tax. These domestic entities are subject to
certain modifications to the base erosion anti-abuse tax (BEAT)
that expands the scope of entities subject to the minimum tax,
increases the applicable rate, reduces the benefits of certain
credits, and expands the taxable base to include certain
payments that are currently excluded.

Sec. 112030. Reduction of excise tax on firearms silencers

Current Law: Under current law, a ``silencer'' is defined
as a ``firearm'' (under Section 921 of title 18, U.S. Code) for
purposes of the National Firearms Act and is subject to a $200
transfer tax.
Provision: This provision eliminates the transfer tax on
silencers.

Sec. 112031. Modifications to de minimis entry privilege for commercial
shipments

Current Law: Under current law, Section 321 of the Tariff
Act of 1930 generally allows shipments bound for American
businesses and consumers valued under $800 to enter the U.S.
free of duties and taxes.
Provision: This provision, effective July 1, 2027, repeals
the de minimis privilege worldwide, which currently allows
shipments under $800 to enter the U.S. duty-free. This section
also increases penalties for violators of Section 321 of the
Tariff Act of 1930.

Sec. 112032. Limitation on drawback of taxes paid with respect to
substituted merchandise.

Current Law: Under current law, importers can claim a
refund of excise taxes on imported tobacco products upon
exportation of substitutable goods, even if excise tax was
never paid on those substitute goods
Provision: This provision limits the drawback of excise tax
for tobacco products to scenarios in which excise tax has been
paid on the exported goods that are used as the basis for the
drawback claim.

PART 2--REMOVING TAXPAYER BENEFITS FOR ILLEGAL IMMIGRANTS

Sec. 112101. Permitting premium tax credit only for certain individuals

Current Law: Current law allows individuals who are
``lawfully present'' in the U.S. to receive premium tax credits
to purchase health insurance on the Exchange. Lawful presence
is defined through rulemaking to include most immigration
statuses.
Provision: This provision would eliminate premium tax
credit eligibility for illegal immigrants and only allow
eligibility for Lawful Permanent Residents, certain Cuban
immigrants, and individuals living in the United States through
a Compact of Free Association.

Sec. 112102. Certain aliens treated as ineligible for premium tax
credit

Current Law: Current law allows individuals who are
``lawfully present'' in the U.S. to receive premium tax credits
to purchase health insurance on the Exchange. Lawful presence
is defined through rulemaking to include most immigration
statuses.
Provision: This provision prohibits individuals with
immigration status granted by asylum (or pending an asylum
application), parole, temporary protected status, deferred
enforced departure, and withholding of removal from receiving
premium tax credits.

Sec. 112103. Disallowing premium tax credit during periods of Medicaid
ineligibility due to alien status

Current Law: Current law limits premium tax credit
eligibility to an individual who reports income above 100
percent of the federal poverty level and who is an alien
``lawfully present'' in the U.S. An exception allows such
aliens who report income below 100 percent of the federal
poverty level and are in their five-year Medicaid waiting
period (due to immigration status) to receive premium tax
credits to purchase health insurance on the Exchange.
Provision: This provision strikes this loophole.

Sec. 112104. Limiting Medicare coverage of certain individuals

Current Law: Under current law, individuals who are
``lawfully present'' in the U.S. and meet Medicare's standard
eligibility requirements are generally allowed to enroll in
Medicare.
Provision: This provision would eliminate Medicare
eligibility for illegal immigrants and only allow eligibility
for Lawful Permanent Residents, certain Cuban immigrants, and
individuals living in the United States through a Compact of
Free Association.

Sec. 112105. Excise tax on remittance transfers

Current Law: Not applicable.
Provision: This provision imposes a five percent excise tax
on remittance transfers which will be paid for by the sender
with respect to such transfers. The provision requires that the
tax be collected by the remittance transfer providers and the
remittance transfer providers are responsible for remitting
such tax quarterly to the Secretary of the Treasury. The
provision also makes it clear that remittance transfer
providers have secondary liability for any tax that is not paid
at the time that the transfer is made. The provision also
creates an exception for remittance transfers that are sent by
verified U.S. citizens or U.S. nationals by way of qualified
remittance transfer providers. ``Qualified remittance transfer
providers'' are defined as remittance transfer providers that
enter into a written agreement with the Secretary of the
Treasury to verify the remittance transfer senders as U.S.
citizens or U.S. nationals. The provision also provides a
refundable tax credit for any excise taxes required to be paid
by taxpayers with valid Social Security numbers. Lastly, the
provision also has an anti-conduit rule.

Sec. 112106. Social Security number requirement for American
opportunity and lifetime learning credits

Current Law: Under current law, a student, taxpayer, or
spouse must have a valid taxpayer identification number (TIN)
issued or applied for on or before the due date of the return
(including extensions) in order to claim the American
Opportunity Tax Credit (AOTC) and/or Lifetime Learning Credit
(LLC). A TIN is a Social Security number (SSN), an individual
taxpayer identification number (ITIN), or an adoption taxpayer
identification number (ATIN). The AOTC and/or LLC cannot be
claimed if the TIN is issued after the due date of the return
(including extensions).
Provision: This provision adds requirements for the student
and taxpayer (if filing on behalf of the student) to include
their SSN on their tax return in order to receive either the
AOTC or LLC under IRC section 25A.

PART 3--PREVENTING FRAUD, WASTE, AND ABUSE

Sec. 112201. Requiring Exchange verification of eligibility for health
plan

Current Law: Under current law, Exchanges take steps to
verify applicants' eligibility for coverage and premium tax
credits. However, in some circumstances applicants may be
passively re-enrolled in coverage (and receive premium tax
credits) without updating verification.
Provision: This provision prohibits an individual from
claiming the premium tax credit if the individual's eligibility
related to income, enrollment, and other requirements is not
actively verified annually.

Sec. 112202. Disallowing premium tax credit in case of certain coverage
enrolled in during special enrollment period

Current Law: Under current law, the Centers for Medicare
and Medicaid Services (CMS) has provided for a continuous
special enrollment period available to individuals with a
projected annual household income no greater than 150 percent
of the federal poverty line.
Provision: This provision prohibits individuals from
receiving premium tax credits if they enroll in health coverage
on the Exchange through a special enrollment period associated
with their income.

Sec. 112203. Eliminating limitation on recapture of advance payment of
premium tax credit

Current Law: Under current law, there is a limit on the
amount of excess premium tax credit certain individuals must
repay if they misestimate their projected income and benefit
from a more generous advance payment of the tax credit than
they qualified for.
Provision: This provision removes the repayment limits and
requires affected individuals to reimburse the IRS for the full
amount of excess tax credit received.

Sec. 112204. Implementing artificial intelligence tools for purposes of
reducing and recouping improper payments under Medicare

Current Law: Not applicable.
Provision: This provision provides $25 million for the
Secretary of Health and Human Services to contract with
artificial intelligence contractors and data scientists to
examine Medicare improper payments and recoup overpayments.
Additionally, the Secretary is required to report to Congress
on progress on decreasing the number of Medicare improper
payments.

Sec. 112205. Enforcement provisions with respect to COVID-related
employee retention credits

Current Law: Under current law, assessable penalties are
imposed on promoters of tax shelters or abusive transactions.
One such penalty is based on aiding and abetting the
understatement of tax liability, if the person knows that an
understatement of the tax liability of another person would
result. Separately, paid tax return preparers are subject to a
penalty of $500 for each failure to comply with due diligence
requirements relating to the filing status and amount of
certain credits with respect to a taxpayer's return or claim
for refund.
Provision: This provision increases the penalty for aiding
and abetting the understatement of a tax liability by a COVID
employee retention tax credit (ERTC) promoter. The provision
makes clear that the pre-enactment standard for applying the
aiding and abetting penalty remains unchanged despite the
targeted increase in the amount of the penalty that applies
solely to ERTC promoters.
This section also requires a COVID-ERTC promoter to comply
with due diligence requirements with respect to a taxpayer's
eligibility for (or the amount of) an ERTC and applies a $1,000
penalty for each failure to comply. Under current law,
taxpayers can claim COVID-related ERTC until April 15, 2025.
This section bars the IRS from issuing any additional unpaid
claims, unless a claim for such credit or refund was filed on
or before January 31, 2024.

Sec. 112206. Earned income tax credit reforms

Current Law: Under current law, a taxpayer can qualify for
the earned income tax credit (EITC) if they (1) have earned
income, (2) have a valid Social Security number (SSN), (3) be a
U.S. citizen or resident alien all year, (4) not file Form
2555, (5) meet income and investment limits, and (6) file as
single, head of household, qualifying surviving spouse, or
married filing jointly. The IRS may audit an EITC claim or deny
all or part of the credit if there are errors on a tax return.
The most common error taxpayers claim is (1) that the child
does not qualify, (2) more than one person claimed the child,
(3) the SSN or last names do not match, (4) the taxpayer is
married but filed as single head of household, and (5) over or
underreporting income or expenses. Consequently, the IRS issues
duplicative claims and the EITC has a high rate of improper
payments.
Provision: This provision establishes a phased system for
the IRS to detect and manage duplicate EITC claims. Beginning
in 2024, if there is a duplicate claim, the IRS will send both
claimants a notice stating that the child's SSN was used twice.
The following year, the IRS will hold refunds until October 15
and use its math error authority to correct any duplicative
claims by eliminating the claimed child and processing the
remainder of the claims. Claimants can obtain a refund if they
respond to the math error notice and provide evidence of
eligibility. After the initial two years, this section provides
for a pre-certification process that will reduce erroneous
payments without delaying refunds.
This provision also creates a task force to provide the
Secretary of Treasury a report on recommendations for
improvement of the integrity of the administration of the EITC,
the potential use of third-party payroll and consumption
datasets to verify income, and the integration of automated
databases to allow horizontal verification to reduce improper
payments, fraud, and abuse.
Finally, this provision provides Purple Heart recipients
whose Social Security disability insurance benefits were
terminated due to returning to work with an additional EITC
amount equivalent to one year of the lost disability insurance
benefits.

Sec. 112207. Task force on the termination of Direct File

Current Law: Under current law, the IRS may prepare and
files tax returns online, for free, to qualifying taxpayers in
25 participating states (Direct File program). In addition, the
IRS offers a Free File program where a number of tax
preparation and filing software industry companies provide
their online tax preparation and filing for free.
Provision: This provision terminates the current Direct
File program at the IRS and establishes a public-private
partnership between the IRS and private sector tax preparation
services to offer free tax filing, replacing both the existing
Direct File and Free File programs.

Sec. 112208. Postponement of tax deadlines for hostages and individuals
wrongfully detained abroad

Current Law: Under current law, neither the provision on
service in a combat zone nor the rules on disaster relief
address persons who fail to meet a tax filing or payment
deadline that arises while they are unlawfully or wrongfully
detained abroad.
Provision: This provision directs the IRS to disregard the
time during which an applicable individual is held hostage or
wrongfully detained abroad for purposes of determining whether
a taxpayer filed their return, paid income tax, filed a claim
for a credit or refund of any tax, or committed other acts
described in Section 7508(a)(1) within the required timeframe,
and for purposes of determining the amount of interest or
penalty owed, or amount of any credit or refund. Additionally,
this section requires the Secretary of the Treasury to
establish a program to allow any applicable individual to apply
for a refund or abatement of any amount to the extent such
amount was attributable to the time during which the taxpayer
was held hostage or unlawfully detained abroad.

Sec. 112209. Termination of tax-exempt status of terrorist supporting
organizations

Current Law: Under current law, the IRS generally only
issues a letter revoking recognition of an organization's tax-
exempt status after (1) conducting an examination of the
organization; (2) issuing a letter to the organization
proposing revocation; and (3) allowing the organization to
exhaust the administrative appeal rights that follow the
issuance of the proposed revocation letter.
Provision: This provision grants the Secretary of the
Treasury authority to suspend the tax-exempt status of any tax-
exempt organization that, during the three years prior to
designation, provided more than a minor amount of material
support or resources to a listed terrorist organization. The
provision allows suspensions to be lifted only when the
supported terrorist organization is de-listed as a terrorist
organization, but the Treasury Department's ability to suspend
tax-exempt status is subject to a robust set of procedural and
due process protections, including notice requirements and an
opportunity to challenge the designation.

Sec. 112210. Increase in penalties for unauthorized disclosures of
taxpayer information

Current Law: Under current law, the maximum fine for
unauthorized disclosure of taxpayer information is $5,000. The
maximum term of imprisonment upon conviction of a Section 7213
violation is five years. Additionally, under current law, a
willful unauthorized disclosure involving the returns or return
information of multiple taxpayers is unclear.
Provision: This provision increases the specified maximum
fine in IRC section 7513 to $250,000 and the maximum term of
imprisonment to 10 years. This section also clarifies that a
separate violation occurs with respect to each such taxpayer
whose return or return information is disclosed, upon the
willful unauthorized disclosure involving the returns or return
information of multiple taxpayers.

Sec. 112211. Restriction on regulation of contingency fees with respect
to tax returns, etc.

Current Law: Not applicable.
Provision: This provision restricts the Treasury Department
from regulating, prohibiting, or restricting the use of
contingency fees in connection with tax returns, refunds, or
documentation with tax returns for refunds prepared on behalf
of taxpayers.

Subtitle D--Increase in Debt Limit

Sec. 113001. Modification of limitation on the public debt

Current Law: The current statutory debt limit was
established on January 2, 2025, following a debt limit
suspension period that ran through January 1, 2025.
Provision: This provision increases the statutory debt
limit by $4 trillion.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

Clause 3(e) of rule XIII of the Rules of the House of
Representatives requires that each report of a committee on a
bill or joint resolution contain the text of statutes that are
proposed to be repealed and a comparative print of that part of
the bill proposed to be amended whenever the bill repeals or
amends any statute. The Committee advises that compliance prior
to consideration was not possible.

VIEWS OF COMMITTEE MEMBERS

Clause 2(c) of rule XIII of the Rules of the House of
Representatives requires each report by a committee on a public
matter to include any additional, minority, supplemental, or
dissenting views submitted pursuant to clause 2(l) of rule XI
by one or more members of the committee. In addition, this
report includes views from members of committees submitting
reconciliation recommendations pursuant to Title II of H. Con.
Res. 14 under the appropriate titles of this report. The
Minority Views of members of the Committee on the Budget are as
follows:

MINORITY VIEWS

BIG BILL FOR BILLIONAIRES

The measure before us today is a big bill for billionaires,
and every Democratic Member voted no.
It is the biggest tax cut for billionaires in American
history, paid for by throwing 13.7 million Americans off their
health care coverage. That's not a subjective claim, just this
week the non-partisan Congressional Budget Office confirmed
that at least 13.7 million Americans will lose their healthcare
if the GOP bill for billionaires becomes law. That is bad
economics. It is unconscionable. And it is morally wrong.
Throughout this debate, Republican after Republican said
they must pass this bill, otherwise the tax cuts won't be
extended for the American people. But that's a disingenuous
argument, and Democrats in the Ways and Means Committee proved
it. Democrats offered amendment after amendment to protect the
tax cuts for every single American making less than $1 billion.
Those who make a billion dollars a year or more are less than
0.001 percent of the American people. Even on an amendment,
which all Democrats supported, that would have left in place
the tax cuts for at least 99.999 percent of the American
people, every Republican voted against it. This bill is
delivering the biggest bounty of tax cuts for multimillionaires
and billionaires in American history, paid for on the backs of
the poor and the working poor and the middle class in this
country.
In a recent poll, 81 percent of Americans said they do not
support cutting Medicaid to pay for tax cuts. A majority of
Democrats, a majority of independents, and even a majority of
Republicans said they oppose this radical agenda.
This will do real damage to the American people.
Republicans have been on a 15-year quest to repeal Obamacare.
In this piece of legislation, they will come closer to their
ultimate goal than ever before. Of the 13.7 million Americans
who will lose their health care if this bill passes, about half
are a result of decimating the Affordable Care Act. Eight years
ago, House Republicans passed an ACA repeal, but a few brave
Senators stood up and gave it a famous thumbs down. We hope
House Republicans will join with us now to protect the health
care of millions of Americans and say no to the big bill for
billionaires.
Sincerely,
Brendan F. Boyle,
Ranking Member.
Robert C. ``Bobby'' Scott,
Jimmy Panetta,
Stacey E. Plaskett,
Ilhan Omar,
Marcy Kaptur,
Lloyd Doggett,
Scott H. Peters,
Bonnie Watson Coleman,
Veronica Escobar,
Becca Balint,
Pramila Jayapal,
Judy Chu,
Morgan McGarvey,
Paul D. Tonko,
Gabe Amo,
Members of Congress.

A BILL

To provide for reconciliation pursuant to title II of H.
Con. Res. 14.

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``One Big Beautiful Bill Act''.

SEC. 2. TABLE OF CONTENTS.

The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

TITLE I--COMMITTEE ON AGRICULTURE

Subtitle A--Nutrition

Sec. 10001. Thrifty food plan.
Sec. 10002. Able bodied adults without dependents work requirements.
Sec. 10003. Able bodied adults without dependents waivers.
Sec. 10004. Availability of standard utility allowances based on receipt
of energy assistance.
Sec. 10005. Restrictions on internet expenses.
Sec. 10006. Matching funds requirements.
Sec. 10007. Administrative cost sharing.
Sec. 10008. General work requirement age.
Sec. 10009. National Accuracy Clearinghouse.
Sec. 10010. Quality control zero tolerance.
Sec. 10011. National education and obesity prevention grant program
repealer.
Sec. 10012. Alien SNAP eligibility.
Sec. 10012. Emergency food assistance.

Subtitle B--Investment in Rural America

Sec. 10101. Safety net.
Sec. 10102. Conservation.
Sec. 10103. Trade.
Sec. 10104. Research.
Sec. 10105. Secure rural schools; forestry.
Sec. 10106. Energy.
Sec. 10107. Horticulture.
Sec. 10108. Miscellaneous.

TITLE II--COMMITTEE ON ARMED SERVICES

Sec. 20001. Enhancement of Department of Defense resources for improving
the quality of life for military personnel.
Sec. 20002. Enhancement of Department of Defense resources for
shipbuilding.
Sec. 20003. Enhancement of Department of Defense resources for
integrated air and missile defense.
Sec. 20004. Enhancement of Department of Defense resources for munitions
and defense supply chain resiliency.
Sec. 20005. Enhancement of Department of Defense resources for scaling
low-cost weapons into production.
Sec. 20006. Enhancement of Department of Defense resources for improving
the efficiency and cybersecurity of the Department of Defense.
Sec. 20007. Enhancement of Department of Defense resources for air
superiority.
Sec. 20008. Enhancement of resources for nuclear forces.
Sec. 20009. Enhancement of Department of Defense resources to improve
capabilities of United States Indo-Pacific Command.
Sec. 20010. Enhancement of Department of Defense resources for improving
the readiness of the Armed Forces.
Sec. 20011. Improving Department of Defense border support and counter-
drug missions.
Sec. 20012. Enhancement of military intelligence programs.
Sec. 20013. Department of Defense oversight.
Sec. 20014. Military construction projects authorized.
Sec. 20015. Plan required.
Sec. 20016. Limitation on availability of funds.

TITLE III--COMMITTEE ON EDUCATION AND WORKFORCE

Subtitle A--Student Eligibility

Sec. 30001. Student eligibility.
Sec. 30002. Amount of need; cost of attendance; median cost of college.

Subtitle B--Loan Limits

Sec. 30011. Loan Limits.

Subtitle C--Loan Repayment

Sec. 30021. Loan repayment.
Sec. 30022. Deferment; forbearance.
Sec. 30023. Loan rehabilitation.
Sec. 30024. Public Service Loan Forgiveness.
Sec. 30025. Student loan servicing.

Subtitle D--Pell Grants

Sec. 30031. Eligibility.
Sec. 30032. Workforce pell grants.
Sec. 30033. Pell shortfall.

Subtitle E--Accountability

Sec. 30041. Agreements with institutions.
Sec. 30042. Campus-based aid programs.

Subtitle F--Regulatory Relief

Sec. 30051. Regulatory relief.

Subtitle G--Limitation on Authority

Sec. 30061. Limitation on authority of the Secretary to propose or issue
regulations and executive actions.

TITLE IV--ENERGY AND COMMERCE

Subtitle A--Energy

Sec. 41001. Rescissions relating to certain Inflation Reduction Act
programs.
Sec. 41002. FERC certificates and fees for certain energy infrastructure
at international boundaries of the United States.
Sec. 41003. Natural gas exports and imports.
Sec. 41004. Funding for Department of Energy loan guarantee expenses.
Sec. 41005. Expedited permitting.
Sec. 41006. Carbon dioxide, hydrogen, and petroleum pipeline permitting.
Sec. 41007. De-risking Compensation Program.
Sec. 41008. Strategic Petroleum Reserve.
Sec. 41009. Rescissions of previously appropriated unobligated funds.

Subtitle B--Environment

Part 1--Repeals and Rescissions

Sec. 42101. Repeal and rescission relating to clean heavy-duty vehicles.
Sec. 42102. Repeal and rescission relating to grants to reduce air
pollution at ports.
Sec. 42103. Repeal and rescission relating to Greenhouse Gas Reduction
Fund.
Sec. 42104. Repeal and rescission relating to diesel emissions
reductions.
Sec. 42105. Repeal and rescission relating to funding to address air
pollution.
Sec. 42106. Repeal and rescission relating to funding to address air
pollution at schools.
Sec. 42107. Repeal and rescission relating to low emissions electricity
program.
Sec. 42108. Repeal and rescission relating to funding for section 211(o)
of the Clean Air Act.
Sec. 42109. Repeal and rescission relating to funding for implementation
of the American Innovation and Manufacturing Act.
Sec. 42110. Repeal and rescission relating to funding for enforcement
technology and public information.
Sec. 42111. Repeal and rescission relating to greenhouse gas corporate
reporting.
Sec. 42112. Repeal and rescission relating to environmental product
declaration assistance.
Sec. 42113. Repeal of funding for methane emissions and waste reduction
incentive program for petroleum and natural gas systems.
Sec. 42114. Repeal and rescission relating to greenhouse gas air
pollution plans and implementation grants.
Sec. 42115. Repeal and rescission relating to Environmental Protection
Agency efficient, accurate, and timely reviews.
Sec. 42116. Repeal and rescission relating to low-embodied carbon
labeling for construction materials.
Sec. 42117. Repeal and rescission relating to environmental and climate
justice block grants.

Part 2--Repeal of EPA Rule Relating to Multi-pollutant Emissions
Standards

Sec. 42201. Repeal of EPA rule relating to multi-pollutant emissions
standards for light- and medium-duty vehicles.

Part 3--Repeal of NHTSA Rule Relating to CAFE Standards

Sec. 42301. Repeal of NHTSA rule relating to CAFE standards for
passenger cars and light trucks.

Subtitle C--Communications

Part 1--Spectrum Auctions

Sec. 43101. Identification and auction of spectrum.

Part 2--Artificial Intelligence and Information Technology Modernization

Sec. 43201. Artificial intelligence and information technology
modernization initiative.

Subtitle D--Health

Part 1--Medicaid

subpart a--reducing fraud and improving enrollment processes

Sec. 44101. Moratorium on implementation of rule relating to eligibility
and enrollment in Medicare Savings Programs.
Sec. 44102. Moratorium on implementation of rule relating to eligibility
and enrollment for Medicaid, CHIP, and the Basic Health
Program.
Sec. 44103. Ensuring appropriate address verification under the Medicaid
and CHIP programs.
Sec. 44104. Modifying certain State requirements for ensuring deceased
individuals do not remain enrolled.
Sec. 44105. Medicaid provider screening requirements.
Sec. 44106. Additional Medicaid provider screening requirements.
Sec. 44107. Removing good faith waiver for payment reduction related to
certain erroneous excess payments under Medicaid.
Sec. 44108. Increasing frequency of eligibility redeterminations for
certain individuals.
Sec. 44109. Revising home equity limit for determining eligibility for
long-term care services under the Medicaid program.
Sec. 44110. Prohibiting Federal financial participation under Medicaid
and CHIP for individuals without verified citizenship,
nationality, or satisfactory immigration status.
Sec. 44111. Reducing expansion FMAP for certain States providing
payments for health care furnished to certain individuals.

subpart b--preventing wasteful spending

Sec. 44121. Moratorium on implementation of rule relating to staffing
standards for long-term care facilities under the Medicare and
Medicaid programs.
Sec. 44122. Modifying retroactive coverage under the Medicaid and CHIP
programs.
Sec. 44123. Ensuring accurate payments to pharmacies under Medicaid.
Sec. 44124. Preventing the use of abusive spread pricing in Medicaid.
Sec. 44125. Prohibiting Federal Medicaid and CHIP funding for gender
transition procedures for minors.
Sec. 44126. Federal payments to prohibited entities.

subpart c--stopping abusive financing practices

Sec. 44131. Sunsetting eligibility for increased FMAP for new expansion
States.
Sec. 44132. Moratorium on new or increased provider taxes.
Sec. 44133. Revising the payment limit for certain State directed
payments.
Sec. 44134. Requirements regarding waiver of uniform tax requirement for
Medicaid provider tax.
Sec. 44135. Requiring budget neutrality for Medicaid demonstration
projects under section 1115.

subpart d--increasing personal accountability

Sec. 44141. Requirement for States to establish Medicaid community
engagement requirements for certain individuals.
Sec. 44142. Modifying cost sharing requirements for certain expansion
individuals under the Medicaid program.

Part 2--Affordable Care Act

Sec. 44201. Addressing waste, fraud, and abuse in the ACA Exchanges.

Part 3--Improving Americans' Access to Care

Sec. 44301. Expanding and clarifying the exclusion for orphan drugs
under the Drug Price Negotiation Program.
Sec. 44302. Streamlined enrollment process for eligible out-of-state
providers under Medicaid and CHIP.
Sec. 44303. Delaying DSH reductions.
Sec. 44304. Modifying update to the conversion factor under the
physician fee schedule under the Medicare program.
Sec. 44305. Modernizing and Ensuring PBM Accountability.

TITLE V--COMMITTEE ON FINANCIAL SERVICES

Sec. 50001. Green and resilient retrofit program for multifamily family
housing.
Sec. 50002. Public Company Accounting Oversight Board.
Sec. 50003. Bureau of Consumer Financial Protection.
Sec. 50004. Consumer Financial Civil Penalty Fund.
Sec. 50005. Financial Research Fund.

TITLE VI--COMMITTEE ON HOMELAND SECURITY

Sec. 60001. Border barrier system construction, invasive species, and
border security facilities improvements.
Sec. 60002. U.S. Customs and Border Protection personnel and fleet
vehicles.
Sec. 60003. U.S. Customs and Border Protection technology, National
Vetting Center, and other efforts to enhance border security.
Sec. 60004. State and local law enforcement presidential residence
protection.
Sec. 60005. State homeland security grant program.

TITLE VII--COMMITTEE ON THE JUDICIARY

Subtitle A--Immigration Matters

Part 1--Immigration Fees

Sec. 70001. Applicability of the immigration laws.
Sec. 70002. Asylum fee.
Sec. 70003. Employment authorization document fees.
Sec. 70004. Parole fee.
Sec. 70005. Special immigrant juvenile fee.
Sec. 70006. Temporary protected status fee.
Sec. 70007. Unaccompanied alien child sponsor fee.
Sec. 70008. Visa integrity fee.
Sec. 70009. Form I-94 fee.
Sec. 70010. Yearly asylum fee.
Sec. 70011. Fee for continuances granted in immigration court
proceedings.
Sec. 70012. Fee relating to renewal and extension of employment
authorization for parolees.
Sec. 70013. Fee relating to termination, renewal, and extension of
employment authorization for asylum applicants.
Sec. 70014. Fee relating to renewal and extension of employment
authorization for aliens granted temporary protected status.
Sec. 70015. Diversity immigrant visa fees.
Sec. 70016. EOIR fees.
Sec. 70017. ESTA fee.
Sec. 70018. Immigration user fees.
Sec. 70019. EVUS fee.
Sec. 70020. Fee for sponsor of unaccompanied alien child who fails to
appear in immigration court.
Sec. 70021. Fee for aliens ordered removed in absentia.
Sec. 70022. Customs and Border Protection inadmissible alien
apprehension fee.
Sec. 70023. Amendment to authority to apply for asylum.

Part 2--Use of Funds

Sec. 70100. Executive Office for Immigration Review.
Sec. 70101. Adult alien detention capacity and family residential
centers.
Sec. 70102. Retention and signing bonuses for U.S. Immigration and
Customs Enforcement personnel.
Sec. 70103. Hiring of additional U.S. Immigration and Customs
Enforcement personnel.
Sec. 70104. U.S. Immigration and Customs Enforcement hiring capability.
Sec. 70105. Transportation and removal operations.
Sec. 70106. Information technology investments.
Sec. 70107. Facilities upgrades.
Sec. 70108. Fleet modernization.
Sec. 70109. Promoting family unity.
Sec. 70110. Funding section 287(g) of the Immigration and Nationality
Act.
Sec. 70111. Compensation for incarceration of criminal aliens.
Sec. 70112. Office of the Principal Legal Advisor.
Sec. 70113. Return of aliens arriving from contiguous territory.
Sec. 70114. State and local participation in homeland security efforts.
Sec. 70115. Unaccompanied alien children capacity.
Sec. 70116. Department of Homeland Security criminal and gang checks for
unaccompanied alien children.
Sec. 70117. Department of Health and Human Services criminal and gang
checks for unaccompanied alien children.
Sec. 70118. Information about sponsors and adult residents of sponsor
households.
Sec. 70119. Repatriation of unaccompanied alien children.
Sec. 70120. United States Secret Service.
Sec. 70121. Combating drug trafficking and illegal drug use.
Sec. 70122. Investigating and prosecuting immigration related matters.
Sec. 70123. Expedited removal for criminal aliens.
Sec. 70124. Removal of certain criminal aliens without further hearing.

Subtitle B--Regulatory Matters

Sec. 70200. Review of agency rulemaking.
Sec. 70201. Congressional review act compliance.

Subtitle C--Other Matters

Sec. 70300. Limitation on donations made pursuant to settlement
agreements to which the United States is a party.
Sec. 70301. Solicitation of orders defined.
Sec. 70302. Restriction of funds.

TITLE VIII--COMMITTEE ON NATURAL RESOURCES

Subtitle A--Energy and Mineral Resources

Part I--Oil and Gas

Sec. 80101. Onshore oil and gas lease sales.
Sec. 80102. Noncompetitive leasing.
Sec. 80103. Permit fees.
Sec. 80104. Permitting fee for non-Federal land.
Sec. 80105. Reinstate reasonable royalty rates.

Part II--Geothermal

Sec. 80111. Geothermal leasing.
Sec. 80112. Geothermal royalties.

Part III--Alaska

Sec. 80121. Coastal plain oil and gas leasing.
Sec. 80122. National Petroleum Reserve-Alaska.

Part IV--Mining

Sec. 80131. Superior National Forest lands in Minnesota.
Sec. 80132. Ambler Road in Alaska.

Part V--Coal

Sec. 80141. Coal leasing.
Sec. 80142. Future coal leasing.
Sec. 80143. Coal royalty.
Sec. 80144. Authorization to mine Federal minerals.

Part VI--NEPA

Sec. 80151. Project sponsor opt-in fees for environmental reviews.
Sec. 80152. Rescission relating to environmental and climate data
collection.

Part VII--Miscellaneous

Sec. 80161. Protest fees.

Part VIII--Offshore Oil and Gas Leasing

Sec. 80171. Mandatory offshore oil and gas lease sales.
Sec. 80172. Offshore commingling.
Sec. 80173. Limitations on amount of distributed qualified outer
Continental Shelf revenues.

Part IX--Renewable Energy

Sec. 80181. Renewable energy fees on Federal lands.
Sec. 80182. Renewable energy revenue sharing.

Subtitle B--Water, Wildlife, and Fisheries

Sec. 80201. Rescission of funds for investing in coastal communities and
climate resilience.
Sec. 80202. Rescission of funds for facilities of National Oceanic and
Atmospheric Administration and national marine sanctuaries.
Sec. 80203. Surface water storage enhancement.
Sec. 80204. Water conveyance enhancement.

Subtitle C--Federal Lands

Sec. 80301. Prohibition on the Implementation of the Rock Springs Field
Office, Wyoming, Resource Management Plan.
Sec. 80302. Prohibition on the Implementation of the Buffalo Field
Office, Wyoming, Resource Management Plan.
Sec. 80303. Prohibition on the Implementation of the Miles City Field
Office, Montana, Resource Management Plan.
Sec. 80304. Prohibition on the Implementation of the North Dakota
Resource Management Plan.
Sec. 80305. Prohibition on the Implementation of the Colorado River
Valley Field Office and Grand Junction Field Office Resource
Management Plans.
Sec. 80306. Rescission of Forest Service Funds.
Sec. 80307. Rescission of National Park Service and Bureau of Land
Management Funds.
Sec. 80308. Rescission of Bureau of Land Management and National Park
Service Funds.
Sec. 80309. Rescission of National Park Service Funds.
Sec. 80310. Celebrating America's 250th Anniversary.
Sec. 80311. Long-Term Contracts for the Forest Service.
Sec. 80312. Long-Term Contracts for the Bureau of Land Management.
Sec. 80313. Timber production for the Forest Service.
Sec. 80314. Timber Production for the Bureau of Land Management.
Sec. 80315. Bureau of Land Management Land in Nevada.
Sec. 80316. Forest Service Land in Nevada.
Sec. 80317. Federal land in Utah.

TITLE IX--COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

Sec. 90001. Increase in FERS employee contribution requirements.
Sec. 90002. Elimination of FERS annuity supplement.
Sec. 90003. High-5 average pay for calculating CSRS and FERS pension.
Sec. 90004. Election for at-will employment and lower FERS contributions
for new Federal civil service hires.
Sec. 90005. Filing fee for Merit Systems Protection Board claims and
appeals.
Sec. 90006. FEHB protection.

TITLE X--COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

Sec. 100001. Coast Guard assets necessary to secure the maritime border
and interdict migrants and drugs.
Sec. 100002. Changes to mandatory benefits programs to allow selected
reserve orders for preplanned missions to secure maritime
borders and interdict persons and drugs.
Sec. 100003. Vessel tonnage duties.
Sec. 100004. Registration fee on motor vehicles.
Sec. 100005. Deposit of registration fee on motor vehicles.
Sec. 100006. Motor carrier data.
Sec. 100007. IRA rescissions.
Sec. 100008. Air traffic control staffing and modernization.
Sec. 100009. John F. Kennedy Center for the Performing Arts
appropriations.

TITLE XI--COMMITTEE ON WAYS AND MEANS, ``THE ONE, BIG, BEAUTIFUL BILL''

Sec. 110000. References to the Internal Revenue Code of 1986, etc.

Subtitle A--Make American Families and Workers Thrive Again

Part 1--Permanently Preventing Tax Hikes on American Families and
Workers

Sec. 110001. Extension of modification of rates.
Sec. 110002. Extension of increased standard deduction and temporary
enhancement.
Sec. 110003. Termination of deduction for personal exemptions.
Sec. 110004. Extension of increased child tax credit and temporary
enhancement.
Sec. 110005. Extension of deduction for qualified business income and
permanent enhancement.
Sec. 110006. Extension of increased estate and gift tax exemption
amounts and permanent enhancement.
Sec. 110007. Extension of increased alternative minimum tax exemption
and phase-out thresholds.
Sec. 110008. Extension of limitation on deduction for qualified
residence interest.
Sec. 110009. Extension of limitation on casualty loss deduction.
Sec. 110010. Termination of miscellaneous itemized deduction.
Sec. 110011. Limitation on tax benefit of itemized deductions.
Sec. 110012. Termination of qualified bicycle commuting reimbursement
exclusion.
Sec. 110013. Extension of limitation on exclusion and deduction for
moving expenses.
Sec. 110014. Extension of limitation on wagering losses.
Sec. 110015. Extension of increased limitation on contributions to ABLE
accounts and permanent enhancement.
Sec. 110016. Extension of savers credit allowed for ABLE contributions.
Sec. 110017. Extension of rollovers from qualified tuition programs to
ABLE accounts permitted.
Sec. 110018. Extension of treatment of certain individuals performing
services in the Sinai Peninsula and enhancement to include
additional areas.
Sec. 110019. Extension of exclusion from gross income of student loans
discharged on account of death or disability.

Part 2--Additional Tax Relief for American Families and Workers

Sec. 110101. No tax on tips.
Sec. 110102. No tax on overtime.
Sec. 110103. Enhanced deduction for seniors.
Sec. 110104. No tax on car loan interest.
Sec. 110105. Enhancement of employer-provided child care credit.
Sec. 110106. Extension and enhancement of paid family and medical leave
credit.
Sec. 110107. Enhancement of adoption credit.
Sec. 110108. Recognizing Indian tribal governments for purposes of
determining whether a child has special needs for purposes of
the adoption credit.
Sec. 110109. Tax credit for contributions of individuals to scholarship
granting organizations.
Sec. 110110. Additional elementary, secondary, and home school expenses
treated as qualified higher education expenses for purposes of
529 accounts.
Sec. 110111. Certain postsecondary credentialing expenses treated as
qualified higher education expenses for purposes of 529
accounts.
Sec. 110112. Reinstatement of partial deduction for charitable
contributions of individuals who do not elect to itemize.
Sec. 110113. Exclusion for certain employer payments of student loans
under educational assistance programs made permanent and
adjusted for inflation.
Sec. 110114. Extension of rules for treatment of certain disaster-
related personal casualty losses.
Sec. 110115. MAGA accounts.
Sec. 110116. MAGA accounts contribution pilot program.

Part 3--Investing in Health of American Families and Workers

Sec. 110201. Treatment of health reimbursement arrangements integrated
with individual market coverage.
Sec. 110202. Participants in CHOICE arrangement eligible for purchase of
Exchange insurance under cafeteria plan.
Sec. 110203. Employer credit for CHOICE arrangement.
Sec. 110204. Individuals entitled to part A of Medicare by reason of age
allowed to contribute to health savings accounts.
Sec. 110205. Treatment of direct primary care service arrangements.
Sec. 110206. Allowance of bronze and catastrophic plans in connection
with health savings accounts.
Sec. 110207. On-site employee clinics.
Sec. 110208. Certain amounts paid for physical activity, fitness, and
exercise treated as amounts paid for medical care.
Sec. 110209. Allow both spouses to make catch-up contributions to the
same health savings account.
Sec. 110210. FSA and HRA terminations or conversions to fund HSAs.
Sec. 110211. Special rule for certain medical expenses incurred before
establishment of health savings account.
Sec. 110212. Contributions permitted if spouse has health flexible
spending arrangement.
Sec. 110213. Increase in health savings account contribution limitation
for certain individuals.
Sec. 110214. Regulations.

Subtitle B--Make Rural America and Main Street Grow Again

Part 1--Extension of Tax Cuts and Jobs Act Reforms for Rural America and
Main Street

Sec. 111001. Extension of special depreciation allowance for certain
property.
Sec. 111002. Deduction of domestic research and experimental
expenditures.
Sec. 111003. Modified calculation of adjusted taxable income for
purposes of business interest deduction.
Sec. 111004. Extension of deduction for foreign-derived intangible
income and global intangible low-taxed income.
Sec. 111005. Extension of base erosion minimum tax amount.

Part 2--Additional Tax Relief for Rural America and Main Street

Sec. 111101. Special depreciation allowance for qualified production
property.
Sec. 111102. Renewal and enhancement of opportunity zones.
Sec. 111103. Increased dollar limitations for expensing of certain
depreciable business assets.
Sec. 111104. Repeal of revision to de minimis rules for third party
network transactions.
Sec. 111105. Increase in threshold for requiring information reporting
with respect to certain payees.
Sec. 111106. Repeal of excise tax on indoor tanning services.
Sec. 111107. Exclusion of interest on loans secured by rural or
agricultural real property.
Sec. 111108. Treatment of certain qualified sound recording productions.
Sec. 111109. Modifications to low-income housing credit.
Sec. 111110. Increased gross receipts threshold for small manufacturing
businesses.
Sec. 111111. Global intangible low-taxed income determined without
regard to certain income derived from services performed in
the Virgin Islands.
Sec. 111112. Extension and modification of clean fuel production credit.

Part 3--Investing in the Health of Rural America and Main Street

Sec. 111201. Expanding the definition of rural emergency hospital under
the Medicare program.

Subtitle C--Make America Win Again

Part 1--Working Families Over Elites

Sec. 112001. Termination of previously-owned clean vehicle credit.
Sec. 112002. Termination of clean vehicle credit.
Sec. 112003. Termination of qualified commercial clean vehicles credit.
Sec. 112004. Termination of alternative fuel vehicle refueling property
credit.
Sec. 112005. Termination of energy efficient home improvement credit.
Sec. 112006. Termination of residential clean energy credit.
Sec. 112007. Termination of new energy efficient home credit.
Sec. 112008. Phase-out and restrictions on clean electricity production
credit.
Sec. 112009. Phase-out and restrictions on clean electricity investment
credit.
Sec. 112010. Repeal of transferability of clean fuel production credit.
Sec. 112011. Restrictions on carbon oxide sequestration credit.
Sec. 112012. Phase-out and restrictions on zero-emission nuclear power
production credit.
Sec. 112013. Termination of clean hydrogen production credit.
Sec. 112014. Phase-out and restrictions on advanced manufacturing
production credit.
Sec. 112015. Phase-out of credit for certain energy property.
Sec. 112016. Income from hydrogen storage, carbon capture added to
qualifying income of certain publicly traded partnerships
treated as corporations.
Sec. 112017. Limitation on amortization of certain sports franchises.
Sec. 112018. Limitation on individual deductions for certain State and
local taxes, etc.
Sec. 112019. Excessive employee remuneration from controlled group
members and allocation of deduction.
Sec. 112020. Expanding application of tax on excess compensation within
tax-exempt organizations.
Sec. 112021. Modification of excise tax on investment income of certain
private colleges and universities.
Sec. 112022. Increase in rate of tax on net investment income of certain
private foundations.
Sec. 112023. Certain purchases of employee-owned stock disregarded for
purposes of foundation tax on excess business holdings.
Sec. 112024. Unrelated business taxable income increased by amount of
certain fringe benefit expenses for which deduction is
disallowed.
Sec. 112025. Name and logo royalties treated as unrelated business
taxable income.
Sec. 112026. Exclusion of research income limited to publicly available
research.
Sec. 112027. Limitation on excess business losses of noncorporate
taxpayers.
Sec. 112028. 1-percent floor on deduction of charitable contributions
made by corporations.
Sec. 112029. Enforcement of remedies against unfair foreign taxes.
Sec. 112030. Reduction of excise tax on firearms silencers.
Sec. 112031. Modifications to de minimis entry privilege for commercial
shipments.
Sec. 112032. Limitation on drawback of taxes paid with respect to
substituted merchandise.

Part 2--Removing Taxpayer Benefits for Illegal Immigrants

Sec. 112101. Permitting premium tax credit only for certain individuals.
Sec. 112102. Certain aliens treated as ineligible for premium tax
credit.
Sec. 112103. Disallowing premium tax credit during periods of Medicaid
ineligibility due to alien status.
Sec. 112104. Limiting Medicare coverage of certain individuals.
Sec. 112105. Excise tax on remittance transfers.
Sec. 112106. Social security number requirement for American opportunity
and lifetime learning credits.

Part 3--Preventing Fraud, Waste, and Abuse

Sec. 112201. Requiring Exchange verification of eligibility for health
plan.
Sec. 112202. Disallowing premium tax credit in case of certain coverage
enrolled in during special enrollment period.
Sec. 112203. Eliminating limitation on recapture of advance payment of
premium tax credit.
Sec. 112204. Implementing artificial intelligence tools for purposes of
reducing and recouping improper payments under Medicare.
Sec. 112205. Enforcement provisions with respect to COVID-related
employee retention credits.
Sec. 112206. Earned income tax credit reforms.
Sec. 112207. Task force on the termination of Direct File.
Sec. 112208. Postponement of tax deadlines for hostages and individuals
wrongfully detained abroad.
Sec. 112209. Termination of tax-exempt status of terrorist supporting
organizations.
Sec. 112210. Increase in penalties for unauthorized disclosures of
taxpayer information.
Sec. 112211. Restriction on regulation of contingency fees with respect
to tax returns, etc.

Subtitle D--Increase in Debt Limit

Sec. 113001. Modification of limitation on the public debt.

TITLE I--COMMITTEE ON AGRICULTURE

Subtitle A--Nutrition

SEC. 10001. THRIFTY FOOD PLAN.

Section 3(u) of the Food and Nutrition Act of 2008 (7 U.S.C.
2012(u)) is amended to read as follows:
``(u)(1) `Thrifty food plan' means the diet required to feed
a family of 4 persons consisting of a man and a woman 20
through 50, a child 6 through 8, and a child 9 through 11 years
of age, based on relevant market baskets that shall only be
changed pursuant to paragraph (3). The cost of such diet shall
be the basis for uniform allotments for all households
regardless of their actual composition. The Secretary shall
only adjust the cost of the diet as specified in paragraphs (2)
and (4).
``(2) Household Adjustments.--The Secretary shall make
household-size adjustments based on the following ratios of
household size as a percentage of the maximum 4-person
allotment:
``(A) For a 1-person household, 30 percent.
``(B) For a 2-person household, 55 percent.
``(C) For a 3-person household, 79 percent.
``(D) For a 4-person household, 100 percent.
``(E) For a 5-person household, 119 percent.
``(F) For a 6-person household, 143 percent.
``(G) For a 7-person household, 158 percent.
``(H) For an 8-person household, 180 percent.
``(I) For a 9-person household, 203 percent.
``(J) For a 10-person household, 224 percent.
``(K) For households with more than 10 persons, such
adjustment for each additional person shall be 224
percent plus the product of 21 percent and the
difference in the number of persons in the household
and 10.
``(3) Reevaluation of market baskets.--
``(A) Evaluation.--Not earlier than October
1, 2028, and at not more frequently than 5-year
intervals thereafter, the Secretary may
reevaluate the market baskets of the thrifty
food plan taking into consideration current
food prices, food composition data, consumption
patterns, and dietary guidance.
``(B) Notice.--Prior to any update of the
market baskets of the thrifty food plan based
on a reevaluation pursuant to subparagraph (A),
the methodology and results of any such
revelation shall be published in the Federal
Register with an opportunity for comment of not
less than 60 days.
``(C) Cost neutrality.--The Secretary shall
not increase the cost of the thrifty food plan
based on a reevaluation or update under this
paragraph.
``(4) Allowable cost adjustments.--On October 1
immediately following the effective date of this
paragraph and on each October 1 thereafter, the
Secretary shall--
``(A) adjust the cost of the thrifty food
plan to reflect changes in the Consumer Price
Index for All Urban Consumers, published by the
Bureau of Labor Statistics of the Department of
Labor, for the most recent 12-month period
ending in June;
``(B) make cost adjustments in the thrifty
food plan for urban and rural parts of Hawaii
and urban and rural parts of Alaska to reflect
the cost of food in urban and rural Hawaii and
urban and rural Alaska provided such cost
adjustment shall not exceed the rate of
increase described in the Consumer Price Index
for All Urban Consumers, published by the
Bureau of Labor Statistics of the Department of
Labor, for the most recent 12-month period
ending in June; and
``(C) make cost adjustments in the separate
thrifty food plans for Guam and the Virgin
Islands of the United States to reflect the
cost of food in those States, but not to exceed
the cost of food in the 50 States and the
District of Columbia, provided that such cost
adjustment shall not exceed the rate of
increase described in the Consumer Price Index
for All Urban Consumers, published by the
Bureau of Labor Statistics of the Department of
Labor, for the most recent 12-month period
ending in June.''.

SEC. 10002. ABLE BODIED ADULTS WITHOUT DEPENDENTS WORK REQUIREMENTS.

(a) Section 6(o)(3) of the Food and Nutrition Act of 2008 is
amended to read as follows:
``(3) Exception.--Paragraph (2) shall not apply to an
individual if the individual is--
``(A) under 18 or over 65 years of age;
``(B) medically certified as physically or
mentally unfit for employment;
``(C) a parent or other member of a household
with responsibility for a dependent child under
7 years of age;
``(D) otherwise exempt under subsection
(d)(2);
``(E) a pregnant woman;
``(F) currently homeless;
``(G) a veteran;
``(H) 24 years of age or younger and was in
foster care under the responsibility of a State
on the date of attaining 18 years of age or
such higher age as the State has elected under
section 475(8)(B)(iii) of the Social Security
Act (42 U.S.C. 675(8)(B)(iii)); or
``(I) responsible for a dependent child 7
years of age or older and is married to, and
resides with, an individual who is in
compliance with the requirements of paragraph
(2).''.
(b) Sunset Provision.--The exceptions in subparagraphs (F)
through (H) shall cease to have effect on October 1, 2030.

SEC. 10003. ABLE BODIED ADULTS WITHOUT DEPENDENTS WAIVERS.

Section 6(o) of the Food and Nutrition Act of 2008 (7 U.S.C.
2015(o)) is amended--
(1) by amending paragraph (4)(A) to read as follows:
``(A) In general.--On the request of a State
agency and with the support of the chief
executive officer of the State, the Secretary
may waive the applicability of paragraph (2)
for not more than 12 consecutive months to any
group of individuals in the State if the
Secretary makes a determination that the
county, or county-equivalent (as recognized by
the Census Bureau) in which the individuals
reside has an unemployment rate of over 10
percent.''; and
(2) in paragraph (6)(F) by striking ``8 percent'' and
inserting ``1 percent''.

SEC. 10004. AVAILABILITY OF STANDARD UTILITY ALLOWANCES BASED ON
RECEIPT OF ENERGY ASSISTANCE.

(a) Allowance to Recipients of Energy Assistance.--
(1) Standard utility allowance.--Section
5(e)(6)(C)(iv)(I) of the of the Food and Nutrition Act
of 2008 (7 U.S.C. 2014(e)(6)(C)(iv)(I)) is amended by
inserting ``with an elderly or disabled member'' after
``households''.
(2) Conforming amendments.--Section 2605(f)(2)(A) of
the Low-Income Home Energy Assistance Act is amended by
inserting ``received by a household with an elderly or
disabled member'' before ``, consistent with section
5(e)(6)(C)(iv)(I)''.
(b) Third-party Energy Assistance Payments.--Section 5(k)(4)
of the Food and Nutrition Act of 2008 (7 U.S.C. 2014(k)(4)) is
amended--
(1) in subparagraph (A) by inserting ``without an
elderly or disabled member'' after ``household'' the
1st place it appears; and
(2) in subparagraph (B) by inserting ``with an
elderly or disabled member'' after ``household'' the
1st place it appears.

SEC. 10005. RESTRICTIONS ON INTERNET EXPENSES.

Section 5(e)(6) of the Food and Nutrition Act of 2008 (7
U.S.C. 2014(e)(6)) is amended by adding at the end the
following:
``(E) Restrictions on internet expenses.--
Service fees associated with internet
connection, including, but not limited to,
monthly subscriber fees (i.e., the base rate
paid by the household each month in order to
receive service, which may include high-speed
internet), taxes and fees charged to the
household by the provider that recur on regular
bills, the cost of modem rentals, and fees
charged by the provider for initial
installation, shall not be used in computing
the excess shelter expense deduction.''.

SEC. 10006. MATCHING FUNDS REQUIREMENTS.

(a) In General.--Section 4(a) of the Food and Nutrition Act
of 2008 (7 U.S.C. 2013(a)) is amended--
(1) by striking ``(a) Subject to'' and inserting the
following:
``(a) Program.--
``(1) Establishment.--Subject to''; and
(2) by adding at the end the following:
``(2) Matching Funds Requirements.--
``(A) In general.--
``(i) Federal share.--Subject to subparagraph
(B), the Federal share of the cost of
allotments described in paragraph (1) in a
fiscal year shall be--
``(I) for each of fiscal years 2026
and 2027, 100 percent; and
``(II) for fiscal year 2028 and each
fiscal year thereafter, 95 percent.
``(ii) State share.--Subject to subparagraph
(B), the State share of the cost of allotments
described in paragraph (1) in a fiscal year
shall be--
``(I) for each of fiscal years 2026
and 2027, 0 percent; and
``(II) for fiscal year 2028 and each
fiscal year thereafter, 5 percent.
``(B) State quality control incentive.--Beginning in
fiscal year 2028, any State that has a payment error
rate, as defined in section 16, for the most recent
complete fiscal year for which data is available, of--
``(i) equal to or greater than 6 percent but
less than 8 percent, shall have its Federal
share of the cost of allotments described in
paragraph (1) for the current fiscal year equal
85 percent, and its State share equal 15
percent;
``(ii) equal to or greater than 8 percent but
less than 10 percent, shall have its Federal
share of the cost of allotments described in
paragraph (1) for the current fiscal year equal
80 percent, and its State share equal 20
percent; and
``(iii) equal to or greater than 10 percent,
shall have its Federal share of the cost of
allotments described in paragraph (1) for the
current fiscal year equal 75 percent, and its
State share equal 25 percent.''.
(b) Rule of Construction.--The Secretary of Agriculture may
not pay towards the cost of allotments described in paragraph
(1) of section 4(a) of the Food and Nutrition Act of 2008 (7
U.S.C. 2013(a)), as designated by subsection (a), an amount
greater than the applicable Federal share described in
paragraph (2) of such section 4(a), as added by subsection (a).

SEC. 10007. ADMINISTRATIVE COST SHARING.

Section 16(a) of the Food and Nutrition Act of 2008 (7 U.S.C.
2025(a)) is amended by striking ``50 per centum'' and inserting
``25 percent''.

SEC. 10008. GENERAL WORK REQUIREMENT AGE.

Section 6(d) of the Food and Nutrition Act of 2008 (7 U.S.C.
2015(d)) is amended--
(1) in paragraph (1)(A), in the matter preceding
clause (i), by striking ``over the age of 15 and under
the age of 60'' and inserting ``over the age of 17 and
under the age of 65''; and
(2) in paragraph (2)--
(A) by striking ``child under age six'' and
inserting ``child under age seven''; and
(B) by striking ``between 1 and 6 years of
age'' and inserting ``between 1 and 7 years of
age''.

SEC. 10009. NATIONAL ACCURACY CLEARINGHOUSE.

Section 11(x)(2) of the Food and Nutrition Act of 2008 (7
U.S.C. 2020(x)(2)) is amended by adding at the end the
following:
``(D) Data sharing to prevent other multiple
issuances.--A State agency shall use each
indication of multiple issuance, or each
indication that an individual receiving
supplemental nutrition assistance program
benefits in 1 State has applied to receive
supplemental nutrition assistance program
benefits in another State, to prevent multiple
issuances of other Federal and State assistance
program benefits that a State agency
administers through the integrated eligibility
system that the State uses to administer the
supplemental nutrition assistance program in
the State.''.

SEC. 10010. QUALITY CONTROL ZERO TOLERANCE.

Section 16(c)(1)(A)(ii) of the Food and Nutrition Act of 2008
(7 U.S.C. 2025(c)(1)(A)(ii)) is amended--
(1) in subclause (I), by striking ``and'' at the end;
(2) in subclause (II)--
(A) by striking ``fiscal year thereafter''
and inserting ``of fiscal years 2015 through
2025''; and
(B) by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(III) for each fiscal year
thereafter, $0.''.

SEC. 10011. NATIONAL EDUCATION AND OBESITY PREVENTION GRANT PROGRAM
REPEALER.

The Food and Nutrition Act of 2008 (7 U.S.C. 2011 et seq.) is
amended by striking section 28 (7 U.S.C. 2036a).

SEC. 10012. ALIEN SNAP ELIGIBILITY.

Section 6(f) of the Food and Nutrition Act of 2008 (7 U.S.C.
2015(f)) is amended--
(1) in the 1st sentence--
(A) by striking ``No'' and inserting ``In
addition to the limitations on eligibility in
the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996, no'';
and
(B) by striking ``; or (C) an alien who
entered the United States prior to June 30,
1948, or such subsequent date as is enacted by
law, has continuously maintained his or her
residence in the United States since then, and
is not ineligible for citizenship, but who is
deemed to be lawfully admitted for permanent
residence as a result of an exercise of
discretion by the Attorney General pursuant to
section 249 of the Immigration and Nationality
Act (8 U.S.C. 1259); or (D) an alien who has
qualified for conditional entry pursuant to
sections 207 and 208 of the Immigration and
Nationality Act (8 U.S.C. 1157 and 1158); or
(E) an alien who is lawfully present in the
United States as a result of an exercise of
discretion by the Attorney General for emergent
reasons or reasons deemed strictly in the
public interest pursuant to section 212(d)(5)
of the Immigration and Nationality Act (8
U.S.C. 1182(d)(5)); or (F) an alien within the
United States as to whom the Attorney General
has withheld deportation pursuant to section
243 of the Immigration and Nationality Act (8
U.S.C. 1253(h))''; and
(2) in the 2d sentence by striking ``clauses (B)
through (F)'' and inserting ``paragraph (2)(B)''.

SEC. 10012. EMERGENCY FOOD ASSISTANCE.

Section 203D(d)(5) of the Emergency Food Assistance Act of
1983 (7 U.S.C. 7507(d)(5)) is amended by striking ``2024'' and
inserting ``2031''.

Subtitle B--Investment in Rural America

SEC. 10101. SAFETY NET.

(a) Reference Price.--Section 1111(19) of the Agricultural
Act of 2014 (7 U.S.C. 9011(19)) is amended to read as follows:
``(19) Reference price.--
``(A) In general.--Subject to subparagraphs
(B) and (C), the term `reference price', with
respect to a covered commodity for a crop year,
means the following:
``(i) For wheat, $6.35 per bushel.
``(ii) For corn, $4.10 per bushel.
``(iii) For grain sorghum, $4.40 per
bushel.
``(iv) For barley, $5.45 per bushel.
``(v) For oats, $2.65 per bushel.
``(vi) For long grain rice, $16.90
per hundredweight.
``(vii) For medium grain rice, $16.90
per hundredweight.
``(viii) For soybeans, $10.00 per
bushel.
``(ix) For other oilseeds, $23.75 per
hundredweight.
``(x) For peanuts, $630.00 per ton.
``(xi) For dry peas, $13.10 per
hundredweight.
``(xii) For lentils, $23.75 per
hundredweight.
``(xiii) For small chickpeas, $22.65
per hundredweight.
``(xiv) For large chickpeas, $25.65
per hundredweight.
``(xv) For seed cotton, $0.42 per
pound.
``(B) Effectiveness.--Effective beginning
with the 2031 crop year, the reference prices
defined in subparagraph (A) with respect to a
covered commodity shall equal the reference
price in the previous crop year multiplied by
1.005.
``(C) Limitation.--In no case shall a
reference price for a covered commodity exceed
115 percent of the reference price for such
covered commodity listed in subparagraph
(A).''.
(b) Base Acres.--Section 1112 of the Agricultural Act of 2014
(7 U.S.C. 9012) is amended--
(1) in subsection (d)(3)(A), by striking ``2023'' and
inserting ``2031''; and
(2) by adding at the end the following:
``(e) Additional Base Acres.--
``(1) In general.--As soon as practicable after the
date of enactment of this subsection, and
notwithstanding subsection (a), the Secretary shall
provide notice to owners of eligible farms pursuant to
paragraph (4) and allocate to those eligible farms a
total of not more than an additional 30,000,000 base
acres in the manner provided in this subsection.
``(2) Content of notice.--The notice under paragraph
(1) shall include the following:
``(A) Information that the allocation is
occurring.
``(B) Information regarding the eligibility
of the farm for an allocation of base acres
under paragraph (4).
``(C) Information regarding how an owner may
appeal a determination of ineligibility for an
allocation of base acres under paragraph (4)
through an appeals process established by the
Secretary.
``(3) Opt-out.--An owner of a farm that is eligible
to receive an allocation of base acres may elect to not
receive that allocation by notifying the Secretary.
``(4) Eligibility.--
``(A) In general.--Subject to subparagraph
(D), effective beginning with the 2026 crop
year, a farm is eligible to receive an
allocation of base acres if, with respect to
the farm, the amount described in subparagraph
(B) exceeds the amount described in
subparagraph (C).
``(B) 5-year average sum.--The amount
described in this subparagraph, with respect to
a farm, is the sum of--
``(i) the 5-year average of--
``(I) the acreage planted on
the farm to all covered
commodities for harvest,
grazing, haying, silage or
other similar purposes for the
2019 through 2023 crop years;
and
``(II) any acreage on the
farm that the producers were
prevented from planting during
the 2019 through 2023 crop
years to covered commodities
because of drought, flood, or
other natural disaster, or
other condition beyond the
control of the producers, as
determined by the Secretary;
plus
``(ii) the lesser of--
``(I) 15 percent of the total
acres on the farm; and
``(II) the 5-year average
of--
``(aa) the acreage
planted on the farm to
eligible noncovered
commodities for
harvest, grazing,
haying, silage, or
other similar purposes
for the 2019 through
2023 crop years; and
``(bb) any acreage on
the farm that the
producers were
prevented from planting
during the 2019 through
2023 crop years to
eligible noncovered
commodities because of
drought, flood, or
other natural disaster,
or other condition
beyond the control of
the producers, as
determined by the
Secretary.
``(C) Total number of base acres for covered
commodities.--The amount described in this
subparagraph, with respect to a farm, is the
total number of base acres for covered
commodities on the farm (excluding unassigned
crop base), as in effect on September 30, 2024.
``(D) Effect of no recent plantings of
covered commodities.--In the case of a farm for
which the amount determined under clause (i) of
subparagraph (B) is equal to zero, that farm
shall be ineligible to receive an allocation of
base acres under this subsection.
``(E) Acreage planted on the farm to eligible
noncovered commodities defined.--In this
paragraph, the term `acreage planted on the
farm to eligible noncovered commodities' means
acreage planted on a farm to commodities other
than covered commodities, trees, bushes, vines,
grass, or pasture (including cropland that was
idle or fallow), as determined by the
Secretary.
``(5) Number of base acres.--Subject to paragraphs
(4) and (7), the number of base acres allocated to an
eligible farm shall--
``(A) be equal to the difference obtained by
subtracting the amount determined under
subparagraph (C) of paragraph (4) from the
amount determined under subparagraph (B) of
that paragraph; and
``(B) include unassigned crop base.
``(6) Allocation of acres.--
``(A) Allocation.--The Secretary shall
allocate the number of base acres under
paragraph (5) among those covered commodities
planted on the farm at any time during the 2019
through 2023 crop years.
``(B) Allocation formula.--The allocation of
additional base acres for covered commodities
shall be in proportion to the ratio of--
``(i) the 5-year average of--
``(I) the acreage planted on
the farm to each covered
commodity for harvest, grazing,
haying, silage, or other
similar purposes for the 2019
through 2023 crop years; and
``(II) any acreage on the
farm that the producers were
prevented from planting during
the 2019 through 2023 crop
years to that covered commodity
because of drought, flood, or
other natural disaster, or
other condition beyond the
control of the producers, as
determined by the Secretary; to
``(ii) the 5-year average determined
under paragraph (4)(B)(i).
``(C) Inclusion of all 5 years in average.--
For the purpose of determining a 5-year acreage
average under subparagraph (B) for a farm, the
Secretary shall not exclude any crop year in
which a covered commodity was not planted.
``(D) Treatment of multiple planting or
prevented planting.--For the purpose of
determining under subparagraph (B) the acreage
on a farm that producers planted or were
prevented from planting during the 2019 through
2023 crop years to covered commodities, if the
acreage that was planted or prevented from
being planted was devoted to another covered
commodity in the same crop year (other than a
covered commodity produced under an established
practice of double cropping), the owner may
elect the covered commodity to be used for that
crop year in determining the 5-year average,
but may not include both the initial covered
commodity and the subsequent covered commodity.
``(E) Limitation.--The allocation of
additional base acres among covered commodities
on a farm under this paragraph may not result
in a total number of base acres for the farm in
excess of the total number of acres on the
farm.
``(7) Reduction by the secretary.--In carrying out
this subsection, if the total number of eligible acres
allocated to base acres across all farms in the United
States under this subsection would exceed 30,000,000
acres, the Secretary shall apply an across-the-board,
pro-rata reduction to the number of eligible acres to
ensure the number of allocated base acres under this
subsection is equal to 30,000,000 acres.
``(8) Payment yield.--Beginning with crop year 2026,
for the purpose of making price loss coverage payments
under section 1116, the Secretary shall establish
payment yields to base acres allocated under this
subsection equal to--
``(A) the payment yield established on the
farm for the applicable covered commodity; and
``(B) if no such payment yield for the
applicable covered commodity exists, a payment
yield--
``(i) equal to the average payment
yield for the covered commodity for the
county in which the farm is situated;
or
``(ii) determined pursuant to section
1113(c).
``(9) Treatment of new owners.--In the case of a farm
for which the owner on the date of enactment of this
subsection was not the owner for the 2019 through 2023
crop years, the Secretary shall use the planting
history of the prior owner or owners of that farm for
purposes of determining--
``(A) eligibility under paragraph (4);
``(B) eligible acres under paragraph (5); and
``(C) the allocation of acres under paragraph
(6).''.
(c) Producer Election.--Section 1115 of the Agricultural Act
of 2014 (7 U.S.C. 9015) is amended--
(1) in subsection (a), in the matter preceding
paragraph (1) by striking ``2023'' and inserting
``2031''; and
(2) in subsection (c)--
(A) in the matter preceding paragraph (1), by
striking ``2014 crop year or the 2019 crop
year, as applicable'' and inserting ``2014 crop
year, 2019 crop year, or 2026 crop year, as
applicable'';
(B) in paragraph (1), by striking ``2014 crop
year or the 2019 crop year, as applicable,''
and inserting ``2014 crop year, 2019 crop year,
or 2026 crop year, as applicable,''; and
(C) in paragraph (2)--
(i) in subparagraph (A), by striking
``and'' at the end;
(ii) in subparagraph (B), by striking
the period at the end and inserting ``;
and''; and
(iii) by adding at the end the
following:
``(C) the same coverage for each covered
commodity on the farm for the 2026 through 2031
crop years as was applicable for the 2024 crop
year.''.
(d) Price Loss Coverage.--Section 1116 of the Agricultural
Act of 2014 (7 U.S.C. 9016) is amended--
(1) in subsection (a)(2), in the matter preceding
subparagraph (A), by striking ``2023'' and inserting
``2031'';
(2) in subsection (c)(1)(B)--
(A) in the subparagraph heading, by striking
``2023'' and inserting ``2031''; and
(B) in the matter preceding clause (i), by
striking ``2023'' and inserting ``2031'';
(3) in subsection (d), by striking ``2025'' and
inserting ``2031''; and
(4) in subsection (g), by striking ``2012 through
2016'' each place it appears and inserting ``2017
through 2021''.
(e) Agriculture Risk Coverage.--Section 1117 of the
Agricultural Act of 2014 (7 U.S.C. 9017) is amended--
(1) in subsection (a), in the matter preceding
paragraph (1), by striking ``2023'' and inserting
``2031'';
(2) in subsection (c)--
(A) in paragraph (1), by inserting ``for each
of the 2014 through 2024 crop years and 90
percent of the benchmark revenue for each of
the 2025 through 2031 crop years'' before the
period at the end;
(B) by striking ``2023'' each place it
appears and inserting ``2031''; and
(C) in paragraph (4)(B), in the subparagraph
heading, by striking ``2023'' and inserting
``2031'';
(3) by amending subsection (d)(1)(B) to read as
follows:
``(B)(i) for each of the crop years 2014
through 2024, 10 percent of the benchmark
revenue for the crop year applicable under
subsection (c); and
``(ii) for each of the crop years 2025
through 2031, 12.5 percent of the benchmark
revenue for the crop year applicable under
subsection (c).''; and
(4) in subsections (e), (g)(5), and (i)(5), by
striking ``2023'' each place it appears and inserting
``2031''.
(f) Equitable Treatment of Certain Entities.--
(1) In general.--Section 1001 of the Food Security
Act of 1985 (7 U.S.C. 1308) is amended--
(A) in subsection (a)--
(i) by redesignating paragraph (5) as
paragraph (6); and
(ii) by inserting after paragraph (4)
the following:
``(5) Qualified pass-through entity.--The term
`qualified pass-through entity' means--
``(A) a partnership (within the meaning of
subchapter K of chapter 1 of the Internal
Revenue Code of 1986);
``(B) an S corporation (as defined in section
1361 of that Code);
``(C) a limited liability company that does
not affirmatively elect to be treated as a
corporation; and
``(D) a joint venture or general
partnership.'';
(B) in subsections (b) and (c), by striking
``except a joint venture or general
partnership'' each place it appears and
inserting ``except a qualified pass-through
entity''; and
(C) in subsection (d), by striking ``subtitle
B'' and all that follows through the end and
inserting ``title I of the Agricultural Act of
2014.''.
(2) Attribution of payments.--Section
1001(e)(3)(B)(ii) of the Food Security Act of 1985 (7
U.S.C. 1308(e)(3)(B)(ii)) is amended--
(A) in the clause heading, by striking
``joint ventures and general partnerships'' and
inserting ``qualified pass-through entities'';
(B) by striking ``a joint venture or a
general partnership'' and inserting ``a
qualified pass-through entity'';
(C) by striking ``joint ventures and general
partnerships'' and inserting ``qualified pass-
through entities''; and
(D) by striking ``the joint venture or
general partnership'' and inserting ``the
qualified pass-through entity''.
(3) Persons actively engaged in farming.--Section
1001A(b)(2) of the Food Security Act of 1985 (7 U.S.C.
1308-1(b)(2)) is amended--
(A) subparagraphs (A) and (B), by striking
``in a general partnership, a participant in a
joint venture'' each place it appears and
inserting ``a qualified pass-through entity'';
and
(B) in subparagraph (C), by striking ``a
general partnership, joint venture, or similar
entity'' and inserting ``a qualified pass-
through entity or a similar entity''.
(4) Joint and several liability.--Section 1001B(d) of
the Food Security Act of 1985 (7 U.S.C. 1308-2(d)) is
amended by striking ``partnerships and joint ventures''
and inserting ``qualified pass-through entities''.
(5) Exclusion from agi calculation.--Section 1001D(d)
of the Food Security Act of 1985 (7 U.S.C. 1308-3a(d))
is amended by striking ``, general partnership, or
joint venture'' each place it appears.
(g) Payment Limitations.--Section 1001 of the Food Security
Act of 1985 (7 U.S.C. 1308) is amended--
(1) in subsection (b)--
(A) by striking ``The'' and inserting
``Subject to subsection (i), the''; and
(B) by striking ``$125,000'' and inserting
``$155,000'';
(2) in subsection (c)--
(A) by striking ``The'' and inserting
``Subject to subsection (i), the''; and
(B) by striking ``$125,000'' and inserting
``$155,000''; and
(3) by adding at the end the following:
``(i) Adjustment.--For the 2025 crop year and each crop year
thereafter, the Secretary shall annually adjust the amounts
described in subsections (b) and (c) for inflation based on the
Consumer Price Index for All Urban Consumers published by the
Bureau of Labor Statistics of the Department of Labor.''.
(h) Adjusted Gross Income Limitation.--Section 1001D(b) of
the Food Security Act of 1985 (7 U.S.C. 1308-3a(b)) is
amended--
(1) in paragraph (1), by striking ``paragraph (3)''
and inserting ``paragraphs (3) and (4)''; and
(2) by adding at the end the following:
``(4) Exception for certain operations.--
``(A) Definitions.--In this paragraph:
``(i) Excepted payment or benefit.--
The term `excepted payment or benefit'
means--
``(I) a payment or benefit
under subtitle E of title I of
the Agricultural Act of 2014 (7
U.S.C. 9081 et seq.);
``(II) a payment or benefit
under section 196 of the
Federal Agriculture Improvement
and Reform Act of 1996 (7
U.S.C. 7333); and
``(III) a payment or benefit
described in paragraph (2)(C)
received on or after October 1,
2024.
``(ii) Farming, ranching, or
silviculture activities.--The term
`farming, ranching, or silviculture
activities' includes agritourism,
direct-to-consumer marketing of
agricultural products, the sale of
agricultural equipment by a person or
legal entity that owns such equipment,
and other agriculture-related
activities, as determined by the
Secretary.
``(B) Exception.--In the case of an excepted
payment or benefit, the limitation established
by paragraph (1) shall not apply to a person or
legal entity during a crop, fiscal, or program
year, as appropriate, if greater than or equal
to 75 percent of the average gross income of
the person or legal entity derives from
farming, ranching, or silviculture
activities.''.
(i) Marketing Loans.--
(1) Availability of nonrecourse marketing assistance
loans for loan commodities.--Section 1201(b)(1) of the
Agricultural Act of 2014 (7 U.S.C. 9031(b)(1)) is
amended by striking ``2023'' and inserting ``2031''.
(2) Loan rates for nonrecourse marketing assistance
loans.--Section 1202 of the Agricultural Act of 2014 (7
U.S.C. 9032) is amended--
(A) in subsection (b)--
(i) in the subsection heading, by
striking ``2023'' and inserting
``2025''; and
(ii) in the matter preceding
paragraph (1), by striking ``2023'' and
inserting ``2025'';
(B) by redesignating subsection (c) and (d)
as subsections (d) and (e), respectively;
(C) by inserting after subsection (b) the
following:
``(c) 2026 Through 2031 Crop Years.--For purposes of each of
the 2026 through 2031 crop years, the loan rate for a marketing
assistance loan under section 1201 for a loan commodity shall
be equal to the following:
``(1) In the case of wheat, $3.72 per bushel.
``(2) In the case of corn, $2.42 per bushel.
``(3) In the case of grain sorghum, $2.42 per bushel.
``(4) In the case of barley, $2.75 per bushel.
``(5) In the case of oats, $2.20 per bushel.
``(6) In the case of upland cotton, $0.55 per pound.
``(7) In the case of extra long staple cotton, $1.00
per pound.
``(8) In the case of long grain rice, $7.70 per
hundredweight.
``(9) In the case of medium grain rice, $7.70 per
hundredweight.
``(10) In the case of soybeans, $6.82 per bushel.
``(11) In the case of other oilseeds, $11.10 per
hundredweight for each of the following kinds of
oilseeds:
``(A) Sunflower seed.
``(B) Rapeseed.
``(C) Canola.
``(D) Safflower.
``(E) Flaxseed.
``(F) Mustard seed.
``(G) Crambe.
``(H) Sesame seed.
``(I) Other oilseeds designated by the
Secretary.
``(12) In the case of dry peas, $6.87 per
hundredweight.
``(13) In the case of lentils, $14.30 per
hundredweight.
``(14) In the case of small chickpeas, $11.00 per
hundredweight.
``(15) In the case of large chickpeas, $15.40 per
hundredweight.
``(16) In the case of graded wool, $1.60 per pound.
``(17) In the case of nongraded wool, $0.55 per
pound.
``(18) In the case of mohair, $5.00 per pound.
``(19) In the case of honey, $1.50 per pound.
``(20) In the case of peanuts, $390 per ton.'';
(D) in subsection (d) (as so redesignated),
by striking ``(a)(11) and (b)(11)'' and
inserting ``(a)(11), (b)(11), and (c)(11)'';
and
(E) by amending subsection (e) (as so
redesignated) to read as follows:
``(e) Special Rule for Seed Cotton and Corn.--
``(1) In general.--For purposes of section 1116(b)(2)
and paragraphs (1)(B)(ii) and (2)(A)(ii)(II) of section
1117(b), the loan rate shall be deemed to equal--
``(A) for seed cotton, $0.30 per pound; and
``(B) for corn, $3.30 per bushel.
``(2) Effect.--Nothing in this subsection authorizes
any nonrecourse marketing assistance loan under this
subtitle for seed cotton.''.
(3) Payment of cotton storage costs.--Section 1204(g)
of the Agricultural Act of 2014 (7 U.S.C. 9034(g)) is
amended--
(A) by striking ``Effective'' and inserting
the following:
``(1) Crop years 2014 through 2025.--Effective'';
(B) in paragraph (1) (as so designated), by
striking ``2023'' and inserting ``2025''; and
(C) by adding at the end the following:
``(2) Payment of cotton storage costs.--Effective for
each of the 2026 through 2031 crop years, the Secretary
shall make cotton storage payments for upland cotton
and extra long staple cotton available in the same
manner as the Secretary provided storage payments for
the 2006 crop of upland cotton, except that the payment
rate shall be equal to the lesser of--
``(A) the submitted tariff rate for the
current marketing year; and
``(B) in the case of storage in--
``(i) California or Arizona, a
payment rate of $4.90; and
``(ii) any other State, a payment
rate of $3.00.''.
(4) Loan deficiency payments.--
(A) Continuation.--Section 1205(a)(2)(B) of
the Agricultural Act of 2014 (7 U.S.C.
9035(a)(2)(B)) is amended by striking ``2023''
and inserting ``2031''.
(B) Payments in lieu of ldps.--Section 1206
of the Agricultural Act of 2014 (7 U.S.C. 9036)
is amended, in subsections (a) and (d), by
striking ``2023'' each place it appears and
inserting ``2031''.
(5) Special competitive provisions for extra long
staple cotton.--Section 1208(a) of the Agricultural Act
of 2014 (7 U.S.C. 9038(a)) is amended, in the matter
preceding paragraph (1), by striking ``2026'' and
inserting ``2032''.
(6) Availability of recourse loans.--Section 1209 of
the Agricultural Act of 2014 (7 U.S.C. 9039) is
amended, in subsections (a)(2), (b), and (c), by
striking ``2023'' each place it appears and inserting
``2031''.
(j) Repayment of Marketing Loans.--Section 1204 of the
Agricultural Act of 2014 (7 U.S.C. 9034) is amended--
(1) in subsection (b)--
(A) by redesignating paragraph (1) as
subparagraph (A) and indenting appropriately;
(B) in the matter preceding subparagraph (A)
(as so redesignated), by striking ``The
Secretary'' and inserting the following:
``(1) In general.--The Secretary''; and
(C) by striking paragraph (2) and inserting
the following:
``(B)(i) in the case of long grain rice and
medium grain rice, the prevailing world market
price for the commodity, as determined and
adjusted by the Secretary in accordance with
this section; or
``(ii) in the case of upland cotton, the
lowest prevailing world market price for the
commodity, as determined and adjusted by the
Secretary in accordance with this section,
during the 30-day period following the day on
which the producer repays the marketing
assistance loan.
``(2) Refund for upland cotton.--In the case of a
repayment for a marketing assistance loan for upland
cotton at a rate described in paragraph (1)(B)(ii), the
Secretary shall provide to the producer a refund (if
any) in an amount equal to the difference between the
lowest prevailing world market price described in that
paragraph and the repayment amount.'';
(2) in subsection (c)--
(A) by striking the period at the end and
inserting ``; and'';
(B) by striking ``at the loan rate'' and
inserting the following: ``at a rate that is
the lesser of--
``(1) the loan rate''; and
(C) by adding at the end the following:
``(2) the prevailing world market price for the
commodity, as determined and adjusted by the Secretary
in accordance with this section.'';
(3) in subsection (d)--
(A) in paragraph (1), by striking ``and
medium grain rice'' and inserting ``medium
grain rice, and extra long staple cotton'';
(B) by redesignating paragraphs (1) and (2)
as subparagraphs (A) and (B), respectively, and
indenting appropriately;
(C) in the matter preceding subparagraph (A)
(as so redesignated), by striking ``For
purposes'' and inserting the following:
``(1) In general.--For purposes''; and
(D) by adding at the end the following:
``(2) Upland cotton.--In the case of upland cotton,
for any period when price quotations for Middling (M)
1\3/32\-inch cotton are available, the formula under
paragraph (1)(A) shall be based on the average of the 3
lowest-priced growths that are quoted.''; and
(4) in subsection (e)--
(A) in the subsection heading, by inserting
``Extra Long Staple Cotton,'' after ``Upland
Cotton,'';
(B) in paragraph (2)--
(i) in the paragraph heading, by
inserting ``Upland'' before ``Cotton'';
and
(ii) in subparagraph (B), in the
matter preceding clause (i), by
striking ``2024'' and inserting
``2032'';
(C) by redesignating paragraph (3) as
paragraph (4); and
(D) by inserting after paragraph (2) the
following:
``(3) Extra long staple cotton.--The prevailing world
market price for extra long staple cotton determined
under subsection (d)--
``(A) shall be adjusted to United States
quality and location, with the adjustment to
include the average costs to market the
commodity, including average transportation
costs, as determined by the Secretary; and
``(B) may be further adjusted, during the
period beginning on the date of enactment of
this paragraph and ending on July 31, 2032, if
the Secretary determines the adjustment is
necessary--
``(i) to minimize potential loan
forfeitures;
``(ii) to minimize the accumulation
of stocks of extra long staple cotton
by the Federal Government;
``(iii) to ensure that extra long
staple cotton produced in the United
States can be marketed freely and
competitively, both domestically and
internationally; and
``(iv) to ensure an appropriate
transition between current-crop and
forward-crop price quotations, except
that the Secretary may use forward-crop
price quotations prior to July 31 of a
marketing year only if--
``(I) there are insufficient
current-crop price quotations;
and
``(II) the forward-crop price
quotation is the lowest such
quotation available.''.
(k) Economic Adjustment Assistance for Textile Mills.--
Section 1207(c) of the Agricultural Act of 2014 (7 U.S.C.
9037(c)) is amended by striking paragraph (2) and inserting the
following:
``(2) Value of assistance.--The value of the
assistance provided under paragraph (1) shall be--
``(A) for the period beginning on August 1,
2013, and ending on July 31, 2025, 3 cents per
pound; and
``(B) beginning on August 1, 2025, 5 cents
per pound.''.
(l) Sugar Program Updates.--
(1) Loan rate modifications.--Section 156 of the
Federal Agriculture Improvement and Reform Act of 1996
(7 U.S.C. 7272) is amended--
(A) in subsection (a)--
(i) in paragraph (4), by striking
``and'' at the end;
(ii) in paragraph (5), by striking
``2023 crop years.'' and inserting
``2024 crop years; and''; and
(iii) by adding at the end the
following:
``(6) 24.00 cents per pound for raw cane sugar for
each of the 2025 through 2031 crop years.'';
(B) in subsection (b)--
(i) in paragraph (1), by striking
``and'' at the end;
(ii) in paragraph (2), by striking
``2023 crop years.'' and inserting
``2024 crop years; and''; and
(iii) by adding at the end the
following:
``(3) a rate that is equal to 136.55 percent of the
loan rate per pound of raw cane sugar under subsection
(a)(6) for each of the 2025 through 2031 crop years.'';
and
(C) in subsection (i), by striking ``2023''
and inserting ``2031''.
(2) Adjustments to commodity credit corporation
storage rates.--Section 167 of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C. 7287) is
amended--
(A) by striking subsection (a) and inserting
the following:
``(a) In General.--Notwithstanding any other provision of
law, for the 2025 crop year and each subsequent crop year, the
Commodity Credit Corporation shall establish rates for the
storage of forfeited sugar in an amount that is not less than--
``(1) in the case of refined sugar, 34 cents per
hundredweight per month; and
``(2) in the case of raw cane sugar, 27 cents per
hundredweight per month.''; and
(B) in subsection (b)--
(i) in the subsection heading, by
striking ``Subsequent'' and inserting
``Prior''; and
(ii) by striking ``and subsequent''
and inserting ``through 2024''.
(3) Modernizing beet sugar allotments.--
(A) Sugar estimates.--Section 359b(a)(1) of
the Agricultural Adjustment Act of 1938 (7
U.S.C. 1359bb(a)(1)) is amended by striking
``2023'' and inserting ``2031''.
(B) Allocation to processors.--Section
359c(g)(2) of the Agricultural Adjustment Act
of 1938 (7 U.S.C. 1359cc(g)(2)) is amended--
(i) by striking ``In the case'' and
inserting the following:
``(A) In general.--Except as provided in
subparagraph (B), in the case''; and
(ii) by adding at the end the
following:
``(B) Exception.--If the Secretary makes an
upward adjustment under paragraph (1)(A), in
adjusting allocations among beet sugar
processors, the Secretary shall give priority
to beet sugar processors with available
sugar.''.
(C) Timing of reassignment.--Section
359e(b)(2) of the Agricultural Adjustment Act
of 1938 (7 U.S.C. 1359ee(b)(2)) is amended--
(i) by redesignating subparagraphs
(A) through (C) as clauses (i) through
(iii), respectively, and indenting
appropriately;
(ii) in the matter preceding clause
(i) (as so redesignated), by striking
``If the Secretary determines that a
sugar beet processor who has been
allocated a share of the beet sugar
allotment will be unable to market that
allocation'' and inserting the
following:
``(A) In general.--If the Secretary
determines that a sugar beet processor who has
been allocated a share of the beet sugar
allotment for the crop year will be unable to
market that allocation''; and
(iii) by adding at the end the
following:
``(B) Timing.--In carrying out subparagraph
(A), the Secretary shall--
``(i) make an initial determination
following the publication of the World
Agricultural Supply and Demand
Estimates (in this subparagraph
referred to as `WASDE') approved by the
World Agricultural Outlook Board for
the month of January that is applicable
to the crop year for which a
determination under subparagraph (A) is
made; and
``(ii) provide for an initial
reassignment under subparagraph (A)(i)
not later than 30 days after the date
of the announcement of such WASDE.''.
(4) Reallocations of tariff-rate quota shortfall.--
Section 359k of the Agricultural Adjustment Act of 1938
(7 U.S.C. 1359kk) is amended by adding at the end the
following:
``(c) Reallocation.--
``(1) Initial reallocation.--Subject to paragraph
(3), following the establishment of the tariff-rate
quotas under subsection (a) for a quota year, the
United States Trade Representative, in consultation
with the Secretary, shall--
``(A) determine which countries do not intend
to fulfill their allocation for the quota year;
and
``(B) reallocate any forecasted shortfall in
the fulfillment of the tariff-rate quotas as
soon as practicable.
``(2) Subsequent reallocation.--Subject to paragraph
(3), not later than March 1 of a quota year, the United
States Trade Representative, in consultation with the
Secretary, shall reallocate any additional forecasted
shortfall in the fulfillment of the tariff-rate quotas
for raw cane sugar established under subsection (a)(1)
for that quota year.
``(3) Cessation of effectiveness.--Paragraphs (1) and
(2) shall cease to be in effect if--
``(A) the Agreement Suspending the
Countervailing Duty Investigation on Sugar from
Mexico, signed December 19, 2014, is
terminated; and
``(B) no countervailing duty order under
subtitle A of title VII of the Tariff Act of
1930 (19 U.S.C. 1671 et seq.) is in effect with
respect to sugar from Mexico.
``(d) Refined Sugar.--
``(1) Definition of domestic sugar industry.--In this
subsection, the term `domestic sugar industry' means
domestic--
``(A) sugar beet producers and processors;
``(B) producers and processors of sugar cane;
and
``(C) refiners of raw cane sugar.
``(2) Study required.--
``(A) In general.--Not later than 180 days
after the date of enactment of this subsection,
the Secretary shall conduct a study on whether
the establishment of additional terms and
conditions with respect to refined sugar
imports is necessary and appropriate.
``(B) Elements.--In conducting the study
under subparagraph (A), the Secretary shall
examine the following:
``(i) The need for--
``(I) defining `refined
sugar' as having a minimum
polarization of 99.8 degrees or
higher;
``(II) establishing a
standard for color- or
reflectance-based units for
refined sugar such as those
utilized by the International
Commission of Uniform Methods
of Sugar Analysis;
``(III) prescribing
specifications for packaging
type for refined sugar;
``(IV) prescribing
specifications for
transportation modes for
refined sugar;
``(V) requiring affidavits or
other evidence that sugar
imported as refined sugar will
not undergo further refining in
the United States;
``(VI) prescribing
appropriate terms and
conditions to avoid the
circumvention of Federal laws
relating to any sugar imports;
and
``(VII) establishing other
definitions, terms and
conditions, or other
requirements.
``(ii) The potential impact of
modifications described in each of
subclauses (I) through (VII) of clause
(i) on the domestic sugar industry.
``(iii) Whether, based on the needs
described in clause (i) and the impact
described in clause (ii), the
establishment of additional terms and
conditions is appropriate.
``(C) Consultation.--In conducting the study
under subparagraph (A), the Secretary shall
consult with representatives of the domestic
sugar industry, users of refined sugar, and
relevant State and Federal agencies.
``(D) Report.--Not later than 1 year after
the date of enactment of this subsection, the
Secretary shall submit to the Committee on
Agriculture of the House of Representatives and
the Committee on Agriculture, Nutrition, and
Forestry of the Senate a report that describes
the findings of the study conducted under
subparagraph (A).
``(3) Establishment of additional terms and
conditions permitted.--
``(A) In general.--Based on the findings in
the report submitted under paragraph (2)(D),
and after providing notice to the Committee on
Agriculture of the House of Representatives and
the Committee on Agriculture, Nutrition, and
Forestry of the Senate, the Secretary may issue
regulations in accordance with subparagraph (B)
to establish additional terms and conditions
with respect to refined sugar imports that are
necessary and appropriate.
``(B) Promulgation of regulations.--The
Secretary may issue regulations under
subparagraph (A) if the regulations--
``(i) do not have an adverse impact
on the domestic sugar industry; and
``(ii) are consistent with the
requirements of this part, section 156
of the Federal Agriculture Improvement
and Reform Act of 1996 (7 U.S.C. 7272),
and obligations under international
trade agreements that have been
approved by Congress.''.
(5) Clarification of tariff-rate quota adjustments.--
Section 359k(b)(1) of the Agricultural Adjustment Act
of 1938 (7 U.S.C. 1359kk(b)(1)) is amended, in the
matter preceding subparagraph (A)--
(A) by striking ``Before'' and inserting
``Notwithstanding any other provision of law,
before''; and
(B) by striking ``if there is an'' and
inserting ``for the sole purpose of responding
directly to an''.
(6) Period of effectiveness.--Section 359l(a) of the
Agricultural Adjustment Act of 1938 (7 U.S.C.
1359ll(a)) is amended by striking ``2023'' and
inserting ``2031''.
(m) Dairy Policy Updates.--
(1) Dairy margin coverage production history.--
(A) Definition.--Section 1401(8) of the
Agricultural Act of 2014 (7 U.S.C. 9051(8)) is
amended by striking ``when the participating
dairy operation first registers to participate
in dairy margin coverage''.
(B) Production history of participating dairy
operations.--Section 1405 of the Agricultural
Act of 2014 (7 U.S.C. 9055) is amended--
(i) by amending subsection (a) to
read as follows:
``(a) Production History.--Except as provided in subsection
(b), the production history of a dairy operation for dairy
margin coverage is equal to the highest annual milk marketings
of the participating dairy operation during any one of the
2021, 2022, or 2023 calendar years.''; and
(ii) by amending subsection (b) to
read as follows:
``(b) Election by New Dairy Operations.--In the case of a
participating dairy operation that has been in operation for
less than a year, the participating dairy operation shall elect
1 of the following methods for the Secretary to determine the
production history of the participating dairy operation:
``(1) The volume of the actual milk marketings for
the months the participating dairy operation has been
in operation extrapolated to a yearly amount.
``(2) An estimate of the actual milk marketings of
the participating dairy operation based on the herd
size of the participating dairy operation relative to
the national rolling herd average data published by the
Secretary.''.
(2) Dairy margin coverage payments.--Section
1406(a)(1)(C) of the Agricultural Act of 2014 (7 U.S.C.
9056(a)(1)(C)) is amended by striking ``5,000,000'' and
inserting ``6,000,000'' each place it appears.
(3) Premiums for dairy margins.--
(A) Tier i.--Section 1407(b) of the
Agricultural Act of 2014 (7 U.S.C. 9057(b)) is
amended--
(i) in the heading, by striking
``5,000,000'' and inserting
``6,000,000''; and
(ii) in paragraph (1), by striking
``5,000,000'' and inserting
``6,000,000''.
(B) Tier ii.--Section 1407(c) of the
Agricultural Act of 2014 (7 U.S.C. 9057(c)) is
amended--
(i) in the heading, by striking
``5,000,000'' and inserting
``6,000,000''; and
(ii) in paragraph (1), by striking
``5,000,000'' and inserting
``6,000,000''.
(C) Premium discounts.--Section 1407(g) of
the Agricultural Act of 2014 (7 U.S.C. 9057(g))
is amended--
(i) in paragraph (1)--
(I) by striking ``2019
through 2023'' and inserting
``2026 through 2031''; and
(II) by striking ``January
2019'' and inserting ``January
2026''; and
(ii) in paragraph (2), by striking
``2023'' each place it appears and
inserting ``2031''.
(4) Duration.--Section 1409 of the Agricultural Act
of 2014 (7 U.S.C. 9059) is amended by striking ``2025''
and inserting ``2031''.
(n) Suspension of Permanent Price Support Authority.--Section
1602 of the Agricultural Act of 2014 (7 U.S.C. 9092) is amended
by striking ``2023'' each place it appears and inserting
``2031''.
(o) Implementation.--Section 1614(c) of the Agricultural Act
of 2014 (7 U.S.C. 9097(c)) is amended by adding at the end the
following:
``(5) Fiscal year 2025 reconciliation.--The Secretary
shall make available to the Farm Service Agency to
carry out section 10101 of the Act titled `An Act to
provide for reconciliation pursuant to title II of H.
Con. Res. 14', and the amendments made by that section,
$50,000,000, to remain available until expended, of
which--
``(A) not less than $5,000,000 shall be used
to carry out paragraphs (3) and (4) of
subsection (b);
``(B) $3,000,000 shall be used for activities
described in paragraph (3)(A) of this
subsection;
``(C) $3,000,000 shall be used for activities
described in paragraph (3)(B) of this
subsection; and
``(D) $10,000,000 shall be used to--
``(i) carry out mandatory surveys of
dairy production cost and product yield
information to be reported by
manufacturers required to report under
section 273 of the Agricultural
Marketing Act of 1946 (7 U.S.C. 1637b),
for all products processed in the same
facility or facilities; and
``(ii) publish the results of such
surveys biennially.''.
(p) Livestock Safety Net Updates.--
(1) In general.--Section 1501(b) of the Agricultural
Act of 2014 (7 U.S.C. 9081(b)) is amended--
(A) by amending paragraph (2) to read as
follows:
``(2) Payment rates.--
``(A) Losses due to predation.--Indemnity
payments to an eligible producer on a farm
under paragraph (1)(A) shall be made at a rate
of 100 percent of the market value of the
affected livestock on the applicable date, as
determined by the Secretary.
``(B) Losses due to adverse weather or
disease.--Indemnity payments to an eligible
producer on a farm under subparagraph (B) or
(C) of paragraph (1) shall be made at a rate of
75 percent of the market value of the affected
livestock on the applicable date, as determined
by the Secretary.
``(C) Determination of market value.--In
determining the market value described in
subparagraphs (A) and (B), the Secretary may
consider the ability of eligible producers to
document regional price premiums for affected
livestock that exceed the national average
market price for those livestock.
``(D) Applicable date defined.--In this
paragraph, the term `applicable date' means,
with respect to livestock, as applicable--
``(i) the day before the date of
death of the livestock; or
``(ii) the day before the date of the
event that caused the harm to the
livestock that resulted in a reduced
sale price.''; and
(B) by adding at the end the following:
``(5) Additional payment for unborn livestock.--
``(A) In general.--In the case of unborn
livestock death losses incurred on or after
January 1, 2024, the Secretary shall make an
additional payment to eligible producers on
farms that have incurred such losses in excess
of the normal mortality due to a condition
specified in paragraph (1).
``(B) Payment rate.--Additional payments
under subparagraph (A) shall be made at a
rate--
``(i) determined by the Secretary;
and
``(ii) less than or equal to 85
percent of the payment rate established
with respect to the lowest weight class
of the livestock, as determined by the
Secretary, acting through the
Administrator of the Farm Service
Agency.
``(C) Payment amount.--The amount of a
payment to an eligible producer that has
incurred unborn livestock death losses shall be
equal to the payment rate determined under
subparagraph (B) multiplied, in the case of
livestock described in--
``(i) subparagraph (A), (B), or (F)
of subsection (a)(4), by 1;
``(ii) subparagraph (D) of such
subsection, by 2;
``(iii) subparagraph (E) of such
subsection, by 12; and
``(iv) subparagraph (G) of such
subsection, by the average number of
birthed animals (for one gestation
cycle) for the species of each such
livestock, as determined by the
Secretary.
``(D) Unborn livestock death losses
defined.--In this paragraph, the term `unborn
livestock death losses' means losses of any
livestock described in subparagraph (A), (B),
(D), (E), (F), or (G) of subsection (a)(4) that
was gestating on the date of the death of the
livestock.''.
(2) Livestock forage disaster program.--Section
1501(c)(3)(D)(ii)(I) of the Agricultural Act of 2014 (7
U.S.C. 9081(c)(3)(D)(ii)(I)) is amended--
(A) by striking ``1 monthly payment'' and
inserting ``2 monthly payments''; and
(B) by striking ``county for at least 8
consecutive'' and inserting the following:
``county for not less than--
``(aa) 4 consecutive
weeks during the normal
grazing period for the
county, as determined
by the Secretary, shall
be eligible to receive
assistance under this
paragraph in an amount
equal to 1 monthly
payment using the
monthly payment rate
determined under
subparagraph (B); or
``(bb) any of the 7
of the previous 8
consecutive''.
(3) Emergency assistance for livestock, honey bees,
and farm-raised fish.--Section 1501(d) of the
Agricultural Act of 2014 (7 U.S.C. 9081(d)) is amended
by adding at the end the following:
``(5) Assistance for losses due to bird
depredation.--
``(A) Payments.--Eligible producers on a farm
of farm-raised fish, including fish grown as
food for human consumption, shall be eligible
to receive payments under this subsection to
aid in the reduction of losses due to
piscivorous birds.
``(B) Payment rate.--
``(i) In general.--The payment rate
for payments under subparagraph (B)
shall be determined by the Secretary,
taking into account--
``(I) costs associated with
the deterrence of piscivorous
birds;
``(II) the value of lost fish
and revenue due to bird
depredation; and
``(III) costs associated with
disease loss from bird
depredation.
``(ii) Minimum rate.--The payment
rate for payments under subparagraph
(B) shall be not less than $600 per
acre of farm-raised fish.
``(C) Payment amount.--The amount of a
payment under subparagraph (B) shall be the
product obtained by multiplying--
``(i) the applicable payment rate
under subparagraph (C); and
``(ii) 85 percent of the total number
of acres of farm-raised fish farms that
the eligible producer has in production
for the calendar year.''.
(4) Tree assistance program.--Section 1501(e) of the
Agricultural Act of 2014 (7 U.S.C. 9081(e)) is
amended--
(A) in paragraph (2)(B), by striking ``15
percent (adjusted for normal mortality)'' and
inserting ``normal mortality''; and
(B) in paragraph (3)--
(i) in subparagraph (A)(i), by
striking ``15 percent mortality
(adjusted for normal mortality)'' and
inserting ``normal mortality''; and
(ii) in subparagraph (B)--
(I) by striking ``50'' and
inserting ``65''; and
(II) by striking ``15 percent
damage or mortality (adjusted
for normal tree damage and
mortality)'' and inserting
``normal tree damage or
mortality''.
(q) Emergency Assistance for Honeybees.--In determining
honeybee colony losses eligible for assistance under section
1501(d) of the Agricultural Act of 2014 (7 U.S.C. 9081(d)), the
Secretary shall utilize a normal mortality rate of 15 percent.
(r) Beginning and Veteran Farmer and Rancher Benefit.--
(1) Definitions.--
(A) In general.--Section 502(b) of the
Federal Crop Insurance Act (7 U.S.C. 1502(b))
is amended--
(i) in paragraph (3), by striking
``5'' and inserting ``10''; and
(ii) in paragraph (14)(B)--
(I) in clause (i), by adding
``or'' at the end after the
semicolon;
(II) in clause (ii), by
striking ``5 years; or'' and
inserting ``10 years.''; and
(III) in clause (iii), by
striking ``5-year'' and
inserting ``10-year''.
(B) Conforming amendment.--Section 522(c)(7)
of the Federal Crop Insurance Act (7 U.S.C.
1522(c)(7)) is amended by striking subparagraph
(F).
(2) Increase in assistance.--Section 508(e)(8) of the
Federal Crop Insurance Act (7 U.S.C. 1508(e)(8)) is
amended--
(A) by striking ``Notwithstanding'' and
inserting the following:
``(A) In general.--Notwithstanding'';
(B) in subparagraph (A) (as so designated),
by striking ``is 10 percentage points greater
than'' and inserting ``is the number of
percentage points specified in subparagraph (B)
greater than''; and
(C) by adding at the end the following:
``(B) Percentage points adjustments.--The
percentage points referred to in subparagraph
(A) are the following:
``(i) For each of the first and
second reinsurance years that a
beginning farmer or rancher or veteran
farmer or rancher participates as a
beginning farmer or rancher or veteran
farmer or rancher, respectively, in the
applicable policy or plan of insurance,
15 percentage points.
``(ii) For the third reinsurance year
that a beginning farmer or rancher or
veteran farmer or rancher participates
as a beginning farmer or rancher or
veteran farmer or rancher,
respectively, in the applicable policy
or plan of insurance, 13 percentage
points.
``(iii) For the fourth reinsurance
year that a beginning farmer or rancher
or veteran farmer or rancher
participates as a beginning farmer or
rancher or veteran farmer or rancher,
respectively, in the applicable policy
or plan of insurance, 11 percentage
points.
``(iv) For each of the fifth through
tenth reinsurance years that a
beginning farmer or rancher or veteran
farmer or rancher participates as a
beginning farmer or rancher or veteran
farmer or rancher, respectively, in the
applicable policy or plan of insurance,
10 percentage points.''.
(s) Area-based Crop Insurance Coverage and Affordability.--
(1) Coverage level.--Section 508(c)(4) of the Federal
Crop Insurance Act (7 U.S.C. 1508(c)(4)) is amended--
(A) by amending subparagraph (A)(ii) to read
as follows:
``(ii) may be purchased at any level
not to exceed--
``(I) in the case of the
individual yield or revenue
coverage, 85 percent;
``(II) in the case of
individual yield or revenue
coverage aggregated across
multiple commodities, 90
percent; and
``(III) in the case of area
yield or revenue coverage (as
determined by the Corporation),
95 percent.''; and
(B) in subparagraph (C)--
(i) in clause (ii), by striking
``14'' and inserting ``10''; and
(ii) in clause (iii)(I), by striking
``86'' and inserting ``90''.
(2) Premium cost share.--Section 508(e)(2)(H)(i) of
the Federal Crop Insurance Act (7 U.S.C.
1508(e)(2)(H)(i)) is amended by striking ``65'' and
inserting ``80''.
(t) Premium Support.--Section 508(e)(2) of the Federal Crop
Insurance Act (7 U.S.C. 1508(e)(2)) is amended--
(1) in subparagraph (C)(i), by striking ``64'' and
inserting ``69'';
(2) in subparagraph (D)(i), by striking ``59'' and
inserting ``64'';
(3) in subparagraph (E)(i), by striking ``55'' and
inserting ``60'';
(4) in subparagraph (F)(i), by striking ``48'' and
inserting ``51''; and
(5) in subparagraph (G)(i), by striking ``38'' and
inserting ``41''.
(u) Administrative and Operating Expense Adjustments.--
Section 508(k) of the Federal Crop Insurance Act (7 U.S.C.
1508(k)) is amended by adding at the end the following:
``(10) Additional expenses.--
``(A) In general.--Beginning with the 2026
reinsurance year and for each reinsurance year
thereafter, in addition to the terms and
conditions of the Standard Reinsurance
Agreement, to cover additional expenses for
loss adjustment procedures, the Corporation
shall pay an additional administrative and
operating expense subsidy to approved insurance
providers for eligible contracts.
``(B) Payment amount.--In the case of an
eligible contract, the payment to an approved
insurance provider required under subparagraph
(A) shall be the amount equal to 6 percent of
the net book premium.
``(C) Definitions.--In this paragraph:
``(i) Eligible state.--The term
`eligible State' means a State--
``(I) identified in State
Group 2 or State Group 3 (as
defined in the Standard
Reinsurance Agreement for
reinsurance year 2026); and
``(II) in which, with respect
to an insurance year, the loss
ratio for eligible contracts is
greater than 120 percent of the
total net book premium written
by all approved insurance
providers.
``(ii) Eligible contracts.--The term
`eligible contract'--
``(I) means a crop insurance
contract entered into by an
approved insurance provider in
an eligible State; and
``(II) does not include a
contract for--
``(aa) catastrophic
risk protection under
subsection (b);
``(bb) an area-based
plan of insurance or
similar plan of
insurance, as
determined by the
Corporation; or
``(cc) a policy under
which an approved
insurance provider does
not incur loss
adjustment expenses, as
determined by the
Corporation.
``(11) Specialty crops.--
``(A) Minimum reimbursement.--Beginning with
the 2026 reinsurance year and for each
reinsurance year thereafter, the rate of
reimbursement to approved insurance providers
and agents for administrative and operating
expenses with respect to crop insurance
contracts covering agricultural commodities
described in section 101 of title I of the
Specialty Crops Competitiveness Act of 2004 (7
U.S.C. 1621 note) shall be equal to or greater
than the percent that is the greater of the
following:
``(i) 17 percent of the premium used
to define loss ratio.
``(ii) The percent of the premium
used to define loss ratio that is
otherwise applicable for the
reinsurance year under the terms of the
Standard Reinsurance Agreement in
effect for the reinsurance year.
``(B) Other contracts.--In carrying out
subparagraph (A), the Corporation shall not
reduce, with respect to any reinsurance year,
the amount or the rate of reimbursement to
approved insurance providers and agents under
the Standard Reinsurance Agreement described in
clause (ii) of such subparagraph for
administrative and operating expenses with
respect to contracts covering agricultural
commodities that are not subject to such
subparagraph.
``(C) Administration.--The requirements of
this paragraph and the adjustments made
pursuant to this paragraph shall not be
considered a renegotiation under paragraph
(8)(A).
``(12) A&O inflation adjustment.--
``(A) In general.--Subject to subparagraph
(B), for the 2026 reinsurance year, and each
reinsurance year thereafter, the Corporation
shall increase the total administrative and
operating expense reimbursements otherwise
required under the Standard Reinsurance
Agreement in effect for the reinsurance year in
order to account for inflation, in a manner
consistent with the increases provided with
respect to the 2011 through 2015 reinsurance
years under the enclosure included in Risk
Management Agency Bulletin numbered MGR-10-007
and dated June 30, 2010.
``(B) Special rule for 2026 reinsurance
year.--The increase under subparagraph (A) for
the 2026 reinsurance year shall not exceed the
percentage change for the preceding reinsurance
year included in the Consumer Price Index for
All Urban Consumers published by the Bureau of
Labor Statistics of the Department of Labor.
``(C) Administration.--An increase under
subparagraph (A)--
``(i) shall apply with respect to all
contracts covering agricultural
commodities that were subject to an
increase during the period of the 2011
through 2015 reinsurance years under
the enclosure referred to in that
subparagraph; and
``(ii) shall not be considered to be
a renegotiation of the Standard
Reinsurance Agreement for purposes of
paragraph (8)(A).''.
(v) Program Compliance and Integrity.--Section 515(l)(2) of
the Federal Crop Insurance Act (7 U.S.C. 1515(l)(2)) is amended
by striking ``than'' and all that follows through the period at
the end and inserting the following: ``than--
``(A) $4,000,000 for each of fiscal years
2009 through 2025; and
``(B) $6,000,000 for fiscal year 2026 and
each subsequent fiscal year.''.
(w) Reviews, Compliance, and Integrity.--Section
516(b)(2)(C)(i) of the Federal Crop Insurance Act (7 U.S.C.
1516(b)(2)(C)(i)) is amended by striking ``each fiscal year''
and inserting ``each of fiscal years 2014 through 2025 and
$10,000,000 for fiscal year 2026 and each fiscal year
thereafter''.
(x) Poultry Insurance Pilot Program.--Section 523 of the
Federal Crop Insurance Act (7 U.S.C. 1523) is amended by adding
at the end the following:
``(j) Poultry Insurance Pilot Program.--
``(1) In general.--Notwithstanding subsection (a)(2),
the Corporation shall establish a pilot program under
which contract poultry growers, including growers of
broilers and laying hens, may elect to receive index-
based insurance from extreme weather-related risk
resulting in increased utility costs (including costs
of natural gas, propane, electricity, water, and other
appropriate costs, as determined by the Corporation)
associated with poultry production.
``(2) Stakeholder engagement.--The Corporation shall
engage with poultry industry stakeholders in
establishing the pilot program under paragraph (1).
``(3) Location.--The pilot program established under
paragraph (1) shall be conducted in a sufficient number
of counties to provide a comprehensive evaluation of
the feasibility, effectiveness, and demand among
producers in the top poultry producing States,
including Alabama, Arkansas, and Mississippi, as
determined by the Corporation.
``(4) Approval of policy or plan.--Notwithstanding
section 508(l), the Board shall approve a policy or
plan of insurance based on the pilot program under
paragraph (1)--
``(A) in accordance with section 508(h); and
``(B) not later than 24 months after the date
of enactment of this subsection.''.

SEC. 10102. CONSERVATION.

(a) Grassroots Source Water Protection Program.--Section
1240O(b) of the Food Security Act of 1985 (16 U.S.C. 3839bb-
2(b)) is amended--
(1) in paragraph (1), by striking ``2023'' and
inserting ``2031''; and
(2) in paragraph (3)--
(A) in subparagraph (A), by striking the
``and'' at the end;
(B) in subparagraph (B), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following:
``(C) $1,000,000 beginning in fiscal year
2026, to remain available until expended.''.
(b) Voluntary Public Access and Habitat Incentive Program.--
Section 1240R(f)(1) of the Food Security Act of 1985 (16 U.S.C.
3839bb-5(f)(1)) is amended--
(1) by striking the ``and'' after ``2023,''; and
(2) by inserting ``, and $10,000,000 for each of
fiscal years 2025 through 2031'' before the period at
the end.
(c) Feral Swine Eradication and Control Pilot Program.--
Section 2408(g)(1) of the Agriculture Improvement Act of 2018
(7 U.S.C. 8351 note; Public Law 115-334) is amended--
(1) by striking ``and'' and inserting a comma; and
(2) by inserting ``, and $15,000,000 for each of
fiscal years 2025 through 2031'' before the period at
the end.
(d) Funding.--
(1) In general.--Section 1241(a) of the Food Security
Act of 1985 (16 U.S.C. 3841(a)) is amended--
(A) in paragraph (2), by striking
subparagraphs (A) through (F) and inserting the
following:
``(A) $625,000,000 for fiscal year 2026;
``(B) $650,000,000 for fiscal year 2027;
``(C) $675,000,000 for fiscal year 2028;
``(D) $700,000,000 for fiscal year 2029;
``(E) $700,000,000 for fiscal year 2030; and
``(F) $700,000,000 for fiscal year 2031.'';
and
(B) in paragraph (3)--
(i) in subparagraph (A), by striking
clauses (i) through (v) and inserting
the following:
``(i) $2,655,000,000 for fiscal year
2026;
``(ii) $2,855,000,000 for fiscal year
2027;
``(iii) $3,255,000,000 for fiscal
year 2028;
``(iv) $3,255,000,000 for fiscal year
2029;
``(v) $3,255,000,000 for fiscal year
2030; and
``(vi) $3,255,000,000 for fiscal year
2031; and''; and
(ii) in subparagraph (B), by striking
clauses (i) through (v) and inserting
the following:
``(i) $1,300,000,000 for fiscal year
2026;
``(ii) $1,325,000,000 for fiscal year
2027;
``(iii) $1,350,000,000 for fiscal
year 2028;
``(iv) $1,375,000,000 for fiscal year
2029;
``(v) $1,375,000,000 for fiscal year
2030; and
``(vi) $1,375,000,000 for fiscal year
2031.''.
(2) Regional conservation partnership program.--
Section 1271D of the Food Security Act of 1985 (16
U.S.C. 3871d) is amended by striking subsection (a) and
inserting the following:
``(a) Availability of Funding.--Of the funds of the Commodity
Credit Corporation, the Secretary shall use to carry out the
program, to the maximum extent practicable--
``(1) $425,000,000 for fiscal year 2026;
``(2) $450,000,000 for fiscal year 2027;
``(3) $450,000,000 for fiscal year 2028;
``(4) $450,000,000 for fiscal year 2029;
``(5) $450,000,000 for fiscal year 2030; and
``(6) $450,000,000 for fiscal year 2031.''.
(3) Watershed protection and flood prevention.--
Section 15 of the Watershed Protection and Flood
Prevention Act (16 U.S.C. 1012a) is amended--
(A) by striking ``$50,000,000 for fiscal year
2019'' and inserting ``$150,000,000 for fiscal
year 2026''; and
(B) by inserting ``, to remain available
until expended'' before the period at the end.
(4) Rescission.--The unobligated balances of amounts
appropriated by section 21001(a) of Public Law 117-169
(136 Stat. 2015) are rescinded.

SEC. 10103. TRADE.

Section 203(f) of the Agricultural Trade Act of 1978 (7
U.S.C. 5623(f)) is amended--
(1) in paragraph (2)--
(A) by striking ``For each of fiscal years''
and inserting ``(A) in general.--For each of
fiscal years''; and
(B) by adding at the end the following new
subparagraph:
``(B) Fiscal years 2026 through 2031.--For
each of fiscal years 2026 through 2031, of the
funds of, or an equal value of commodities
owned by, the Commodity Credit Corporation, the
Secretary shall use to carry out this section
$489,500,000, to remain available until
expended.'';
(2) by redesignating paragraphs (4) and (5) as
paragraphs (5) and (6), respectively;
(3) by inserting after paragraph (3) the following
new paragraph:
``(4) Allocations for fiscal years 2026 through
2031.--
``(A) In general.--For each of fiscal years
2026 through 2031, the Secretary shall allocate
funds to carry out this section in accordance
with the following:
``(i) Market access program.--For
market access activities authorized
under subsection (b), of the funds of,
or an equal value of commodities owned
by, the Commodity Credit Corporation,
not less than $400,000,000 for each
fiscal year.
``(ii) Foreign market development
cooperator program.--To carry out
subsection (c), of the funds of, or an
equal value of commodities owned by,
the Commodity Credit Corporation, not
less than $69,000,000 for each fiscal
year.
``(iii) E (kika) de la garza emerging
markets program.--To provide assistance
under subsection (d), of the funds of,
or an equal value of commodities owned
by, the Commodity Credit Corporation,
not more than $8,000,000 for each
fiscal year.
``(iv) Technical assistance for
specialty crops.--To carry out
subsection (e), of the funds of, or an
equal value of the commodities owned
by, the Commodity Credit Corporation,
$9,000,000 for each fiscal year.
``(v) Priority trade fund.--
``(I) In general.--In
addition to the amounts
allocated under clauses (i)
through (iv), and
notwithstanding any limitations
in those clauses, as determined
by the Secretary, for 1 or more
programs under this section for
authorized activities to
access, develop, maintain, and
expand markets for United
States agricultural
commodities, $3,500,000 for
each fiscal year.
``(II) Considerations.--In
allocating funds made available
under subclause (I), the
Secretary may consider
providing a greater allocation
to 1 or more programs under
this section for which the
amounts requested under
applications exceed available
funding for the 1 or more
programs.
``(B) Reallocation.--Any funds allocated
under clauses (i) through (iv) of subparagraph
(A) that remain unobligated one year after the
end of the fiscal year in which they are first
made available shall be reallocated to the
priority trade fund under subparagraph (A)(v).
To the maximum extent practicable, the
Secretary shall allocate such reallocated funds
to support exports of those types of United
States agricultural commodities eligible for
assistance under the program for which the
funds were originally allocated under
subparagraph (A).''; and
(4) in paragraph (6), as so redesignated, by
inserting ``, paragraph (4)(A)(v),'' after ``paragraph
(3)(A)(v)''.

SEC. 10104. RESEARCH.

(a) Urban, Indoor, and Other Emerging Agricultural Production
Research, Education, and Extension Initiative.--Section
1672E(d)(1)(B) of the Food, Agriculture, Conservation, and
Trade Act of 1990 (7 U.S.C. 5925g(d)(1)(B)) is amended by
striking ``fiscal year 2024, to remain available until
expended'' and inserting ``each of fiscal years 2024 through
2031''.
(b) Foundation for Food and Agriculture Research.--Section
7601(g)(1)(A) of the Agricultural Act of 2014 (7 U.S.C.
5939(g)(1)(A)) is amended adding at the end the following:
``(iv) Further funding.--Of the funds
of the Commodity Credit Corporation,
the Secretary shall transfer to the
Foundation to carry out this section,
to remain available until expended, not
later than 30 days after the date of
enactment of this clause,
$37,000,000.''.
(c) Scholarships for Students at 1890 Institutions.--Section
1446 of the National Agricultural Research, Extension, and
Teaching Policy Act of 1977 (7 U.S.C. 3222a) is amended--
(1) in subsection (a)--
(A) by striking paragraph (3); and
(B) by redesignating paragraph (4) as
paragraph (3); and
(2) in subsection (b), by amending paragraph (1) to
read as follows:
``(1) Mandatory funding.--Of the funds of the
Commodity Credit Corporation, the Secretary shall make
available to carry out this section $60,000,000 for
fiscal year 2026, to remain available until
expended.''.
(d) Assistive Technology Program for Farmers With
Disabilities.--Section 1680(c) of the Food, Agriculture,
Conservation, and Trade Act of 1990 (7 U.S.C. 5933(c)) is
amended--
(1) in the subsection heading, by striking
``Authorization of Appropriations'' and inserting
``Funding'';
(2) by redesignating paragraphs (1) and (2) as
paragraphs (2) and (3), respectively; and
(3) by inserting before paragraph (2), as so
redesignated, the following:
``(1) Mandatory funding.--Of the funds of the
Commodity Credit Corporation, the Secretary shall use
to carry out this section $8,000,000, to remain
available until expended.''; and
(4) in paragraph (2), as so redesignated--
(A) in the paragraph heading, by striking
``In general'' and inserting ``Authorization of
appropriations''; and
(B) by striking ``Subject to paragraph (2)''
and inserting ``Subject to paragraph (3)''.
(e) Specialty Crop Research Initiative.--Section 412(k)(1)(B)
of the Agricultural Research, Extension, and Education Reform
Act of 1998 (7 U.S.C. 7632(k)(1)(B)) is amended by striking
``section $80,000,000 for fiscal year 2014'' and inserting the
following: ``section--
``(i) $80,000,000 for each of fiscal
years 2014 through 2025; and
``(ii) $175,000,000 for fiscal year
2026''.
(f) Research Facilities Act.--Section 6 of the Research
Facilities Act (7 U.S.C. 390d) is amended--
(1) in the section heading by striking
``AUTHORIZATION OF APPROPRIATIONS'' and inserting
``FUNDING''; and
(2) in subsection (a)--
(A) by striking ``(a) In General.--Subject
to'' and inserting the following:
``(a) In General.--
``(1) Authorization of appropriations.--Subject to'';
and
(B) by adding at the end the following:
``(2) Mandatory funding.--Of the funds of the
Commodity Credit Corporation, the Secretary shall make
available to carry out the competitive grant program
under section 4, $125,000,000 for each fiscal year
beginning with fiscal year 2026.''.

SEC. 10105. SECURE RURAL SCHOOLS; FORESTRY.

(a) Extension of Certain Provisions of Secure Rural Schools
and Community Self-Determination Act of 2000.--
(1) Secure payments for states and counties
containing federal land.--
(A) Secure payments.--Section 101 of the
Secure Rural Schools and Community Self-
Determination Act of 2000 (16 U.S.C. 7111) is
amended--
(i) in subsections (a) and (b), by
striking ``2023'' each place it appears
and inserting ``2026''; and
(ii) by adding at the end the
following:
``(e) Special Rule for Fiscal Year 2024 Payments.--
``(1) State payment.--If an eligible county in a
State that will receive a share of the State payment
for fiscal year 2024 has already received, or will
receive, a share of the 25-percent payment for fiscal
year 2024 distributed to the State before the date of
enactment of this subsection--
``(A) if the amount of the State payment
exceeds the amount of the 25-percent payment,
the amount of the State payment shall be
reduced by the amount of the share of the
eligible county of the 25-percent payment; or
``(B) if the amount of the State payment is
less than or equal to the amount of the 25-
percent payment, the eligible county--
``(i) may retain the amount of the
share of the eligible county of the 25-
percent payment; and
``(ii) if so retained, such amount
shall be treated as if it were received
by the county as a State payment for
purposes of this Act.
``(2) County payment.--If an eligible county that
will receive a county payment for fiscal year 2024 has
already received a 50-percent payment for fiscal year
2024--
``(A) if the amount of the county payment
exceeds the amount of the 50-percent payment,
the amount of the county payment shall be
reduced by the amount of the 50-percent
payment; or
``(B) if the amount of the county payment is
less than or equal to the amount of the 50-
percent payment, the eligible county--
``(i) may retain the amount of the
50-percent payment; and
``(ii) if so retained, such amount
shall be treated as if it were received
as a county payment for purposes of
this Act.
``(3) Timely payment.--Not later than 90 days after
the date of enactment of this subsection, the Secretary
of the Treasury shall make all payments under this
title for fiscal year 2024.''.
(B) Distribution of payments to eligible
counties.--Section 103(d)(2) of the Secure
Rural Schools and Community Self-Determination
Act of 2000 (16 U.S.C. 7113(d)(2)) is amended
by striking ``2023'' and inserting ``2026''.
(2) Payments to states and counties.--Section 102 of
the Secure Rural Schools and Community Self-
Determination Act of 2000 (16 U.S.C. 7112) is amended--
(A) in subsection (b)--
(i) in paragraph (1), by adding at
the end the following:
``(E) Payments for each of fiscal years 2024
and 2025.--The election otherwise required by
subparagraph (A) shall not apply for each of
fiscal years 2024 and 2025.''; and
(ii) in paragraph (2), by adding at
the end the following:
``(C) Fiscal years 2024 and 2025.--The
election described in paragraph (1)(A)
applicable to a county in fiscal year 2023
shall be effective for each of fiscal years
2024 and 2025.''; and
(B) in subsection (d)--
(i) in paragraph (1), by adding at
the end the following:
``(G) Payments for each of fiscal years 2024
and 2025.--The election made by an eligible
county under subparagraph (B), (C), or (D) for
fiscal year 2023, or deemed to be made by the
county under paragraph (3)(B) for that fiscal
year, shall be effective for each of fiscal
years 2024 and 2025.''; and
(ii) in paragraph (3), by adding at
the end the following:
``(E) Payments for each of fiscal years 2024
and 2025.--This paragraph does not apply for
each of fiscal years 2024 and 2025.''.
(3) Extension of authority to conduct special
projects on federal land.--
(A) Committee on composition waiver
authority.--Section 205(d)(6)(C) of the Secure
Rural Schools and Community Self-Determination
Act of 2000 (16 U.S.C. 7125(d)(6)(C)) is
amended by striking ``2023'' and inserting
``2026''.
(B) Extension of authority.--Section 208 of
the Secure Rural Schools and Community Self-
Determination Act of 2000 (16 U.S.C. 7128) is
amended--
(i) in subsection (a), by striking
``2025'' and inserting ``2028''; and
(ii) in subsection (b), by striking
``2026'' and inserting ``2029''.
(4) Extension of authority to expend county funds.--
Section 305 of the Secure Rural Schools and Community
Self-Determination Act of 2000 (16 U.S.C. 7144) is
amended--
(A) in subsection (a), by striking ``2025''
and inserting ``2028''; and
(B) in subsection (b), by striking ``2026''
and inserting ``2029''.
(b) Resource Advisory Committee Pilot Program Extension.--
Section 205(g) of the Secure Rural Schools and Community Self-
Determination Act of 2000 (16 U.S.C. 7125(g)) is amended--
(1) in paragraph (5), by striking ``2023'' and
inserting ``2026''; and
(2) by striking paragraph (6).
(c) Technical Corrections.--
(1) Resource advisory committees.--Section 205 of the
Secure Rural Schools and Community Self-Determination
Act of 2000 (16 U.S.C. 7125) is amended--
(A) in subsection (c)--
(i) in paragraph (1), by striking
``concerned,'' and inserting
``concerned''; and
(ii) in paragraph (3), by striking
``the date of the enactment of this
Act'' and inserting ``October 3,
2008''; and
(B) in subsection (d)(4), by striking ``to
extent'' and inserting ``to the extent''.
(2) Use of project funds.--Section 206(b)(2) of the
Secure Rural Schools and Community Self-Determination
Act of 2000 (16 U.S.C. 7126(b)(2)) is amended by
striking ``concerned,'' and inserting ``concerned''.
(d) Rescissions.--
(1) Competitive grants for non-federal forest
landowners.--All of the unobligated balances of the
funds made available under each of paragraphs (1)
through (4) of section 23002(a) of subtitle D of Public
Law 117-169 are rescinded.
(2) State and private forestry conservation
programs.--Of the unobligated balances available under
section 23003(a)(1) of subtitle D of Public Law 117-
169, $100,719,676 are rescinded.

SEC. 10106. ENERGY.

(a) Biobased Markets Program.--Section 9002(k)(1) of the Farm
Security and Rural Investment Act of 2002 (7 U.S.C. 8102(k)(1))
is amended by striking ``2024'' and inserting ``2031''.
(b) Bioenergy Program for Advanced Biofuels.--Section
9005(g)(1)(F) of the Farm Security and Rural Investment Act of
2002 (7 U.S.C. 8105(g)(1)(F)) is amended by striking ``2024''
and inserting ``2031''.

SEC. 10107. HORTICULTURE.

(a) Plant Pest and Disease Management and Disaster
Prevention.--Section 420(f) of the Plant Protection Act (7
U.S.C. 7721) is amended--
(1) in paragraph (5), by striking ``and'' at the end;
(2) by redesignating paragraph (6) as paragraph (7);
(3) by inserting after paragraph (5) the following:
``(6) $75,000,000 for each of fiscal years 2018
through 2025; and''; and
(4) in paragraph (7) (as so redesignated), by
striking ``$75,000,000 for fiscal year 2018'' and
inserting ``$90,000,000 for fiscal year 2026''.
(b) Specialty Crop Block Grants.--Section 101(l)(1) of the
Specialty Crops Competitiveness Act of 2004 (7 U.S.C. 1621
note; Public Law 108-465) is amended--
(1) in subparagraph (D), by striking ``and'' at the
end;
(2) by redesignating subparagraph (E) as subparagraph
(F);
(3) by inserting after subparagraph (D) the
following:
``(E) $85,000,000 for each of fiscal years
2018 through 2025; and''; and
(4) in subparagraph (F) (as so redesignated), by
striking ``$85,000,000 for fiscal year 2018'' and
inserting ``$100,000,000 for fiscal year 2026''.''.
(c) Organic Production and Market Data Initiative.--Section
7407(d)(1) of the Farm Security and Rural Investment Act of
2002 (7 U.S.C. 5925c(d)(1)) is amended--
(1) in subparagraph (B), by striking ``and'' at the
end;
(2) in subparagraph (C), by striking the period at
the end and inserting ``; and''; and
(3) by adding at the end the following:
``(D) $10,000,000 for the period of fiscal
years 2026 through 2031.''.
(d) Modernization and Improvement of International Trade
Technology Systems and Data Collection Funding.--Section
2123(c)(4) of the Organic Foods Production Act of 1990 (7
U.S.C. 6522(c)(4)) is amended, in the matter preceding
subparagraph (A), by striking ``and $1,000,000 for fiscal year
2024'' and inserting ``, $1,000,000 for fiscal years 2024 and
2025, and $5,000,000 for fiscal year 2026''.
(e) National Organic Certification Cost-share Program.--
Section 10606(d)(1)(C) of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 6523(d)(1)(C)) is amended by
striking ``for each of fiscal years 2022 through 2024'' and
inserting ``for each of fiscal years 2022 through 2031''.
(f) Multiple Crop and Pesticide Use Survey.--Section
10109(c)(1) of the Agriculture Improvement Act of 2018 (Public
Law 115-334; 132 Stat. 4906) is amended to read as follows:
``(1) Mandatory funding.--Of the funds of the
Commodity Credit Corporation, the Secretary shall use
to carry out this section--
``(A) $500,000 for fiscal year 2019, to
remain available until expended;
``(B) $100,000 for fiscal year 2024, to
remain available until expended; and
``(C) $5,000,000 for fiscal year 2026, to
remain available until expended.''.

SEC. 10108. MISCELLANEOUS.

(a) Animal Disease Prevention and Management.--Section
10409A(d)(1) of the Animal Health Protection Act (7 U.S.C.
8308a(d)(1)) is amended to read as follows:
``(1) Mandatory funding.--
``(A) Fiscal years 2023 through 2025.--Of the
funds of the Commodity Credit Corporation, the
Secretary shall make available to carry out
this section $30,000,000 for each of fiscal
years 2023 through 2025, of which not less than
$18,000,000 shall be made available for each of
those fiscal years to carry out subsection (b).
``(B) Fiscal years 2026 through 2030.--Of the
funds of the Commodity Credit Corporation, the
Secretary shall make available to carry out
this section $233,000,000 for each of fiscal
years 2026 through 2030, of which--
``(i) not less than $10,000,000 shall
be made available for each such fiscal
year to carry out subsection (a);
``(ii) not less than $70,000,000
shall be made available for each such
fiscal year to carry out subsection
(b); and
``(iii) not less than $153,000,000
shall be made available for each such
fiscal year to carry out subsection
(c).
``(C) Subsequent fiscal years.--Of the funds
of the Commodity Credit Corporation, the
Secretary shall make available to carry out
this section $75,000,000 for fiscal year 2031
and each fiscal year thereafter, of which not
less than $45,000,000 shall be made available
for each of those fiscal years to carry out
subsection (b).''.
(b) Sheep Production and Marketing Grant Program.--Section
209(c) of the Agricultural Marketing Act of 1946 (7 U.S.C.
1627a(c)) is amended--
(1) by striking ``$2,000,000 for fiscal year 2019,
and''; and
(2) by inserting ``and $3,000,000 for fiscal year
2026'' after ``fiscal year 2024''.
(c) Miscellaneous Trust Funds.--
(1) Pima agriculture cotton trust fund.--Section
12314 of the Agricultural Act of 2014 (7 U.S.C. 2101
note; Public Law 113-79) is amended--
(A) in subsection (b), in the matter
preceding paragraph (1), by striking ``2024''
and inserting ``2031''; and
(B) in subsection (h), by striking ``2024''
and inserting ``2031''.
(2) Agriculture wool apparel manufacturers trust
fund.--Section 12315 of the Agricultural Act of 2014 (7
U.S.C. 7101 note; Public Law 113-79) is amended by
striking ``2024'' each place it appears and inserting
``2031''.
(3) Wool research and promotion.--Section 12316(a) of
the Agricultural Act of 2014 (7 U.S.C. 7101 note;
Public Law 113-79) is amended by striking ``2024'' and
inserting ``2031''.
(4) Emergency citrus disease research and development
trust fund.--Section 12605(d) of the Agriculture
Improvement Act of 2018 (7 U.S.C. 7632 note; Public Law
115-334) is amended by striking ``2024'' and inserting
``2031''.

TITLE II--COMMITTEE ON ARMED SERVICES

SEC. 20001. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES FOR
IMPROVING THE QUALITY OF LIFE FOR MILITARY
PERSONNEL.

SEC. 20002. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES FOR
SHIPBUILDING.

In addition to amounts otherwise available, there are
appropriated to the Secretary of Defense for fiscal year 2025,
out of any money in the Treasury not otherwise appropriated, to
remain available until September 30, 2029--
(1) $250,000,000 for the expansion of accelerated
Training in Defense Manufacturing program;
(2) $250,000,000 for United States production of
turbine generators for shipbuilding industrial base;
(3) $450,000,000 for United States additive
manufacturing for wire production and machining
capacity for shipbuilding industrial base;
(4) $492,000,000 for next-generation shipbuilding
techniques;
(5) $85,000,000 for United States-made steel plate
for shipbuilding industrial base;
(6) $50,000,000 for machining capacity for naval
propellers for shipbuilding industrial base;
(7) $110,000,000 for rolled steel and fabrication
facility for shipbuilding industrial base;
(8) $400,000,000 for expansion of collaborative
campus for naval shipbuilding;
(9) $450,000,000 for application of autonomy and
artificial intelligence to naval shipbuilding;
(10) $500,000,000 for the adoption of advanced
manufacturing techniques in the maritime industrial
base;
(11) $500,000,000 for additional dry-dock capability;
(12) $50,000,000 for the expansion of cold spray
repair technologies;
(13) $450,000,000 for additional maritime industrial
workforce development programs;
(14) $750,000,000 for additional supplier development
across the naval shipbuilding industrial base;
(15) $250,000,000 for additional advanced
manufacturing processes across the naval shipbuilding
industrial base;
(16) $4,600,000,000 for a second Virginia-class
submarine in fiscal year 2027;
(17) $5,400,000,000 for two additional Guided Missile
Destroyer (DDG) ships;
(18) $160,000,000 for advanced procurement for
Landing Ship Medium;
(19) $1,803,941,000 for procurement of Landing Ship
Medium;
(20) $295,000,000 for development of a second Landing
Craft Utility shipyard and production of additional
Landing Craft Utility;
(21) $100,000,000 for the procurement of commercial
logistics ships;
(22) $600,000,000 for the lease or purchase of new
ships through the National Defense Sealift Fund;
(23) $2,725,000,000 for the procurement of T-AO
oilers;
(24) $500,000,000 for cost-to-complete for rescue and
salvage ships;
(25) $300,000,000 for production of ship-to-shore
connectors;
(26) $695,000,000 for the implementation of a multi-
ship amphibious warship contract;
(27) $80,000,000 for accelerated development of
vertical launch system reloading at sea;
(28) $250,000,000 for expansion of Navy corrosion
control programs;
(29) $159,000,000 for leasing of ships for Marine
Corps operations;
(30) $1,534,000,000 for expansion of small unmanned
surface vessel production;
(31) $1,800,000,000 for expansion of medium unmanned
surface vessel production;
(32) $1,300,000,000 for expansion of unmanned
underwater vehicle production;
(33) $188,360,000 for the development and testing of
maritime robotic autonomous systems and enabling
technologies;
(34) $174,000,000 for the development of a Test
Resource Management Center robotic autonomous systems
proving ground;
(35) $250,000,000 for the development, production,
and integration of wave-powered unmanned underwater
vehicles;
(36) $2,100,000,000 for San Antonio-class Amphibious
Transport Dock (LPD); and
(37) $3,700,000,000 for America-class Amphibious
Assault Ship (LHA).

SEC. 20003. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES FOR
INTEGRATED AIR AND MISSILE DEFENSE.

(a) Next Generation Missile Defense Technologies.--In
addition to amounts otherwise available, there are appropriated
to the Secretary of Defense for fiscal year 2025, out of any
money in the Treasury not otherwise appropriated, to remain
available until September 30, 2029--
(1) $183,000,000 for Missile Defense Agency special
programs;
(2) $250,000,000 for development and testing of
directed energy capabilities by the Under Secretary for
Research and Engineering;
(3) $300,000,000 for classified military space
superiority programs run by the Strategic Capabilities
Office;
(4) $500,000,000 for national security space launch
infrastructure;
(5) $2,000,000,000 for air moving target indicator
military satellites;
(6) $400,000,000 for expansion of Multi-Service
Advanced Capability Hypersonic Test Bed program;
(7) $5,600,000,000 for development of space-based and
boost phase intercept capabilities;
(8) $2,400,000,000 for the development of military
non-kinetic missile defense effects; and
(9) $7,200,000,000 for the development, procurement,
and integration of military space-based sensors.
(b) Layered Homeland Defense.--In addition to amounts
otherwise available, there are appropriated to the Secretary of
Defense for fiscal year 2025, out of any money in the Treasury
not otherwise appropriated, to remain available until September
30, 2029--
(1) $2,200,000,000 for acceleration of hypersonic
defense systems;
(2) $800,000,000 for accelerated development and
deployment of next-generation intercontinental
ballistic missile defense systems;
(3) $408,000,000 for Army space and strategic missile
test range infrastructure restoration and modernization
in the United States Indo-Pacific Command area of
operations west of the international dateline;
(4) $1,975,000,000 for improved ground-based missile
defense radars; and
(5) $530,000,000 for the design and construction of
Missile Defense Agency missile instrumentation range
safety ship.

SEC. 20004. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES FOR
MUNITIONS AND DEFENSE SUPPLY CHAIN RESILIENCY.

(a) Appropriations.--In addition to amounts otherwise
available, there are appropriated to the Secretary of Defense
for fiscal year 2025, out of any money in the Treasury not
otherwise appropriated, to remain available until September 30,
2029--
(1) $400,000,000 for the development, production, and
integration of Navy and Air Force long-range anti-ship
missiles;
(2) $380,000,000 for production capacity expansion
for Navy and Air Force long-range anti-ship missiles;
(3) $490,000,000 for the development, production, and
integration of Navy and Air Force long-range air-to-
surface missiles;
(4) $94,000,000 for the development, production, and
integration of alternative Navy and Air Force long-
range air-to-surface missiles;
(5) $630,000,000 for the development, production, and
integration of long-range Navy air defense and anti-
ship missiles;
(6) $688,000,000 for the development, production, and
integration of long-range multi-service cruise
missiles;
(7) $250,000,000 for production capacity expansion
and supplier base strengthening of long-range multi-
service cruise missiles;
(8) $70,000,000 for the development, production, and
integration of short-range Navy and Marine Corps anti-
ship missiles;
(9) $100,000,000 for the development of an anti-ship
seeker for short-range Army ballistic missiles;
(10) $175,000,000 for production capacity expansion
for next-generation Army medium-range ballistic
missiles;
(11) $50,000,000 for the mitigation of diminishing
manufacturing sources for medium-range air-to-air
missiles;
(12) $250,000,000 for the procurement of medium-range
air-to-air missiles;
(13) $225,000,000 for the expansion of production
capacity for medium-range air-to-air missiles;
(14) $50,000,000 for the development of second
sources for components of short-range air-to-air
missiles;
(15) $325,000,000 for production capacity
improvements for air-launched anti-radiation missiles;
(16) $50,000,000 for the accelerated development of
Army next-generation medium-range anti-ship ballistic
missiles;
(17) $114,000,000 for the production of Army next-
generation medium-range ballistic missiles;
(18) $300,000,000 for the production of Army medium-
range ballistic missiles;
(19) $85,000,000 for the accelerated development of
Army long-range ballistic missiles;
(20) $400,000,000 for the production of heavyweight
torpedoes;
(21) $200,000,000 for the development, procurement,
and integration of commercial heavyweight torpedoes;
(22) $70,000,000 for the improvement of heavyweight
torpedo maintenance activities;
(23) $200,000,000 for the production of lightweight
torpedoes;
(24) $500,000,000 for the development, procurement,
and integration of maritime mines;
(25) $50,000,000 for the development, procurement,
and integration of new underwater explosives;
(26) $55,000,000 for the development, procurement,
and integration of lightweight multi-mission torpedoes;
(27) $80,000,000 for the production of sonobuoys;
(28) $150,000,000 for the development, procurement,
and integration of air-delivered long-range maritime
mines;
(29) $61,000,000 for the acceleration of Navy
expeditionary loitering munitions deployment;
(30) $50,000,000 for the acceleration of one-way
attack unmanned aerial systems with advanced autonomy;
(31) $1,000,000,000 for the expansion of the one-way
attack unmanned aerial systems industrial base;
(32) $3,500,000,000 for grants made pursuant to the
Industrial Base Fund established under section 4817 of
title 10, United States Code;
(33) $1,000,000,000 for grants and purchase
commitments made pursuant to the Industrial Base Fund
established under section 4817 of title 10, United
States Code;
(34) $200,000,000 for investments in solid rocket
motor industrial base through the Industrial Base Fund
established under section 4817 of title 10, United
States Code;
(35) $400,000,000 for investments in the emerging
solid rocket motor industrial base through the
Industrial Base Fund established under section 4817 of
title 10, United States Code;
(36) $42,000,000 for investments in second sources
for large-diameter solid rocket motors for hypersonic
missiles;
(37) $1,000,000,000 for the creation of next-
generation automated munitions production factories;
(38) $170,000,000 for the development of advanced
radar depot for repair, testing, and production of
radar and electronic warfare systems;
(39) $25,000,000 for the expansion of the Department
of Defense industrial base policy analysis workforce;
(40) $30,300,000 for the repair of Army missiles;
(41) $100,000,000 for the production of small and
medium ammunition;
(42) $2,500,000,000 for additional activities to
improve the United States production of critical
minerals through the National Defense Stockpile,
authorized by subchapter III of chapter 5 of title 50,
United States Code;
(43) $10,000,000 for the expansion of the Department
of Defense armaments cooperation workforce;
(44) $250,000,000 for the expansion of the Defense
Exportability Features program;
(45) $250,000,000 for the development of new
armaments cooperation programs;
(46) $350,000,000 for production of Navy long-range
air and missile defense interceptors;
(47) $93,000,000 for replacement of Navy long-range
air and missile defense interceptors;
(48) $100,000,000 for development of a second solid
rocket motor source for Navy air defense and anti ship
missiles;
(49) $65,000,000 for expansion of production capacity
of Missile Defense Agency long-range anti-ballistic
missiles;
(50) $225,000,000 for expansion of production
capacity for Navy air defense and anti-ship missiles;
(51) $103,300,000 for expansion of depot level
maintenance facility for Navy long-range air and
missile defense interceptors;
(52) $18,000,000 for creation of domestic source for
guidance section of Navy short-range air defense
missiles;
(53) $65,000,000 for integration of Army medium-range
air and missile defense interceptor with Navy ships;
(54) $176,100,000 for production of Army long-range
movable missile defense radar;
(55) $100,000,000 for accelerated fielding of Army
short-range gun-based air and missile defense system;
(56) $40,000,000 for development of low-cost
alternatives to air and missile defense interceptors;
(57) $50,000,000 for acceleration of Army next-
generation shoulder-fired air defense system;
(58) $91,000,000 for production of Army next-
generation shoulder-fired air defense system;
(59) $500,000,000 for development, production, and
integration of counter-unmanned aerial systems
programs;
(60) $350,000,000 for development, production, and
integration of non-kinetic counter-unmanned aerial
systems programs;
(61) $250,000,000 for development, production, and
integration of land-based counter-unmanned aerial
systems programs;
(62) $200,000,000 for development, production, and
integration of ship-based counter-unmanned aerial
systems programs; and
(63) $400,000,000 for acceleration of hypersonic
strike programs.
(b) Appropriations.--In addition to amounts otherwise
available, there is appropriated to the Secretary of Defense,
out of any money in the Treasury not otherwise appropriated, to
remain available until September 30, 2029, $500,000,000 to the
``Department of Defense Credit Program Account'' to carry out
the capital assistance program, including loans, loan
guarantees, and technical assistance, established under section
149(e) of title 10, United States Code, for the development of
reliable sources of critical minerals: Provided, That--
(1) such amounts are available to subsidize gross
obligations for the principal amount of direct loans,
and total loan principal, any part of which is to be
guaranteed, not to exceed $100,000,000,000; and
(2) such amounts are available to cover all costs and
expenditures as provided under section 149(e)(5)(B) of
title 10, United States Code.

SEC. 20005. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES FOR SCALING
LOW-COST WEAPONS INTO PRODUCTION.

SEC. 20006. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES FOR
IMPROVING THE EFFICIENCY AND CYBERSECURITY OF THE
DEPARTMENT OF DEFENSE.

In addition to amounts otherwise available, there are
appropriated to the Secretary of Defense for fiscal year 2025,
out of any money in the Treasury not otherwise appropriated, to
remain available until September 30, 2029--
(1) $150,000,000 for business systems replacement to
accelerate the audits of the financial statements of
the Department of Defense pursuant to chapter 9A and
section 2222 of title 10, United States Code;
(2) $200,000,000 for the deployment of automation and
artificial intelligence to accelerate the audits of the
financial statements of the Department of Defense
pursuant to chapter 9A and section 2222 of title 10,
United States Code;
(3) $10,000,000 for the improvement of the budgetary
and programmatic infrastructure of the Office of the
Secretary of Defense; and
(4) $20,000,000 for defense cybersecurity programs of
the Defense Advanced Research Projects Agency.

SEC. 20007. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES FOR AIR
SUPERIORITY.

In addition to amounts otherwise available, there are
appropriated to the Secretary of Defense for fiscal year 2025,
out of any money in the Treasury not otherwise appropriated, to
remain available until September 30, 2029--
(1) $3,150,000,000 to increase F-15EX aircraft
production;
(2) $361,220,000 to prevent the retirement of F-22
aircraft;
(3) $127,460,000 to prevent the retirement of F-15E
aircraft;
(4) $50,000,000 to accelerate installation of F-16
electronic warfare capability;
(5) $116,000,000 for C-17A Mobility Aircraft
Connectivity;
(6) $84,000,000 for KC-135 Mobility Aircraft
Connectivity;
(7) $440,000,000 to increase C-130J production;
(8) $474,000,000 to increase EA-37B production;
(9) $300,000,000 for Air Force classified programs;
(10) $678,000,000 to accelerate the Collaborative
Combat Aircraft program;
(11) $400,000,000 to accelerate production of the F-
47 aircraft;
(12) $230,000,000 for Navy classified programs;
(13) $500,000,000 accelerate the FA/XX aircraft;
(14) $100,000,000 for production of Advanced Aerial
Sensors;
(15) $160,000,000 to accelerate V-22 nacelle
improvement; and
(16) $100,000,000 to accelerate production of MQ-25
aircraft.

SEC. 20008. ENHANCEMENT OF RESOURCES FOR NUCLEAR FORCES.

(a) DOD Appropriations.--In addition to amounts otherwise
available, there are appropriated to the Secretary of Defense
for fiscal year 2025, out of any money in the Treasury not
otherwise appropriated, to remain available until September 30,
2029--
(1) $1,500,000,000 for risk reduction activities for
the Sentinel intercontinental ballistic missile
program;
(2) $4,500,000,000 for acceleration of the B-21 long-
range bomber aircraft;
(3) $500,000,000 for improvements to the Minuteman
III intercontinental ballistic missile system;
(4) $100,000,000 for capability enhancements to
intercontinental ballistic missile reentry vehicles;
(5) $148,000,000 for the expansion of D5 missile
motor production;
(6) $400,000,000 to accelerate the development of
Trident D5LE2 submarine-launched ballistic missiles;
(7) $2,000,000,000 to accelerate the development,
procurement, and integration of the nuclear-armed sea-
launched cruise missile;
(8) $62,000,000 to convert Ohio-class submarine tubes
to accept additional missiles;
(9) $22,000,000 to enhance nuclear deterrence through
classified programs;
(10) $168,000,000 to accelerate the production of the
Survivable Airborne Operations Center program;
(11) $65,000,000 to accelerate the modernization of
nuclear command, control, and communications; and
(12) $210,300,000 for the increased production of MH-
139 helicopters.
(b) NNSA Appropriations.--In addition to amounts otherwise
available, there are appropriated to the Administrator of the
National Nuclear Security Administration for fiscal year 2025,
out of any money in the Treasury not otherwise appropriated, to
remain available until September 30, 2029--
(1) $200,000,000 to perform National Nuclear Security
Administration Phase 1 studies pursuant to section 3211
of the National Nuclear Security Administration Act (50
U.S.C. 2401);
(2) $540,000,000 to address deferred maintenance and
repair needs of the National Nuclear Security
Administration pursuant to section 3211 of the National
Nuclear Security Administration Act (50 U.S.C. 2401);
(3) $1,000,000,000 to accelerate the construction of
National Nuclear Security Administration facilities
pursuant to section 3211 of the National Nuclear
Security Administration Act (50 U.S.C. 2401);
(4) $400,000,000 to accelerate the development,
procurement, and integration of the warhead for the
nuclear-armed sea-launched cruise missile pursuant to
section 3211 of the National Nuclear Security
Administration Act (50 U.S.C. 2401);
(5) $500,000,000 to accelerate primary capability
modernization pursuant to section 3211 of the National
Nuclear Security Administration Act (50 U.S.C. 2401);
(6) $500,000,000 to accelerate secondary capability
modernization pursuant to section 3211 of the National
Nuclear Security Administration Act (50 U.S.C. 2401);
and
(7) $100,000,000 to accelerate domestic uranium
enrichment centrifuge deployment for defense purposes
pursuant to section 3211 of the National Nuclear
Security Administration Act (50 U.S.C. 2401).

SEC. 20009. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES TO IMPROVE
CAPABILITIES OF UNITED STATES INDO-PACIFIC COMMAND.

In addition to amounts otherwise available, there are
appropriated to the Secretary of Defense for fiscal year 2025,
out of any money in the Treasury not otherwise appropriated, to
remain available until September 30, 2029--
(1) $365,000,000 for Army exercises and operations in
the Western Pacific area of operations;
(2) $53,000,000 for Special Operations Command
exercises and operations in the Western Pacific area of
operations;
(3) $47,000,000 for Marine Corps exercises and
operations in Western Pacific area of operations;
(4) $90,000,000 for Air Force exercises and
operations in Western Pacific area of operations;
(5) $532,600,000 for the Pacific Air Force biennial
large-scale exercise;
(6) $19,000,000 for the development of naval small
craft capabilities;
(7) $35,000,000 for military additive manufacturing
capabilities in the United States Indo-Pacific Command
area of operations west of the international dateline;
(8) $450,000,000 for the development of airfields
within the area of operations of United States Indo-
Pacific Command;
(9) $1,100,000,000 for development of infrastructure
within the area of operations of United States Indo-
Pacific Command;
(10) $124,000,000 for mission networks for United
States Indo-Pacific Command;
(11) $100,000,000 for Air Force regionally based
cluster pre-position base kits;
(12) $25,000,000 to explore the revitalization of
existing Arctic naval infrastructure;
(13) $90,000,000 for the accelerated development of
non-kinetic capabilities;
(14) $20,000,000 for military exercises with Taiwan;
(15) $23,000,000 for anti-submarine sonar arrays;
(16) $30,000,000 for intelligence, surveillance, and
reconnaissance capabilities for United States Africa
Command;
(17) $30,000,000 for intelligence, surveillance, and
reconnaissance capabilities for United States Indo-
Pacific Command;
(18) $400,000,000 for the development, coordination,
and deployment of economic competition effects within
the Department of Defense;
(19) $10,000,000 for the expansion of Department of
Defense workforce for economic competition;
(20) $1,000,000,000 for offensive cyber operations;
(21) $500,000,000 for the Joint Training Team;
(22) $300,000,000 for the procurement of mesh network
communications capabilities for Special Operations
Command Pacific;
(23) $850,000,000 for activities to protect United
States interests and deter Chinese Communist Party
aggression through provision of military support and
assistance to the military, central government security
forces, and central government security agencies of
Taiwan;
(24) $200,000,000 for acceleration of Guam Defense
System program;
(25) $4,029,000,000 for classified military space
superiority programs;
(26) $68,000,000 for Space Force facilities
improvements;
(27) $100,000,000 for ground moving target indicator
military satellites; and
(28) $528,000,000 for DARC and SILENTBARKER military
space situational awareness programs.

SEC. 20010. ENHANCEMENT OF DEPARTMENT OF DEFENSE RESOURCES FOR
IMPROVING THE READINESS OF THE ARMED FORCES.

SEC. 20011. IMPROVING DEPARTMENT OF DEFENSE BORDER SUPPORT AND COUNTER-
DRUG MISSIONS.

In addition to amounts otherwise available, there are
appropriated to the Secretary of Defense for fiscal year 2025,
out of any money in the Treasury not otherwise appropriated, to
remain available until September 30, 2029, $5,000,000,000 for
activities in support of border operations, including
deployment of military personnel, operations and maintenance,
counter-narcotics and counter-transnational criminal
organization mission support, the operation of and construction
in national defense areas, the temporary detention of migrants
on Department of Defense installations, and the repatriation of
persons in support of law enforcement activities, pursuant to
sections 272, 277, 284, and 2672 of title 10, United States
Code.

SEC. 20012. ENHANCEMENT OF MILITARY INTELLIGENCE PROGRAMS.

SEC. 20013. DEPARTMENT OF DEFENSE OVERSIGHT.

(a) Office of the Secretary of Defense.--In addition to
amounts otherwise available, there is appropriated to the
Inspector General of the Department of Defense for fiscal year
2025, out of any money in the Treasury not otherwise
appropriated, $10,000,000, to remain available through
September 30, 2029, to carry out this section.
(b) Oversight of Programs.--The Inspector General shall
monitor Department of Defense activities for which funding is
appropriated in this title, including--
(1) programs with mutual technological dependencies;
(2) programs with related data management and data
ownership considerations;
(3) programs particularly vulnerable to supply chain
disruptions and long lead time components; and
(4) programs involving classified matters.
(c) Classified Matters.--Not later than 30 days after the
date of the enactment of this title, the Chairs of the
Committees on Armed Services of the Senate and House of
Representatives shall jointly transmit to the Department of
Defense a classified memorandum regarding amounts made
available in this title related to classified matters.

SEC. 20014. MILITARY CONSTRUCTION PROJECTS AUTHORIZED.

(a) Authorization of Appropriations.--Funds are hereby
authorized to be appropriated for military construction, land
acquisition, and military family housing functions of each
military department (as defined in section 101(a) of title 10,
United States Code) as specified in this title.
(b) Spending Plan.--Not later than 30 days after the date of
the enactment of this title, the Secretary of each military
department shall submit to the congressional defense committees
(as defined in section 101(a) of title 10, United States Code)
a detailed spending plan by project for all funds made
available by this title to be expended on military construction
projects.

SEC. 20015. PLAN REQUIRED.

(a) In General.--Not later than 45 days after the date of the
enactment of this title, the Secretary of Defense shall submit
to the Committees on Armed Services of the Senate and the House
of Representatives a spending, expenditure, or operating plan
for amounts made available pursuant to this title. Such plan
shall include the same level of detail as required for the
report submitted under section 8007 of division A of the
Further Consolidated Appropriations Act, 2024 (Public Law 118-
47; 138 Stat. 482).
(b) Expenditure Report.--Not later than one year after the
date of enactment of this title, and annually thereafter, the
Secretary shall submit to the Committees on Armed Services of
the Senate and the House of Representative a report that
includes a description of any expenditures made pursuant to the
plan required under subsection (a).

SEC. 20016. LIMITATION ON AVAILABILITY OF FUNDS.

The funds made available under this title may not be used to
enter into any agreement under which any payment of such funds
could be outlaid or disbursed after September 30, 2034.

TITLE III--COMMITTEE ON EDUCATION AND WORKFORCE

Subtitle A--Student Eligibility

SEC. 30001. STUDENT ELIGIBILITY.

(a) In General.--Section 484(a)(5) of the Higher Education
Act of 1965 (20 U.S.C. 1091(a)(5)) is amended to read as
follows:
``(5) be--
``(A) a citizen or national of the United
States;
``(B) an alien who is lawfully admitted for
permanent residence under the Immigration and
Nationality Act (8 U.S.C. 1101 et seq.);
``(C) an alien who--
``(i) is a citizen or national of the
Republic of Cuba;
``(ii) is the beneficiary of an
approved petition under section 203(a)
of the Immigration and Nationality Act
(8 U.S.C. 1153(a));
``(iii) meets all eligibility
requirements for an immigrant visa but
for whom such a visa is not immediately
available;
``(iv) is not otherwise inadmissible
under section 212(a) of such Act (8
U.S.C. 8 U.S.C. 1182(a)); and
``(v) is physically present in the
United States pursuant to a grant of
parole in furtherance of the commitment
of the United States to the minimum
level of annual legal migration of
Cuban nationals to the United States
specified in the U.S.-Cuba Joint
Communique on Migration, done at New
York September 9, 1994, and reaffirmed
in the Cuba-United States: Joint
Statement on Normalization of
Migration, Building on the Agreement of
September 9, 1994, done at New York May
2, 1995;
``(D) an alien described in section 401(a) of
the Additional Ukraine Supplemental
Appropriations Act, 2022 (Public Law 117-128; 8
U.S.C. 1101 note);
``(E) an alien described in section 2502(a)
of the Afghanistan Supplemental Appropriations
Act, 2022 (division C of Public Law 117-43; 8
U.S.C. 1101 note); or
``(F) an individual who lawfully resides in
the United States in accordance with a Compact
of Free Association referred to in section
402(b)(2)(G) of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (8
U.S.C. 1612(b)(2)(G)); and''.
(b) Effective Date and Application.--The amendment made by
subsection (a) shall take effect on July 1, 2025, and shall
apply with respect to award year 2025-2026 and each subsequent
award year, as determined under the Higher Education Act of
1965.

SEC. 30002. AMOUNT OF NEED; COST OF ATTENDANCE; MEDIAN COST OF COLLEGE.

(a) Amount of Need.--Section 471 of the Higher Education Act
of 1965 (20 U.S.C. 1087kk) is amended by amending paragraph (1)
to read as follows:
``(1)(A) for award year 2025-2026, the cost of
attendance of such student; or
``(B) for award year 2026-2027, and each subsequent
award year, the median cost of college of the program
of study of such student, minus''.
(b) Cost of Attendance of a Program of Study.--
(1) Determination of cost of attendance of a program
of study.--
(A) In general.--Section 472(a) of the Higher
Education Act of 1965 (20 U.S.C. 1087ll(a)) is
amended--
(i) in paragraph (1), by striking
``carrying the same academic workload''
and inserting ``enrolled in the same
program of study'';
(ii) in paragraph (2), by striking
``same course of study'' and inserting
``same program of study''; and
(iii) in paragraph (14), by striking
``program'' and inserting ``program of
study''.
(B) Effective date.--The amendments made by
subparagraph (A) shall take effect on July 1,
2026, and shall apply with respect to award
year 2026-2027 and each subsequent award year,
as determined under the Higher Education Act of
1965.
(2) Disclosure.--Section 472(c) of the Higher
Education Act of 1965 (20 U.S.C. 1087ll(c)) is
amended--
(A) by inserting ``of each program of study
at the institution'' after ``cost of
attendance''; and
(B) by striking ``of the institution'' and
inserting ``of such programs of study at the
institution''.
(c) Determination of Median Cost of College.--Part F of title
IV of the Higher Education Act of 1965 (20 U.S.C. 1087kk) is
amended by inserting after section 472 (as so amended), the
following:

``SEC. 472A. DETERMINATION OF MEDIAN COST OF COLLEGE.

``(a) In General.--For the purpose of this title, the term
`median cost of college', when used with respect to a program
of study, offered by one or more institutions of higher
education for an award year, means the median of the cost of
attendance of the program of study (as determined under section
472) across all institutions of higher education offering such
a program of study for the preceding award year.
``(b) Program of Study Defined.--In this section and section
472, and part D:
``(1) In general.--The term `program of study'--
``(A) means an eligible program at an
institution of higher education that is
classified by a combination of--
``(i) one or more CIP codes; and
``(ii) one credential level,
determined by the credential awarded
upon completion of the program; and
``(B) does not include a program of study
abroad.
``(2) CIP code.--The term `CIP code' means the six-
digit taxonomic identification code assigned by an
institution of higher education to a specific program
of study at the institution, determined by the
institution of higher education in accordance with the
Classification of Instructional Programs published by
the National Center for Education Statistics.
``(3) Credential level.--
``(A) In general.--The term `credential
level' means the level of the degree or other
credential awarded by an institution of higher
education to students who complete a program of
study of the institution. Each degree or other
credential awarded by an institution shall be
categorized by the institution as either
undergraduate credential level or graduate
credential level.
``(B) Undergraduate credential.--When used
with respect to a credential or credential
level, the term `undergraduate credential'
includes credentials such as an undergraduate
certificate, an associate degree, a bachelor's
degree, and a post-baccalaureate certificate
(including the coursework specified in
paragraphs (3)(B) and (4)(B) of section
484(b)).
``(C) Graduate credential.--When used with
respect to a credential or credential level,
the term `graduate credential' includes
credentials such as a master's degree, a
doctoral degree, a professional degree, and a
postgraduate certificate.''.
(d) Exemption of Certain Assets.--
(1) In general.--Section 480(f)(2) of the Higher
Education Act of 1965 (20 U.S.C. 1087vv(f)(2)) is
amended--
(A) by striking ``net value of the'' and
inserting the following: ``net value of--
``(A) the'';
(B) by striking the period at the end and
inserting a semicolon; and
(C) by adding at the end the following:
``(B) a family farm on which the family
resides; or
``(C) a small business with not more than 100
full-time or full-time equivalent employees (or
any part of such a small business) that is
owned and controlled by the family.''.
(2) Effective date.--The amendments made by paragraph
(1) shall take effect on July 1, 2026, and shall apply
with respect to award year 2026-2027 and each
subsequent award year, as determined under the Higher
Education Act of 1965.

Subtitle B--Loan Limits

SEC. 30011. LOAN LIMITS.

(a) Terminations of and Restrictions on Loan Authority.--
(1) Termination of authority to make subsidized loans
to undergraduate students.--Section 455(a)(3) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(a)(3)) is
amended by adding at the end the following:
``(C) Termination of authority to make
subsidized loans to undergraduate students.--
Notwithstanding any provision of this part or
part B, except as provided in paragraph (4),
for any period of instruction beginning on or
after July 1, 2026--
``(i) an undergraduate student shall
not be eligible to receive a Federal
Direct Stafford loan under this part;
and
``(ii) the maximum annual amount of
Federal Direct Unsubsidized Stafford
loans such a student may borrow in any
academic year (as defined in section
481(a)(2)) or its equivalent shall be
the maximum annual amount for such
student determined under paragraph
(5)).''.
(2) Termination of authority to make federal direct
plus loans to any student borrower.--Section 455(a)(3)
of the Higher Education Act of 1965 (20 U.S.C.
1087e(a)(3)) is further amended by adding at the end
the following:
``(D) Termination of authority to make
federal direct plus loans to any student
borrower.--Notwithstanding any provision of
this part or part B, except as provided in
paragraph (4), for any period of instruction
beginning on or after July 1, 2026, a graduate
student or professional student shall not be
eligible to receive a Federal Direct PLUS Loan
under this part.''.
(3) Restriction on authority to make federal direct
plus loans to any parent borrower.--Section 455(a)(3)
of the Higher Education Act of 1965 (20 U.S.C.
1087e(a)(3)) is further amended by adding at the end
the following:
``(E) Restriction on authority to make
federal direct plus loans to any parent
borrower.--
``(i) In general.--Notwithstanding
any provision of this part or part B,
except as provided in clause (ii) and
paragraph (4), for any period of
instruction beginning on or after July
1, 2026, a parent, on behalf of a
dependent student, shall not be
eligible to receive a Federal Direct
PLUS Loan under this part.
``(ii) Exception.--A parent may
receive a Federal Direct PLUS Loan
under this part, on behalf of a
dependent student, in any academic year
(as defined in section 481(a)(2)) or
its equivalent if--
``(I) such student borrows
the maximum annual amount of
Federal Direct Unsubsidized
Stafford loans such student may
borrow in such academic year;
and
``(II) such maximum annual
amount is less than the cost of
attendance of the program of
study of such student.''.
(4) Conforming amendments.--Section 455(a)(3) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(a)(3)) is
further amended--
(A) in the paragraph heading, by striking
``Termination of authority to make interest
subsidized loans to graduate and professional
students'' and inserting ``Terminations of and
restrictions on loan authority'';
(B) in subparagraph (A)--
(i) in the heading, by striking ``In
general'' and inserting ``Termination
of authority to make subsidized loans
to graduate and professional
students'';
(ii) in the matter preceding clause
(i), by striking ``beginning on or
after July 1, 2012'';
(iii) in clause (i), by striking ``a
graduate'' and inserting ``beginning on
or after July 1, 2012, a graduate'';
and
(iv) in clause (ii), by striking
``the maximum annual amount of
Federal'' and inserting ``beginning on
or after July 1, 2012, and ending June
30, 2026, the maximum annual amount of
Federal''; and
(C) in subparagraph (B)--
(i) in the heading, by striking
``Exception'' and inserting ``Exception
for subsidized loans to individuals
enrolled in certain course work''.
(ii) by striking ``Subparagraph (A)''
and inserting ``For any period of
instruction beginning on or after July
1, 2012, and ending June 30, 2026,
subparagraph (A)''.
(b) Interim Rules for Enrolled Borrowers.--Section 455(a) of
the Higher Education Act of 1965 (20 U.S.C. 1087e(a)) is
amended by adding at the end the following:
``(4) Interim exception for certain students.--
``(A) Application of prior limits.--
Subparagraphs (C), (D), and (E) of paragraph
(3), and paragraphs (5) and (6), shall not
apply, during the expected time to credential
described in subparagraph (B), with respect to
an individual who, as of June 30, 2026--
``(i) is enrolled in a program of
study at an institution of higher
education; and
``(ii) has received a loan (or on
whose behalf a loan was made) under
this part for such program of study.
``(B) Expected time to credential.--For
purposes of this paragraph, the expected time
to credential of an individual shall be equal
to the lesser of--
``(i) three academic years; or
``(ii) the period determined by
calculating the difference between--
``(I) the program length (as
defined in section 420W) for
the program of study in which
the individual is enrolled; and
``(II) the period of such
program of study that such
individual has completed as of
the date of the determination
under this subparagraph.''.
(c) Loan Limits for Unsubsidized Loans and Certain Federal
Direct PLUS Loans.--
(1) Annual and aggregate unsubsidized loan limits.--
Section 455(a) of the Higher Education Act of 1965 (20
U.S.C. 1087e(a)) is further amended by adding at the
end the following:
``(5) Annual and aggregate unsubsidized loan
limits.--
``(A) Undergraduate students.--
``(i) Annual loan limits.--
Notwithstanding any provision of this
part or part B, subject to subparagraph
(C) and except as provided in paragraph
(4), beginning on July 1, 2026, the
maximum annual amount of Federal Direct
Unsubsidized Stafford loans that an
undergraduate student may borrow in any
academic year (as defined in section
481(a)(2)) or its equivalent shall be
the difference between--
``(I) the amount of the
median cost of college of the
program of study in which the
student is enrolled; and
``(II) the amount of the
Federal Pell Grant under
section 401 awarded to the
student for such academic year.
``(ii) Aggregate limits.--
Notwithstanding any provision of this
part or part B, except as provided in
paragraph (4), beginning on July 1,
2026, the maximum aggregate amount of
Federal Direct Unsubsidized Stafford
loans that a student may borrow for
programs of study that award an
undergraduate credential upon
completion of such a program shall be
$50,000.
``(B) Graduate and professional students.--
``(i) Annual limits.--Notwithstanding
any provision of this part or part B,
subject to subparagraph (C) and except
as provided in paragraph (4), beginning
on July 1, 2026, the maximum annual
amount of Federal Direct Unsubsidized
Stafford loans that a graduate student
or professional student may borrow in
any academic year (as defined in
section 481(a)(2)) or its equivalent
shall be the amount of the median cost
of college of the program of study in
which the student is enrolled.
``(ii) Aggregate limits.--
Notwithstanding any provision of this
part or part B, except as provided in
paragraph (4), beginning on July 1,
2026, the maximum aggregate amount of
Federal Direct Unsubsidized Stafford
loans that, in addition to the maximum
aggregate amount described in
subparagraph (A)(ii)--
``(I) a graduate student--
``(aa) who is not
(and has not been) a
professional student,
may borrow for programs
of study described in
subparagraph (D)(i)
shall be $100,000; or
``(bb) who is (or has
been) a professional
student, may borrow for
programs of study
described in
subparagraph (D)(i)
shall be an amount
equal to--
``(AA)
$150,000, minus
``(BB) the
amount such
student
borrowed for
programs of
study described
in subclauses
(I) and (II) of
subparagraph
(D)(ii); and
``(II) a professional
student--
``(aa) who is not
(and has not been) a
graduate student, may
borrow for programs of
study described in
subclauses (I) and (II)
of subparagraph (D)(ii)
shall be $150,000; or
``(bb) who is (or has
been) a graduate
student, may borrow for
programs of study
described in subclauses
(I) and (II) of
subparagraph (D)(ii)
shall be an amount
equal to--
``(AA)
$150,000, minus
``(BB) the
amount such
student
borrowed for
programs of
study described
in subparagraph
(D)(i).
``(C) Less than full-time enrollment.--In any
case where a student is enrolled in an program
of study of an institution of higher education
on less than a full-time basis during any
academic year, the amount of a loan that
student may borrow for an academic year (as
defined in section 481(a)(2)) or its equivalent
shall be reduced in direct proportion to the
degree to which that student is not so enrolled
on a full-time basis, rounded to the nearest
whole percentage point, as provided in a
schedule of reductions published by the
Secretary computed for purposes of this
paragraph.
``(D) Definition.--For purposes of this
subsection:
``(i) Graduate student.--The term
`graduate student' means a student
enrolled in a program of study that
awards a graduate credential (other
than a professional degree) upon
completion of the program.
``(ii) Professional student.--The
term `professional student' means a
student enrolled in a program of study
that--
``(I) awards a professional
degree upon completion of the
program; or
``(II) provides the training
described in part 141 of title
14, Code of Federal Regulations
(or any successor regulations).
``(iii) Undergraduate student.--The
term `undergraduate student' means a
student enrolled in a program of study
that awards an undergraduate credential
upon completion of the program.''.
(2) Annual and aggregate federal direct plus loans
limits for parent borrowers.--Section 455(a) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(a)) is
further amended by adding at the end the following:
``(6) Annual and aggregate federal direct plus loans
limits for parent borrowers.--
``(A) Annual limits.--Notwithstanding any
provision of this part or part B, subject to
paragraph (3)(E) and except as provided in
paragraph (4), beginning on July 1, 2026, the
maximum annual amount of Federal Direct PLUS
loans that a parent may borrow, on behalf of a
dependent student, in any academic year (as
defined in section 481(a)(2)) or its equivalent
shall be the amount equal to--
``(i) the cost of attendance of the
program of study of such student; minus
``(ii) the maximum annual amount of
Federal Direct Unsubsidized Stafford
loans such student may borrow in such
academic year.
``(B) Aggregate limits.--Notwithstanding any
provision of this part or part B, subject to
paragraph (3)(E) and except as provided in
paragraph (4), beginning on July 1, 2026, the
maximum aggregate amount of Federal Direct PLUS
loans that a parent may borrow shall be
$50,000, without regard to the number of
dependent students on behalf of whom such
parent borrows such a loan.''.
(3) Lifetime maximum aggregate amount for all
students.--Section 455(a) of the Higher Education Act
of 1965 (20 U.S.C. 1087e(a)) is further amended by
adding at the end the following:
``(7) Lifetime maximum aggregate amount for all
students.--Notwithstanding any provision of this part
or part B, except as provided in paragraph (4),
beginning on July 1, 2026, the maximum aggregate amount
of loans made, insured, or guaranteed under this title
that a student may borrow, and that a parent may borrow
on behalf of such student, shall be $200,000, without
regard to any amounts repaid, forgiven, canceled, or
otherwise discharged on any such loan.''.
(4) Institutionally determined limits.--Section
455(a) of the Higher Education Act of 1965 (20 U.S.C.
1087e(a)) is further amended by adding at the end the
following:
``(8) Institutionally determined limits.--
Notwithstanding the annual loan limits described in
subparagraphs (A)(i) and (B)(i) of paragraph (5) and
subparagraph (A) of paragraph (6), beginning on July 1,
2026, an institution of higher education (at the
discretion of a financial aid administrator at the
institution) may limit the total amount of loans made
under this part for a program of study for an academic
year (as defined in section 481(a)(2)) that a student
may borrow, and that a parent may borrow on behalf of
such student, as long as any such limit is applied
consistently to all students enrolled in such program
of study.''.

Subtitle C--Loan Repayment

SEC. 30021. LOAN REPAYMENT.

(a) Transition to Income-based Repayment Plans.--
(1) Authority to transition to income-based repayment
plans.--
(A) Authority to carry out transition.--
Beginning on the date of enactment of this
title, the Secretary of Education shall take
such steps as may be necessary to apply the
repayment plan under section 493C of the Higher
Education Act of 1965 (as amended by this
title) to the loans of each borrower who, on
the day before such date of enactment, is in a
repayment status in accordance with, or an
administrative forbearance associated with, an
income-contingent repayment plan authorized
under section 455(e) of the Higher Education
Act of 1965 (as in effect on the day before the
date of enactment of this title).
(B) Deadline for transition.--The Secretary
shall complete the application of the repayment
plan under section 493C to the loans described
in paragraph (1) as soon as practicable, but
not later than 9 months after the date of
enactment of this title.
(2) Limitation of regulatory authority.--The
Secretary may not establish, promulgate, issue, or
modify any regulations or guidance with respect to any
income-based repayment plan under the Higher Education
Act of 1965, except that the Secretary may--
(A) during the 270-day period after the date
of enactment of this title, issue an interim
final rule as necessary for the application of
the repayment plan under section 493C of such
Act of 1965 in accordance with paragraph (1);
(B) during the 270-day period after the date
of enactment of this title, issue an interim
final rule as necessary to implement the
amendments to such section 493C made by
subsection (f) of this title; and
(C) during the 18-month period after the date
of enactment of this title, issue an interim
final rule as necessary to implement the
income-based Repayment Assistance Program under
section 455(q) of such Act of 1965 (as added by
this title).
(3) Waiver of negotiated rulemaking.--Any guidance or
regulations issued or modified in accordance with
subparagraph (A) or (B) of paragraph (2) shall not be
subject to negotiated rulemaking requirements under
section 492 of the Higher Education Act of 1965 (20
U.S.C. 1098a).
(b) Repayment Plans.--Section 455(d) of the Higher Education
Act of 1965 (20 U.S.C. 1087e(d)) is amended--
(1) in paragraph (1)--
(A) in the matter preceding subparagraph (A),
by inserting ``before July 1, 2026, who has not
received a loan made under this part on or
after July 1, 2026,'' after ``made under this
part'';
(B) by amending subparagraph (D) to read as
follows:
``(D) beginning on July 1, 2026, the income-
based Repayment Assistance Plan under
subsection (q), provided that--
``(i) the borrower is required to pay
each outstanding loan of the borrower
made under this part under such
Repayment Assistance Plan;
``(ii) such Plan shall not be
available to borrowers with an excepted
loan (as defined in paragraph (7)); and
``(iii) the borrower may not change
the borrower's selection of the
Repayment Assistance Plan except in
accordance with paragraph (7)(C).'';
and
(C) in subparagraph (E)--
(i) by striking ``that enables
borrowers who have a partial financial
hardship to make a lower monthly
payment''; and
(ii) by striking ``a Federal Direct
Consolidation Loan, if the proceeds of
such loan were used to discharge the
liability on such Federal Direct PLUS
Loan or a loan under section 428B made
on behalf of a dependent student'' and
inserting ``an excepted Consolidation
Loan (as defined in section
493C(a)(2))'';
(2) in paragraph (5), by amending subparagraph (B) to
read as follows:
``(B) repay the loan pursuant to an income-
based repayment plan under subsection (q) or
section 493C, as applicable.''; and
(3) by adding at the end the following:
``(6) Termination and limitation of repayment
authority.--
``(A) Sunset of repayment plans available
before july 1, 2026.--Paragraphs (1) through
(4) of this subsection shall only apply to
loans made under this part before July 1, 2026.
``(B) Prohibitions.--The Secretary may not,
for any loan made under this part on or after
July 1, 2026--
``(i) authorize a borrower of such a
loan to repay such loan pursuant to a
repayment plan that is not described in
paragraph (7)(A); or
``(ii) carry out or modify a
repayment plan that is not described in
such paragraph.
``(7) Repayment plans for loans made on or after july
1, 2026.--
``(A) Design and selection.--Beginning on
July 1, 2026, the Secretary shall offer a
borrower of a loan made under this part on or
after such date (including such a borrower who
also has a loan made under this part before
such date) two plans for repayment of the
borrower's loans under this part, including
principal and interest on such loans. The
borrower shall be entitled to accelerate,
without penalty, repayment on such loans. The
borrower may choose--
``(i) a standard repayment plan--
``(I) with a fixed monthly
repayment amount paid over a
fixed period of time equal to
the applicable period
determined under subclause
(II); and
``(II) with the applicable
period of time for repayment
determined based on the total
outstanding principal of all
loans of the borrower made
under this part before, on, or
after July 1, 2026, at the time
the borrower is entering
repayment under such plan, as
follows--
``(aa) for a borrower
with total outstanding
principal of less than
$25,000, a period of 10
years;
``(bb) for a borrower
with total outstanding
principal of not less
than $25,000 and less
than $50,000, a period
of 15 years;
``(cc) for a borrower
with total outstanding
principal of not less
than $50,000 and less
than $100,000, a period
of 20 years; and
``(dd) for a borrower
with total outstanding
principal of $100,000
or more, a period of 25
years; or
``(ii) the income-based Repayment
Assistance Plan under subsection (q).
``(B) Selection by secretary.--If a borrower
of a loan made under this part on or after July
1, 2026, does not select a repayment plan
described in subparagraph (A), the Secretary
shall provide the borrower with the standard
repayment plan described in subparagraph
(A)(i).
``(C) Selection available for each new loan;
selection applies to all outstanding loans.--
Each time a borrower receives a loan made under
this part on or after July 1, 2026, the
borrower may select either the standard
repayment plan under subparagraph (A)(i) or the
Repayment Assistance Plan under subparagraph
(A)(ii), provided that the borrower is required
to pay each outstanding loan of the borrower
made under this part under such selected
repayment plan.
``(D) Permissible changes of repayment
plan.--
``(i) Changing from standard
repayment plan.--A borrower may change
the borrower's selection of the
standard repayment plan under
subparagraph (A)(i), or the Secretary's
selection of such plan for the borrower
under subparagraph (C), as the case may
be, to the Repayment Assistance Plan
under subparagraph (A)(ii) at any time.
``(ii) Limited change from repayment
assistance plan.--A borrower may not
change the borrower's selection of the
Repayment Assistance Plan under
subparagraph (A)(ii), except in
accordance with subparagraph (C).
``(E) Special rule for excepted loan
borrowers with loans made on or after july 1,
2026.--
``(i) Standard repayment plan
required.--Notwithstanding
subparagraphs (A) through (D),
beginning on July 1, 2026, the
Secretary shall require a borrower who
has an excepted loan and who has
received a loan made under this part on
or after such date to repay each
outstanding loan of the borrower made
under this part, including principal
and interest on such loans, under the
standard repayment plan under
subparagraph (A)(i). The borrower shall
be entitled to accelerate, without
penalty, repayment on such loans.
``(ii) Excepted loan defined.--For
the purposes of this paragraph, the
term `excepted loan' means a loan with
an outstanding balance that is--
``(I) a Federal Direct PLUS
Loan that is made on behalf of
a dependent student; or
``(II) a Federal Direct
Consolidation Loan, if the
proceeds of such loan were used
to the discharge the liability
on--
``(aa) an excepted
PLUS loan, as defined
in section 493C(a)(1);
or
``(bb) an excepted
consolidation loan (as
such term is defined in
section 493C(a)(2)(A),
notwithstanding
subparagraph (B) of
such section).
``(F) Treatment of borrowers without loans
made on or after july 1, 2026.--A borrower who
has an outstanding loan (including an excepted
loan) made under this part before July 1, 2026,
and who has not received a loan made under this
part on or after July 1, 2026, shall not be
eligible to change the borrower's selection of
a repayment plan to the standard repayment plan
under subparagraph (A)(i).''.
(c) Elimination of Authority to Provide Income Contingent
Repayment Plans.--
(1) Repeal.--Subsection (e) of section 455 the Higher
Education Act of 1965 (20 U.S.C. 1087e(e)) is repealed.
(2) Further amendments to eliminate income contingent
repayment.--
(A) Section 428 of the Higher Education Act
of 1965 (20 U.S.C. 1078) is amended--
(i) in subsection (b)(1)(D), by
striking ``be subject to income
contingent repayment in accordance with
subsection (m)'' and inserting ``be
subject to income-based repayment in
accordance with subsection (m)''; and
(ii) in subsection (m)--
(I) in the subsection
heading, by striking ``Income
Contingent and'';
(II) by amending paragraph
(1) to read as follows:
``(1) Authority of secretary to require.--The
Secretary may require borrowers who have defaulted on
loans made under this part that are assigned to the
Secretary under subsection (c)(8) to repay those loans
pursuant to an income-based repayment plan under
section 455(q) or section 493C, as applicable.''; and
(III) in the heading of
paragraph (2), by striking
``income contingent or''.
(B) Section 428C of the Higher Education Act
of 1965 (20 U.S.C. 1078-3) is amended--
(i) in subsection
(a)(3)(B)(i)(V)(aa), by striking ``for
the purposes of obtaining income
contingent repayment or income-based
repayment'' and inserting ``for the
purposes of qualifying for an income-
based repayment plan under section
455(q) or section 493C, as
applicable'';
(ii) in subsection (b)(5), by
striking ``be repaid either pursuant to
income contingent repayment under part
D of this title, pursuant to income-
based repayment under section 493C, or
pursuant to any other repayment
provision under this section'' and
inserting ``be repaid pursuant to an
income-based repayment plan under
section 493C or any other repayment
provision under this section''; and
(iii) in subsection (c)--
(I) in paragraph (2)(A), by
striking ``or by the terms of
repayment pursuant to income
contingent repayment offered by
the Secretary under subsection
(b)(5)'' and inserting ``or by
the terms of repayment pursuant
to an income-based repayment
plan under section 493C''; and
(II) in paragraph (3)(B), by
striking ``except as required
by the terms of repayment
pursuant to income contingent
repayment offered by the
Secretary under subsection
(b)(5)'' and inserting ``except
as required by the terms of
repayment pursuant to an
income-based repayment plan
under section 493C''.
(C) Section 485(d)(1) of the Higher Education
Act of 1965 (20 U.S.C. 1092(d)(1)) is amended
by striking ``income-contingent and''.
(D) Section 494(a)(2) of the Higher Education
Act of 1965 (20 U.S.C. 1098h(a)(2)) is
amended--
(i) in the paragraph heading, by
striking ``Income-contingent and
income-based'' and inserting ``Income-
based'';
(ii) in subparagraph (A)--
(I) in the matter preceding
clause (i), by striking
``income-contingent or''; and
(II) in clause (ii)(I), by
inserting ``(as in effect on
the day before the date of
repeal of subsection (e) of
section 455)'' after ``section
455(e)(8)''.
(d) Repayment Assistance Plan.--Section 455 of the Higher
Education Act of 1965 (20 U.S.C. 1087e) is amended by adding at
the end the following new subsection:
``(q) Repayment Assistance Plan.--
``(1) In general.--Notwithstanding any other
provision of this Act, beginning on July 1, 2026, the
Secretary shall carry out an income-based repayment
plan (to be known as the `Repayment Assistance Plan'),
that shall have the following terms and conditions:
``(A) The total monthly repayment amount owed
by a borrower for all of the loans of the
borrower that are repaid pursuant to the
Repayment Assistance Plan shall be equal to the
applicable monthly payment of a borrower
calculated under paragraph (3)(B), except that
the borrower may not be precluded from repaying
an amount that exceeds such amount for any
month.
``(B) The Secretary shall apply the
borrower's applicable monthly payment under
this paragraph first toward interest due on
each such loan, next toward any fees due on
each loan, and then toward the principal of
each loan.
``(C) Any principal due and not paid under
subparagraph (B) or paragraph (2)(B) shall be
deferred.
``(D) A borrower who is not in a period of
deferment or forbearance shall make an
applicable monthly payment for each month until
the earlier of--
``(i) the date on which the
outstanding balance of principal and
interest due on all of the loans of the
borrower that are repaid pursuant to
the Repayment Assistance Plan is $0; or
``(ii) the date on which the borrower
has made 360 qualifying monthly
payments.
``(E) The Secretary shall repay or cancel any
outstanding balance of principal and interest
due on a loan made under this part to a
borrower--
``(i) who, for any period of time,
participated in the Repayment
Assistance Plan under this subsection;
``(ii) whose most recent payment for
such loan prior to the loan
cancellation under this subparagraph
was made under such Repayment
Assistance Plan; and
``(iii) who has made 360 qualifying
monthly payments on such loan.
``(F) For the purposes of this subsection,
the term `qualifying monthly payment' means any
of the following:
``(i) An on-time applicable monthly
payment under this subsection.
``(ii) An on-time monthly payment
under the standard repayment plan under
subsection (d)(7)(A)(i) of not less
than the monthly payment required under
such plan.
``(iii) A monthly payment under any
repayment plan of not less than the
monthly payment that would be required
under a standard repayment plan under
section 455(d)(1)(A) with a repayment
period of 10 years.
``(iv) A monthly payment under
section 493C of not less than the
monthly payment required under such
section, including a monthly payment
equal to the minimum payment amount
permitted under such section.
``(v) A monthly payment made before
the date of enactment of this
subsection under an income-contingent
repayment plan carried out under
section 455(d)(1)(D) (or under an
alternative repayment plan in lieu of
repayment under such an income-
contingent repayment plan, if placed in
such an alternative repayment plan by
the Secretary) of not less than the
monthly payment required under such a
plan, including a monthly payment equal
to the minimum payment amount permitted
under such a plan.
``(vi) A month when the borrower did
not make a payment because the borrower
was in deferment due to an economic
hardship described in section 435(o).
``(vii) A month that ended before the
date of enactment of this subsection
when the borrower did not make a
payment because the borrower was in a
period deferment or forbearance
described in section 685.209(k)(4)(iv)
of title 34, Code of Federal
Regulations (as in effect on the date
of enactment of this subsection).
``(G) With respect to carrying out section
494(a)(2) for the Repayment Assistance Plan, an
individual may elect to opt out of the
disclosures required under section
494(a)(2)(A)(ii) in accordance with the
procedures established under section
493C(c)(2)(B).
``(2) Balance assistance for distressed borrowers.--
``(A) Interest subsidy.--With respect to a
borrower of a loan made under this part, for
each month for which such a borrower makes an
on-time applicable monthly payment required
under paragraph (1)(A) and such monthly payment
is insufficient to pay the total amount of
interest that accrues for the month on all
loans of the borrower repaid pursuant to the
Repayment Assistance Plan under this
subsection, the amount of interest accrued and
not paid for the month shall not be charged to
the borrower.
``(B) Matching principal payment.--With
respect to a borrower of a loan made under this
part and not in a period of deferment or
forbearance, for each month for which a
borrower makes an on-time applicable monthly
payment required under paragraph (1)(A) and
such monthly payment reduces the total
outstanding principal balance of all loans of
the borrower repaid pursuant to the Repayment
Assistance Plan under this subsection by less
than $50, the Secretary shall reduce such total
outstanding principal balance of the borrower
by an amount that is equal to--
``(i) the amount that is the lesser
of--
``(I) $50; or
``(II) the total amount paid
by the borrower for such month
pursuant to paragraph (1)(A),
minus
``(ii) the total amount paid by the
borrower for such month pursuant to
paragraph (1)(A) that is applied to
such total outstanding principal
balance.
``(3) Definitions.--In this paragraph:
``(A) Adjusted gross income.--The term
`adjusted gross income', when used with respect
to a borrower, means the adjusted gross income
(as such term is defined in section 62 of the
Internal Revenue Code of 1986) of the borrower
(and the borrower's spouse, as applicable) for
the most recent taxable year, except that, in
the case of a married borrower who files a
separate Federal income tax return, the term
does not include the adjusted gross income of
the borrower's spouse.
``(B) Applicable monthly payment.--
``(i) In general.--Except as provided
in clause (ii) or (iii), the term
`applicable monthly payment' means,
when used with respect to a borrower,
the amount equal to--
``(I) the applicable base
payment of the borrower,
divided by 12; minus
``(II) $50 for each dependent
child of the borrower.
``(ii) Minimum amount.--In the case
of a borrower with an applicable
monthly payment amount calculated under
clause (i) that is less than $10, the
applicable monthly payment of the
borrower shall be $10.
``(iii) Final payment.--In the case
of a borrower whose total outstanding
balance of principal and interest on
all of the loans of the borrower that
are repaid pursuant to the Repayment
Assistance Plan is less than the
applicable monthly payment calculated
pursuant to clause (i) or (ii), as
applicable, then the applicable monthly
payment of the borrower shall be the
total outstanding balance of principal
and interest on all such loans.
``(iv) Base payment.--The amount of
the applicable base payment for a
borrower with an adjusted gross income
of--
``(I) not more than $10,000,
is $120;
``(II) more than $10,000 and
not more than $20,000, is 1
percent of such adjusted gross
income;
``(III) more than $20,000 and
not more than $30,000, is 2
percent of such adjusted gross
income;
``(IV) more than $30,000 and
not more than $40,000, is 3
percent of such adjusted gross
income;
``(V) more than $40,000 and
not more than $50,000, is 4
percent of such adjusted gross
income;
``(VI) more than $50,000 and
not more than $60,000, is 5
percent of such adjusted gross
income;
``(VII) more than $60,000 and
not more than $70,000, is 6
percent of such adjusted gross
income;
``(VIII) more than $70,000
and not more than $80,000, is 7
percent of such adjusted gross
income;
``(IX) more than $80,000 and
not more than $90,000, is 8
percent of such adjusted gross
income;
``(X) more than $90,000 and
not more than $100,000, is 9
percent of such adjusted gross
income; and
``(XI) more than $100,000, is
10 percent of such adjusted
gross income.
``(v) Dependent child of the
borrower.--For the purposes of this
paragraph, the term `dependent child of
the borrower' means an individual who--
``(I) is under 17 years of
age; and
``(II) is the borrower's
dependent child or another
person who lives with and
receives more than one-half of
their support from the
borrower.''.
(e) Federal Consolidation Loans.--Section 455(g) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(g)) is amended by
adding at the end the following new paragraph:
``(3) Consolidation loans made on or after july 1,
2026.--Notwithstanding subsections (b)(5), (c)(2), and
(c)(3)(A) and (B) of section 428C, a Federal Direct
Consolidation Loan offered to a borrower under this
part on or after July 1, 2026, may only be repaid
pursuant to a repayment plan described in subsection
(d)(7)(A)(i) or (ii) of this section, as applicable,
and the repayment schedule of such a Consolidation Loan
shall be determined in accordance with such repayment
plan.''.
(f) Income-based Repayment.--
(1) Amendments.--
(A) Excepted consolidation loan defined.--
Section 493C(a)(2) of the Higher Education Act
of 1965 (20 U.S.C. 1098e(a)(2)) is amended to
read as follows:
``(2) Excepted consolidation loan.--
``(A) In general.--The term `excepted
consolidation loan' means--
``(i) a consolidation loan under
section 428C, or a Federal Direct
Consolidation Loan, if the proceeds of
such loan were used to the discharge
the liability on an excepted PLUS loan;
or
``(ii) a consolidation loan under
section 428C, or a Federal Direct
Consolidation Loan, if the proceeds of
such loan were used to discharge the
liability on a consolidation loan under
section 428C or a Federal Direct
Consolidation Loan described in clause
(i).
``(B) Exclusion.--The term `excepted
consolidation loan' does not include a Federal
Direct Consolidation Loan described in
subparagraph (A) that (on the day before the
date of enactment of this subparagraph) was
being repaid pursuant to the Income-Contingent
Repayment (ICR) plan in accordance with section
685.209(a) of title 34, Code of Federal
Regulations (as in effect on June 30, 2023).''.
(B) Terms of income-based repayment.--Section
493C(b) of the Higher Education Act of 1965 (20
U.S.C. 1098e(b)) is amended--
(i) by amending paragraph (1) to read
as follows:
``(1) a borrower of any loan made, insured, or
guaranteed under part B or D (other than an excepted
PLUS loan or excepted consolidation loan), may elect to
have the borrower's aggregate monthly payment for all
such loans not exceed the result described in
subsection (a)(3)(B) divided by 12;'';
(ii) in paragraph (3)--
(I) in subparagraph (B)--
(aa) in clause (i)--
(AA) by
striking
subclause (II);
and
(BB) by
striking ``the
borrower'' and
all the follows
through
``ends'' and
inserting ``the
borrower
ends''; and
(bb) in clause (ii)--
(AA) by
striking
subclause (II);
(BB) by
striking ``the
borrower'' and
all the follows
through
``ends'' and
inserting ``the
borrower
ends''; and
(CC) by
striking ``or''
at the end;
(iii) by repealing paragraph (6);
(iv) in paragraph (7)(B)--
(I) in the matter preceding
clause (i), by striking ``for a
period of time prescribed by
the Secretary, not to exceed 25
years'' and inserting the
following: ``for 25 years (in
the case of a borrower who is
repaying at least one loan for
a program of study for which a
graduate credential (as defined
in section 472A)) is awarded,
or, for 20 years (in the case
of a borrower who is not
repaying at least one such
loan)'';
(II) in clause (i), by
inserting ``(as such paragraph
was in effect on the day before
the date of the repeal of
paragraph (6))'' after
``paragraph (6)''; and
(III) in clause (iv), by
inserting ``(as such section
was in effect on the day before
the date of the repeal of
paragraph (6))'' after
``section 455(d)(1)(D)''; and
(v) in paragraph (8), by striking
``standard repayment plan'' and
inserting ``standard repayment plan
under section 428(b)(9)(A)(i) or
455(d)(1)(A), or the Repayment
Assistance Program under section
455(q)''.
(C) Eligibility determinations.--Section
493C(c)(2) of the Higher Education Act of 1965
(20 U.S.C. 1098e(c)(2)) is further amended--
(i) in subparagraph (A), by inserting
``(as in effect on the day before the
date of repeal of subsection (e) of
section 455)'' after ``section
455(e)(1)''; and
(ii) in subparagraph (B), by
inserting ``(as in effect on the day
before the date of repeal of subsection
(e) of section 455)'' after ``section
455(e)(8)''.
(D) Termination of special terms for new
borrowers on and after july 1, 2014.--Section
493C of the Higher Education Act of 1965 (20
U.S.C. 1098e(e)) is further amended by striking
subsection (e).
(2) Effective date and application.--The amendments
made by this subsection shall take effect on the date
of enactment of this title, and shall apply with
respect to any borrower who is in repayment before, on,
or after the date of enactment of this title.

SEC. 30022. DEFERMENT; FORBEARANCE.

(a) Heading Amendment.--Section 455(f) of the Higher
Education Act of 1965 (20 U.S.C. 1087e(f)) is amended by
striking the subsection heading and inserting the following:
``Deferment; Forbearance''.
(b) Sunset of Economic Hardship and Unemployment
Deferments.--Section 455(f) of the Higher Education Act of 1965
(20 U.S.C.1087e(f)) is amended--
(1) in paragraph (2)--
(A) in subparagraph (B), by striking ``not
in'' and inserting ``subject to paragraph (7),
not in''; and
(B) in subparagraph (D), by striking ``not
in'' and inserting ``subject to paragraph (7),
not in''; and
(2) by adding at the end the following:
``(7) Sunset of unemployment and economic hardship
deferments.--A borrower who receives a loan made under
this part on or after July 1, 2025, shall not be
eligible to defer such loan under subparagraph (B) or
(D) of paragraph (2).''.
(c) Forbearance on Loans Made Under This Part on or After
July 1, 2025.--Section 455(f) of the Higher Education Act of
1965 (20 U.S.C. 1087e(f)) is amended by adding at the end the
following:
``(8) Forbearance on loans made under this part on or
after july 1, 2025.--A borrower who receives a loan
made under this part on or after July 1, 2025--
``(A) may only be eligible for a forbearance
on such loan pursuant to section 428(c)(3)(B)
that does not exceed 9 months during any 24-
month period; and
``(B) in the case of a borrower who is
serving in a medical or dental internship or
residency program (as such program is described
in section 428(c)(3)(A)(i)(I)), may be eligible
for a forbearance on such loan pursuant to
428(c)(3)(A)(i)(I), during which--
``(i) for the first 4 12-month
intervals, interest shall not accrue;
and
``(ii) for any subsequent 12-month
interval, interest shall accrue.''.

SEC. 30023. LOAN REHABILITATION.

(a) Updating Loan Rehabilitation Limits.--
(1) FFEL and direct loans.--Section 428F(a)(5) of the
Higher Education Act of 1965 (20 U.S.C. 1078-6(a)(5))
is amended by striking ``one time'' and inserting ``two
times''.
(2) Perkins loans.--Section 464(h)(1)(D) of the
Higher Education Act of 1965 (20 U.S.C.
1087dd(h)(1)(D)) is amended by striking ``once'' and
inserting ``twice''.
(3) Effective date.--The amendments made by this
subsection shall take effect on the date of enactment
of this Act, and shall apply with respect to any loan
made, insured, or guaranteed under title IV of the
Higher Education Act of 1965 (20 U.S.C. 1070 et seq.).
(b) Minimum Monthly Payment Amount.--Section 428F(a)(1)(B) of
the Higher Education Act of 1965 (20 U.S.C. 1078-6(a)(1)(B)) is
amended by adding at the end the following: ``With respect a
loan made under part D on or after July 1, 2025, a monthly
payment amount described in subparagraph (A) may not be less
than $10.''.

SEC. 30024. PUBLIC SERVICE LOAN FORGIVENESS.

(a) Repayment Assistance Plan.--Section 455(m)(1)(A) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(m)(1)(A)) is
amended--
(1) in clause (iii), by striking ``; or'' and
inserting a semicolon;
(2) in clause (iv), by striking ``; and'' and
inserting ``(as in effect on the day before the date of
the repeal of subsection (e) of this section); or'';
and
(3) by adding at the end the following new clause:
``(v) on-time payments under the
Repayment Assistance Plan under section
455(q); and''.
(b) Public Service Job.--Section 455(m)(3)(B) of the Higher
Education Act of 1965 (20 U.S.C. 1087e(m)(3)(B)) is amended--
(1) by redesignating clauses (i) and (ii) as
subclauses (I) and (II), respectively, and adjusting
the margins accordingly;
(2) by striking ``The term'' and inserting the
following:
``(i) In general.--The term''; and
(3) by adding at the end the following:
``(ii) Exclusion.--The term `public
service job' does not include time
served in a medical or dental
internship or residency program (as
such program is described in section
428(c)(3)(A)(i)(I)) by an individual
who, as of June 30, 2025, has not
borrowed a Federal Direct PLUS Loan or
a Federal Direct Unsubsidized Stafford
Loan for a program of study that awards
a graduate credential upon completion
of such program.''.

SEC. 30025. STUDENT LOAN SERVICING.

Paragraph (1) of section 458(a) of the Higher Education Act
of 1965 (20 U.S.C. 1087h(a)(1)) is amended to read as follows:
``(1) Additional mandatory funds for fiscal years
2025 and 2026.--For each of the fiscal years 2025 and
2026 there shall be available to the Secretary (in
addition to any other amounts appropriated under any
appropriations Act for administrative costs under this
part and part B and out of any money in the Treasury
not otherwise appropriated) funds to be obligated for
administrative costs under this part and part B,
including the costs of the direct student loan programs
under this part, not to exceed $500,000,000 in each
such fiscal year.''.

Subtitle D--Pell Grants

SEC. 30031. ELIGIBILITY.

(a) Foreign Income and Federal Pell Grant Eligibility.--
(1) Adjusted gross income defined.--Section
401(a)(2)(A) of the Higher Education Act of 1965 (20
U.S.C. 1070a(a)(2)(A)) is amended to read as follows:
``(A) the term `adjusted gross income'
means--
``(i) in the case of a dependent
student, for the second tax year
preceding the academic year--
``(I) the adjusted gross
income (as defined in section
62 of the Internal Revenue Code
of 1986) of the student's
parents; plus
``(II) the foreign income (as
described in section 480(b)(5))
of the student's parents; and
``(ii) in the case of an independent
student, for the second tax year
preceding the academic year--
``(I) the adjusted gross
income (as defined in section
62 of the Internal Revenue Code
of 1986) of the student (and
the student's spouse, if
applicable); plus
``(II) the foreign income (as
described in section 480(b)(5))
of the student (and the
student's spouse, if
applicable);''.
(2) Sunset.--Section 401(b)(1)(D) of the Higher
Education Act of 1965 (20 U.S.C. 1070a(b)(1)(D)) is
amended by striking ``A student'' and inserting ``For
each academic year beginning before July 1, 2025, a
student''.
(3) Conforming amendment.--Section 479A(b)(1)(B) of
the Higher Education Act of 1965 (20 U.S.C.
1087tt(b)(1)(B)) is amended--
(A) by striking clause (v); and
(B) by redesignating clauses (vi) and (vii)
as clauses (v) and (vi), respectively.
(b) Definition of Full Time Enrollment for Federal Pell Grant
Eligibility.--Section 401(a)(2) of the Higher Education Act of
1965 (20 U.S.C. 1070a(a)(2)) is further amended--
(1) in subparagraph (E), by striking ``and'' after
the semicolon;
(2) in subparagraph (F), by striking the period and
inserting ``; and''; and
(3) by adding at the end the following new
subparagraph:
``(G) notwithstanding section
481(a)(2)(A)(iii), the terms `full time' and
`full-time' (except with respect to subsection
(d)(4) when used as part of the term `normal
full-time workload') mean, with respect to a
student enrolled in an undergraduate course of
study, the student is expected to complete at
least 30 semester or trimester hours or 45
quarter credit hours (or the clock hour
equivalent) in each academic year a student is
enrolled in the course of study.''.
(c) Federal Pell Grant Ineligibility Due to a High Student
Aid Index.--Section 401(b)(1) of the Higher Education Act of
1965 (20 U.S.C. 1070a-1(b)(1)) is amended by adding at the end
the following:
``(F) Ineligibility of students with a high
student aid index.--Notwithstanding
subparagraphs (A) through (E), a student shall
not be eligible for a Federal Pell Grant under
this subsection for an academic year in which
the student has a student aid index that equals
or exceeds twice the amount of the total
maximum Federal Pell Grant for such academic
year.''.
(d) No Federal Pell Grant Eligibility for Students Enrolled
Less Than Half Time.--Section 401 of the Higher Education Act
of 1965 (20 U.S.C. 1070a) is further amended--
(1) in subsection (b)--
(A) by striking ``(2) Less'' and inserting
``(2)(A) Less''; and
(B) by inserting after subparagraph (A) (as
so designated by subparagraph (A) of this
subsection) the following new subparagraph:
``(B) Less than half-time enrollment.--
Notwithstanding subparagraph (A), a student who first
receives a Federal Pell Grant on or after July 1, 2025,
shall not be eligible for an award under this
subsection for any academic year beginning after such
date in which the student is enrolled in an eligible
program of an institution of higher education on less
than a half-time basis. The Secretary shall update the
schedule of reductions described in subparagraph (A) in
accordance with this subparagraph, including for
students receiving the minimum Federal Pell Grant.'';
(2) in subsection (c)(6)(A), by inserting ``, and the
eligibility requirement of enrollment on at least a
half-time basis under subsection (b)(2),'' after
``(b)(1)''; and
(3) in subsection (d)(5)(A), by inserting ``(and at
least half time, in the case of a student who first
receives a Federal Pell Grant under subsection (b) on
or after July 1, 2025)'' after ``full time''.
(e) Effective Date and Application.--The amendments made by
this section shall take effect on July 1, 2025, and shall apply
with respect to award year 2025-2026 and each subsequent award
year.

SEC. 30032. WORKFORCE PELL GRANTS.

(a) In General.--Section 401 of the Higher Education Act of
1965 (20 U.S.C. 1070a) is amended by adding at the end the
following:--
``(k) Workforce Pell Grant Program.--
``(1) In general.--For the award year beginning on
July 1, 2026, and each subsequent award year, the
Secretary shall award grants (to be known as `Workforce
Pell Grants') to eligible students under paragraph (2)
in accordance with this subsection.
``(2) Eligible students.--To be eligible to receive a
Workforce Pell Grant under this subsection for any
period of enrollment, a student shall meet the
eligibility requirements for a Federal Pell Grant under
this section, except that the student--
``(A) shall be enrolled, or accepted for
enrollment, in an eligible program under
section 481(b)(3) (hereinafter referred to as
an `eligible workforce program'); and
``(B) may not--
``(i) be enrolled, or accepted for
enrollment, in a program of study that
leads to a graduate credential; or
``(ii) have attained such a
credential.
``(3) Terms and conditions of awards.--The Secretary
shall award Workforce Pell Grants under this subsection
in the same manner and with the same terms and
conditions as the Secretary awards Federal Pell Grants
under this section, except that--
``(A) each use of the term `eligible program'
(except in subsections (b)(9)(A) and (d)(2))
shall be substituted by `eligible workforce
program under section 481(b)(3)'; and
``(B) a student who is eligible for a grant
equal to less than the amount of the minimum
Federal Pell Grant because the eligible
workforce program in which the student is
enrolled or accepted for enrollment is less
than an academic year (in hours of instruction
or weeks of duration) may still be eligible for
a Workforce Pell Grant in an amount that is
prorated based on the length of the program.
``(4) Prevention of double benefits.--No eligible
student described in paragraph (2) may concurrently
receive a grant under both this subsection and--
``(A) subsection (b); or
``(B) subsection (c).
``(5) Duration limit.--Any period of study covered by
a Workforce Pell Grant awarded under this subsection
shall be included in determining a student's duration
limit under subsection (d)(5).''.
(b) Program Eligibility for Workforce Pell Grants.--Section
481(b) of the Higher Education Act of 1965 (20 U.S.C. 1088(b))
is amended--
(1) by redesignating paragraphs (3) and (4) as
paragraphs (4) and (5), respectively; and
(2) by inserting after paragraph (2) the following:
``(3)(A) A program is an eligible program for purposes of the
Workforce Pell Grant program under section 401(k) only if--
``(i) it is a program of at least 150 clock hours of
instruction, but less than 600 clock hours of
instruction, or an equivalent number of credit hours,
offered by an eligible institution during a minimum of
8 weeks, but less than 15 weeks;
``(ii) it is not offered as a correspondence course,
as defined in 600.2 of title 34, Code of Federal
Regulations (as in effect on September 20, 2020);
``(iii) the Governor of a State, after consultation
with the State board, determines that the program--
``(I) provides an education aligned with the
requirements of high-skill, high-wage (as
identified by the State pursuant to section 122
of the Carl D. Perkins Career and Technical
Education Act (20 U.S.C. 2342)), or in-demand
industry sectors or occupations;
``(II) meets the hiring requirements of
potential employers in the sectors or
occupations described in subclause (I);
``(III) either--
``(aa) leads to a recognized
postsecondary credential that is
stackable and portable across more than
one employer; or
``(bb) with respect to students
enrolled in the program--
``(AA) prepares such students
for employment in an occupation
for which there is only one
recognized postsecondary
credential; and
``(BB) provides such students
with such a credential upon
completion of such program; and
``(IV) prepares students to pursue 1 or more
certificate or degree programs at 1 or more
institutions of higher education (which may
include the eligible institution providing the
program), including by ensuring--
``(aa) that a student, upon
completion of the program and
enrollment in such a related
certificate or degree program, will
receive academic credit for the
Workforce Pell program that will be
accepted toward meeting such
certificate or degree program
requirements; and
``(bb) the acceptability of such
credit toward meeting such certificate
or degree program requirements; and
``(iv) after the Governor of such State makes the
determination that the program meets the requirements
under clause (iii), the Secretary determines that--
``(I) the program has been offered by the
eligible institution for not less than 1 year
prior to the date on which the Secretary makes
a determination under this clause;
``(II) for each award year, the program has a
verified completion rate of at least 70
percent, within 150 percent of the normal time
for completion;
``(III) for each award year, the program has
a verified job placement rate of at least 70
percent, measured 180 days after completion;
and
``(IV) for each award year, the median value-
added earnings (as defined in section 420W) of
students who completed such program for the
most recent year for which data is available
exceeds the median total price (as defined in
section 454(d)(3)(D)) charged to students in
such award year.
``(B) In this paragraph:
``(i) The term `eligible institution' means
an institution of higher education (as defined
in section 102), or any other entity that has
entered into a program participation agreement
with the Secretary under section 487(a)
(without regard to whether that entity is
accredited by a national recognized accrediting
agency or association), which has not been
subject, during any of the preceding 3 years,
to--
``(I) any suspension, emergency
action, or termination under this
title;
``(II) in the case of an institution
of higher education, any adverse action
by the institution's accrediting agency
or association that revokes or denies
accreditation for the institution; or
``(III) any final action by the State
in which the institution or other
entity holds its legal domicile,
authorization, or accreditation that
revokes the institution's or entity's
license or other authority to operate
in such State.
``(ii) The term `Governor' means the chief
executive of a State.
``(iii) The terms `industry or sector
partnership', `in-demand industry sector or
occupation', `recognized postsecondary
credential', and `State board' have the
meanings given such terms in section 3 of the
Workforce Innovation and Opportunity Act.''.
(c) Student Eligibility.--Section 484(a)(1) of the Higher
Education Act of 1965 (20 U.S.C. 1091(a)(1)) is amended by
inserting ``or, for purposes of section 401(k), at an entity
(other than an institution of higher education) that meets the
requirements of section 481(b)(3)(B)(i)'' after ``section
487''.
(d) Effective Date; Applicability.--The amendments made by
this section shall take effect on July 1, 2026, and shall apply
with respect to award year 2026-2027 and each succeeding award
year.

SEC. 30033. PELL SHORTFALL.

Section 401(b)(7)(A) of the Higher Education Act of 1965 (20
U.S.C. 1070a(b)(7)(A)) is amended--
(1) in clause (iii)--
(A) by striking ``$2,170,000,000'' and
inserting ``$5,351,000,000''; and
(B) by striking ``and'' at the end;
(2) in clause (iv)--
(A) by striking ``$1,236,000,000'' and
inserting ``$6,058,000,000''; and
(B) by striking `` and each succeeding fiscal
year.'' and inserting a semicolon; and
(3) by adding at the end the following:
``(v) $3,743,000,000 for fiscal year
2028; and
``(vi) $1,236,000,000 for each
succeeding fiscal year.''.

Subtitle E--Accountability

SEC. 30041. AGREEMENTS WITH INSTITUTIONS.

Section 454 of the Higher Education Act of 1965 (20 U.S.C.
1087d) is amended--
(1) in subsection (a)--
(A) in paragraph (5), by striking ``and''
after the semicolon;
(B) by redesignating paragraph (6) as
paragraph (7); and
(C) by inserting after paragraph (5) the
following new paragraph:
``(6) provide annual reimbursements to the Secretary
in accordance with the requirements under subsection
(d); and''; and
(2) by adding at the end the following new
subsection:
``(d) Reimbursement Requirements.--
``(1) Annual reimbursements required.--Beginning in
award year 2028-2029, each institution of higher
education participating in the direct student loan
program under this part shall, for qualifying student
loans, remit to the Secretary, at such time as the
Secretary may specify, an annual reimbursement for each
student cohort of the institution, based on the non-
repayment balance of such cohort and calculated in
accordance with paragraph (3).
``(2) Student cohorts.--
``(A) Cohorts established.--For each
institution of higher education participating
in the direct student loan program under this
part, the Secretary shall establish student
cohorts, beginning with award year 2027-2028,
as follows:
``(i) Completing student cohort.--For
each program of study at such
institution, a student cohort comprised
of all students who received Federal
financial assistance under this title
and who completed such program during
such award year.
``(ii) Undergraduate non-completing
student cohort.--For such institution,
a student cohort comprised of all
students who received Federal financial
assistance under this title, who were
enrolled in the institution during the
previous award year in a program of
study leading to an undergraduate
credential, and who at the time the
cohort is established--
``(I) have not completed such
program of study; and
``(II) are not enrolled at
the institution in any program
of study leading to an
undergraduate credential.
``(iii) Graduate non-completing
student cohort.--For each program of
study leading to a graduate credential
at such institution, a student cohort
comprised of all students who received
Federal financial assistance under this
title, who were enrolled in such
program during the previous award year,
and who at the time the cohort is
established--
``(I) have not completed such
program of study; and
``(II) are not enrolled in
such program.
``(B) Qualifying student loan.--For the
purposes of this subsection, the term
`qualifying student loan' means a loan made
under this part on or after July 1, 2027,
that--
``(i) was made to a student included
in a student cohort of an institution
or to a parent on behalf of such a
student;
``(ii) except in the case of a loan
described in clause (i) or (ii) of
subparagraph (C), is not included in
any other student cohort of any
institution of higher education;
``(iii) is not in--
``(I) a medical or dental
internship or residency
forbearance described in
section 428(c)(3)(A)(i)(I),
section 428B(a)(2), section
428H(a), or section
685.205(a)(3) of title 34, Code
of Federal Regulations;
``(II) a graduate fellowship
deferment described in section
455(f)(2)(A)(ii);
``(III) rehabilitation
training program deferment
described under section
455(f)(2)(A)(ii);
``(IV) an in-school deferment
described under section
455(f)(2)(A)(i);
``(V) a cancer deferment
described under section
455(f)(3);
``(VI) a military service
deferment described under
section 455(f)(2)(C); or
``(VII) a post-active duty
student deferment described
under section 493D; and
``(iv) is not in default.
``(C) Special circumstances.--
``(i) Multiple credentials.--In the
case of a student who completes two or
more programs of study during the same
award year, each qualifying student
loan of the student shall be included
in the student cohort for each of such
program of study for such award year.
``(ii) Treatment of certain
consolidation loans.--A Federal Direct
Consolidation loan made under this
title shall not be considered a
qualifying student loan for a student
cohort for an award year if all of the
loans included in such consolidation
loan are attributable to another
student cohort.
``(iii) Consolidation after inclusion
in a student cohort.--If a qualifying
student loan is consolidated into a
consolidation loan under this title
after such qualifying student loan has
been included in a student cohort, the
percentage of the consolidation loan
that was attributable to such student
cohort at the time of consolidation
shall remain attributable to the
student cohort for the life of the
consolidation loan.
``(3) Calculation of reimbursement.--
``(A) Reimbursement payment formula.--For
each student cohort of an institution of higher
education established under this subsection,
the annual reimbursement for such cohort shall
be equal to--
``(i) the reimbursement percentage
for the cohort, determined in
accordance with subparagraph (B);
multiplied by
``(ii) the non-repayment balance for
the cohort for the award year,
determined in accordance with
subparagraph (C).
``(B) Reimbursement percentage.--The
reimbursement percentage of a student cohort of
an institution shall be determined by the
Secretary when the cohort is established, shall
remain constant for the life of the student
cohort, and shall be determined as follows:
``(i) Completing student cohorts.--
The reimbursement percentage of a
completing student cohort shall be
equal to the percentage determined by--
``(I) subtracting from one
the quotient of--
``(aa) the median
value-added earnings of
students who completed
such program of study
in the most recent
award year for which
such earnings data is
available; divided by
``(bb) the median
total price charged to
students included in
such cohort; and
``(II) multiplying the
difference determined under
subclause (I) by 100.
``(ii) Special circumstances for
completing student cohorts.--
``(I) High-risk cohorts.--
Notwithstanding clause (i), if
the median value-added earnings
of a completing student cohort
under clause (i)(I)(aa) is
negative, the reimbursement
percentage of the student
cohort shall be 100 percent.
``(II) Low-risk cohorts.--
Notwithstanding clause (i), if
the median value-added earnings
of a completing student cohort
under clause (i)(I)(aa) exceeds
the median total price of such
cohort under clause (i)(I)(bb),
the reimbursement percentage of
the student cohort shall be 0
percent.
``(iii) Non-completing student
cohorts.--The reimbursement percentage
of a non-completing student cohort
shall be determined based on the most
recent data available in the award year
in which the cohort is established,
and--
``(I) for an undergraduate
non-completing student cohort,
shall be equal to the
percentage of undergraduate
students who received Federal
financial assistance under this
title at such institution who--
``(aa) did not
complete an
undergraduate program
of study at the
institution within 150
percent of the program
length of such program;
or
``(bb) only in the
case of a two-year
institution, did not,
within 6 years after
first enrolling at the
two-year institution,
complete a program of
study at a four-year
institution for which a
bachelor's degree (or
substantially similar
credential) is awarded;
and
``(II) for a graduate non-
completing student cohort,
shall be equal to the
percentage of students who
received Federal financial
assistance under this title at
the institution for the
applicable graduate program of
study and who did not complete
such program of study within
150 percent of the program
length.
``(C) Non-repayment loan balance.--
``(i) In general.--For each award
year, the Secretary shall determine the
non-repayment loan balance for such
award year for each student cohort of
an institution of higher education by
calculating the sum of--
``(I) for loans in such
cohort, the difference between
the total amount of payments
due from all borrowers on such
loans during such year and the
total amount of payments made
by all such borrowers on such
loans during such year; plus
``(II) the total amount of
interest waived, paid, or
otherwise not charged by the
Secretary during such year
under the income-based
repayment plan described in
section 455(q); plus
``(III) the total amount of
principal and interest
forgiven, cancelled, waived,
discharged, repaid, or
otherwise reduced by the
Secretary under any act during
such year that is not included
in subclause (II) and was not
discharged or forgiven under
section 437(a), 428J, or
section 455(m).
``(ii) Special circumstances.--For
the purpose of calculating the non-
repayment loan balance of student
cohorts under this paragraph, the
Secretary shall--
``(I) for each qualifying
student loan in a student
cohort that is included in
another student cohort because
the student who borrowed such
loan completed two or more
programs of study during the
same award year, the sum of the
amounts described in subclauses
(I) through (III) of clause (i)
for such qualifying student
loan shall be divided equally
among each of the student
cohorts in which such loan is
included; and
``(II) for each consolidation
loan in a student cohort--
``(aa) determine the
percentage of the
outstanding principal
balance of the
consolidation loan
attributable to such
student cohort--
``(AA) at the
time of that
loan was
included in
such cohort, in
the case of a
loan
consolidated
before
inclusion in
such cohort; or
``(BB) at the
time of
consolidation,
in the case of
a loan
consolidated
after inclusion
in such cohort;
and
``(bb) include in the
calculations under
clause (i) for such
student cohort only the
percentage of the sum
of the amounts
described in subclauses
(I) through (III) of
clause (i) for the
consolidation loan for
such year that is equal
to the percentage of
the consolidation loan
determined under item
(aa).
``(D) Total price.--With respect to a student
who received Federal financial assistance under
this title and who completes a program of
study, the term `total price' means the total
amount, before Federal financial assistance
under this title was applied, a student was
required to pay to complete the program of
study. A student's total price shall be
calculated by the Secretary as the difference
between--
``(i) the total amount of tuition and
fees that were charged to such student
before the application of any Federal
financial assistance provided under
this title; minus
``(ii) the total amount of grants and
scholarships described in section
480(i) awarded to such student from
non-Federal sources for such program of
study.
``(4) Notification and remittance.--Beginning with
the first award year for which reimbursements are
required under this subsection, and for each succeeding
award year, the Secretary shall--
``(A) notify each institution of higher
education of the amounts and due dates of each
annual reimbursement calculated under paragraph
(3) for each student cohort of the institution
within 30 days of calculating such amounts; and
``(B) require the institution to remit such
payments within 90 days of such notification.
``(5) Penalty for late payments.--
``(A) Three-month delinquency.--If an
institution fails to remit to the Secretary a
reimbursement for a student cohort as required
under this subsection within 90 days of
receiving notification from the Secretary in
accordance with paragraph (4), the institution
shall pay to the Secretary, in addition to such
reimbursement, interest on such reimbursement
payment, at a rate that is the average rate
applicable to the loans in such student cohort.
``(B) Twelve-month delinquency.--If an
institution fails to remit to the Secretary a
reimbursement for a student cohort as required
under this subsection, plus interest owed in
under subparagraph (A), within 12 months of
receiving notification from the Secretary in
accordance with paragraph (4), the institution
shall be ineligible to make direct loans to any
student enrolled in the program of study for
which the institution has failed to make the
reimbursement payments until such payment is
made.
``(C) Eighteen-month delinquency.--If an
institution fails to remit to the Secretary a
reimbursement for a student cohort as required
under this subsection, plus interest owed under
subparagraph (A), within 18 months of receiving
notification from the Secretary in accordance
with paragraph (4), the institution shall be
ineligible to make direct loans or award
Federal Pell Grants under section 401 to any
student enrolled in the institution until such
payment is made.
``(D) Two-year delinquency.--If an
institution fails to remit to the Secretary a
reimbursement for a student cohort as required
under this subsection, plus interest owed under
subparagraph (A), within 2 years of receiving
notification from the Secretary in accordance
with paragraph (4), the institution shall be
ineligible to participate in any program under
this title for a period of not less than 10
years.
``(6) Relief for voluntary cessation of federal
direct loans for a program of study.--The Secretary
shall, upon the request of an institution that
voluntarily ceases to make Federal Direct loans to
students enrolled in a specific program of study,
reduce the amount of the annual reimbursement owed by
the institution for each student cohort associated with
such program by 50 percent if the institution assures
the Secretary that the institution will not make
Federal Direct loans to any student enrolled in such
program of study (or any substantially similar program
of study, as determined by the Secretary) for a period
of not less than 10 award years, beginning with the
first award year that begins after the date on which
the Secretary reduces such reimbursement.
``(7) Reservation of funds for promise grants.--
Notwithstanding any other provision of law, the
Secretary shall reserve the funds remitted to the
Secretary as reimbursements in accordance with this
subsection, and such funds shall be made available to
the Secretary only for the purpose of awarding PROMISE
grants in accordance with subpart 11 of part A of this
title.''.

SEC. 30042. CAMPUS-BASED AID PROGRAMS.

(a) Promise Grants.--Part A of title IV of the Higher
Education Act of 1965 (20 U.S.C. 1070c et seq.) is amended by
adding at the end the following:

``Subpart 11--Promoting Real Opportunities to Maximize Investments and
Savings in Education

``SEC. 420S. PROMISE GRANTS.

``For award year 2028-2029 and each succeeding award year,
from reserved funds remitted to the Secretary in accordance
with section 454(d) and additional funds made available under
section 420V, as necessary, the Secretary shall award PROMISE
grants to eligible institutions to carry out the activities
described in section 420U(c). PROMISE grants awarded under this
subpart shall be awarded on a noncompetitive basis to each
eligible institution that submits a satisfactory application
under section 420T for a 6-year period in an amount that is
determined in accordance with section 420U.

``SEC. 420T. ELIGIBLE INSTITUTIONS; APPLICATION.

``(a) Eligible Institution.--To be eligible for a PROMISE
grant under this subpart, an institution shall--
``(1) be an institution of higher education under
section 102, except that an institution described in
section 102(a)(1)(C) shall not be an eligible
institution under this subpart; and
``(2) meet the maximum total price guarantee
requirements under subsection (c).
``(b) Application.--An eligible institution seeking a PROMISE
grant under this subpart (including a renewal of such a grant)
shall submit to the Secretary an application, at such time as
the Secretary may require, containing the information required
under this subsection. Such application shall--
``(1) demonstrate that the institution--
``(A) meets the maximum total price guarantee
requirements under subsection (c); and
``(B) will continue to meet the maximum total
price guarantee requirements for each award
year during the grant period with respect to
students first enrolling at the institution for
each such award year;
``(2) describe how grant funds awarded under this
subpart will be used by the institution to carry out
activities related to--
``(A) increasing postsecondary affordability,
including--
``(i) the expansion and continuation
of the maximum total price guarantee
requirements under subsection (c); and
``(ii) any other activities to be
carried out by the institution to
increase postsecondary affordability
and minimize the maximum total price
for completion paid by students
receiving need-based student aid;
``(B) increasing postsecondary access, which
may include--
``(i) the activities described in
section 485E of this Act; and
``(ii) any other activities to be
carried out by the institution to
increase postsecondary access and
expand opportunities for low- and
middle-income students; and
``(C) increasing postsecondary student
success, which may include--
``(i) activities to improve
completion rates and reduce time to
credential;
``(ii) activities to align programs
of study with the needs of employers,
including with respect to in-demand
industry sectors or occupations (as
defined in section 3 of the Workforce
Innovation and Opportunity Act (29
U.S.C. 3102)); and
``(iii) any other activities to be
carried out by the institution to
increase value-added earnings and
postsecondary student success;
``(3) describe--
``(A) how the institution will evaluate the
effectiveness of the institution's use of grant
funds awarded under this subpart; and
``(B) how the institution will collect and
disseminate information on promising practices
developed with the use of such grant funds; and
``(4) in the case of an institution that has
previously received a grant under this subpart, contain
the evaluation required under paragraph (3) for each
previous grant.
``(c) Maximum Total Price Guarantee Requirements.--As a
condition of eligibility for a PROMISE grant under this
subpart, an institution shall--
``(1) for each award year beginning after the date of
enactment of this subpart, not later than 1 year before
the start of each such award year (except that, for the
first award year beginning after such date of
enactment, the institution shall meet these
requirements as soon as practicable after such date of
enactment), determine the maximum total price for
completion, in accordance with subsection (e), for each
program of study at the institution applicable to
students in each income category and student aid index
category (as determined by the Secretary) and publish
such information on the institution's website and in
the institution's catalog, marketing materials, or
other official publications;
``(2) for the award year for which the institution is
applying for a PROMISE grant, and at least 1 award year
preceding such award year, provide to each student who
first enrolls, or plans to enroll, in the institution
during the award year and who receives Federal
financial aid under this title a maximum total price
guarantee, in accordance with this section, for the
minimum guarantee period applicable to the student; and
``(3) provide to the Secretary an assurance that the
institution will continue to meet each of the maximum
total price guarantee requirements under this
subsection for students who first enroll, or plan to
enroll, in the institution during each award year
included in the grant period.
``(d) Duration of Minimum Guarantee Period.--
``(1) In general.--The minimum period during which a
student shall be provided a guarantee under subsection
(c) with respect to the maximum total price for
completion of a program of study at an institution
shall be the average, for the 3 most recent award years
for which data are available, of the median time to
credential of students who completed any undergraduate
program of study at the institution during each such
award year, except that such minimum guarantee period
shall not be less than the program length of the
program of study in which the student is enrolled.
``(2) Limitation.--An institution shall not be
required to provide a maximum total price guarantee
under subsection (c) to a student after the conclusion
of the 6-year period beginning on the first day on
which the student enrolled at such institution.
``(e) Determination of Maximum Total Price for Completion.--
``(1) In general.--For the purposes of subsection
(c), an institution shall determine, prior to the first
award year in which a student enrolls at the
institution, the maximum total price that may be
charged to the student for completion of a program of
study at the institution for the minimum guarantee
period applicable to a student, before application of
any Federal Pell Grants or other Federal financial aid
under this title. Such a maximum total price for
completion shall be determined for students in each
income category and student aid index category (as
determined by the Secretary). In determining the
maximum total price for completion to be charged to
each such category of students, the institution may
consider the ability of a category of students to pay
tuition and fees, but may not include in such
consideration any Federal Pell Grants or other Federal
financial aid awards that may be available to such
category of students under this title.
``(2) Multiple maximum total price guarantees.--In
the event that a student receives more than 1 maximum
total price guarantee because the student is included
in more than 1 category of students for which the
institution determines a maximum total price guarantee
amount for the purposes of subsection (c), the maximum
total price guarantee applicable to such student for
the purposes of this section shall be equal to the
lowest such guarantee amount.

``SEC. 420U. GRANT AMOUNTS; FLEXIBLE USE OF FUNDS.

``(a) Grant Amount Formula.--
``(1) Formula.--Subject to subsection (b) and section
420V(b), the amount of a PROMISE grant for an eligible
institution for each year of the grant period shall be
calculated by the Secretary annually and shall be equal
to the amount determined by multiplying--
``(A) the lesser of--
``(i) the difference determined by
subtracting one from the quotient of--
``(I) the average, for the 3
most recent award years for
which data are available, of
the median value-added earnings
for each such award year of
students who completed any
program of study of the
institution; divided by
``(II) the average, for the 3
most recent award years for
which data are available, of
the maximum total price for
completion determined under
section 420T(e) applicable for
each such award year to
students enrolled in the
institution in any program of
study who received financial
aid under this title; or
``(ii) the number two;
``(B) the average, for the 3 most recent
award years for which data are available, of
the total dollar amount of Federal Pell Grants
awarded to students enrolled in the institution
in each such award year; and
``(C) the average, for the 3 most recent
award years for which data are available, of
the percentage of low-income students who
received Federal financial assistance under
this title who were enrolled in the institution
in each such award year who--
``(i) completed a program of study at
the institution within 100 percent of
the program length of such program; or
``(ii) only in the case of a two-year
institution or a less than two-year
institution--
``(I) transfer to a four-year
institution; and
``(II) within 4 years after
first enrolling at the two-year
or less than two-year
institution, complete a program
of study at the four-year
institution for which a
bachelor's degree (or
substantially similar
credential) is awarded.
``(2) Definition of low-income.--In this section, the
term `low-income', when used with respect to a student,
means that the student's family income does not exceed
the maximum income in the lowest income category (as
determined by the Secretary).
``(b) Maximum Grant Amount.--Notwithstanding subsection (a),
the maximum amount an eligible institution may receive annually
for a grant under this subpart shall be the amount equal to--
``(1) the average, for the 3 most recent award years,
of the number of students enrolled in the institution
in an award year who receive Federal financial aid
under this title; multiplied by
``(2) $5,000.
``(c) Flexible Use of Funds.--A PROMISE grant awarded under
this subpart shall be used by an eligible institution to--
``(1) carry out activities included in the
institution's application for such grant related to
postsecondary affordability, access, and student
success;
``(2) evaluate the effectiveness of the activities
carried out with such grant in accordance with section
420T(b)(3)(A); and
``(3) collect and disseminate promising practices
related to the activities carried out with such grant,
in accordance with section 420T(b)(3)(B).

``SEC. 420V. AVAILABILITY OF FUNDS.

``(a) Used of Reserved Funds.--
``(1) Primary funds.--To carry out this subpart,
there shall be available to the Secretary any funds
remitted to the Secretary as reimbursements in
accordance with section 454(d) for any award year.
``(2) Secondary funds.--Beginning award year 2028-
2029, if the amounts made available to the Secretary
under paragraph (1) to carry out this subpart in any
award year are insufficient to fully fund the PROMISE
grants awarded under this subpart in such award year,
there shall be available to the Secretary, in addition
to such amounts, any funds returned to the Secretary
under section 484B in the previous award year.
``(b) Reduction of Grant Amount in Case of Insufficient
Funds.--
``(1) In general.--If the amounts made available to
the Secretary under subsection (a) to carry out this
subpart for an award year are not sufficient to provide
grants to each eligible institution in the amount
determined under section 420U for such award year, the
Secretary shall reduce each such grant amount by the
applicable percentage described in paragraph (2).
``(2) Applicable percentage.--The applicable
percentage described in this paragraph is the
percentage determined by dividing--
``(A) the amounts made available under
subsection (a) for the award year described in
paragraph (1); by
``(B) the total amount that would be
necessary to provide grants to all eligible
institutions in the amounts determined under
section 420U for such award year.

``SEC. 420W. DEFINITIONS.

``In this title:
``(1) Value-added earnings.--
``(A) In general.--With respect to a student
who received Federal financial aid under this
title and who completed a program of study
offered by an institution of higher education,
the term `value-added earnings' means--
``(i) the annual earnings of such
student measured during the applicable
earnings measurement period for such
program (as determined under
subparagraph (C)); minus
``(ii) in the case of a student who
completed a program of study that
awards--
``(I) an undergraduate
credential, 150 percent of the
poverty line applicable to a
single individual as determined
under section 673(2) of the
Community Services Block Grant
Act (42 U.S.C. 9902(2)) for
such year; or
``(II) a graduate credential,
300 percent of the poverty line
applicable to a single
individual as determined under
section 673(2) of the Community
Services Block Grant Act (42
U.S.C. 9902(2)) for such year.
``(B) Geographic adjustment.--
``(i) In general.--Except as provided
in clause (ii), the Secretary shall use
the geographic location of the
institution at which a student
completed a program of study to adjust
the value-added earnings of the student
calculated under subparagraph (A) by
dividing--
``(I) the difference between
clauses (i) and (ii) of such
subparagraph; by
``(II) the most recent
regional price parity index of
the Bureau of Economics
Analysis for the State or, as
applicable, metropolitan area
in which such institution is
located.
``(ii) Exception.--The value-added
earnings of a student calculated under
subparagraph (A) shall not be adjusted
based on geographic location in
accordance with clause (i) if such
student attended principally through
distance education.
``(C) Earnings measurement period.--
``(i) In general.--For the purpose of
calculating the value-added earnings of
a student, except as provided in clause
(ii), the annual earnings of a student
shall be measured--
``(I) in the case of a
program of study that awards an
undergraduate certificate, post
baccalaureate certificate, or
graduate certificate, 1 year
after the student completes
such program;
``(II) in the case of a
program of study that awards an
associate's degree or master's
degree, 2 years after the
student completes such program;
and
``(III) in the case of a
program of study that awards a
bachelor's degree, doctoral
degree, or professional degree,
4 years after the student
completes such program.
``(ii) Exception.--The Secretary may,
as the Secretary determines appropriate
based on the characteristics of a
program of study, extend an earnings
measurement period described in clause
(i) for a program of study that--
``(I) requires completion of
an additional educational
program after completion of the
program of study in order to
obtain a licensure associated
with the credential awarded for
such program of study; and
``(II) when combined with the
program length of such
additional educational program
for licensure, has a total
program length that exceeds the
relevant earnings measurement
period prescribed for such
program of study under clause
(i),
except that in no case shall the annual
earnings of a student be measured more
than 1 year after the student completes
such additional educational program.
``(2) Program length.--The term `program length'
means the minimum amount of time in weeks, months, or
years that is specified in the catalog, marketing
materials, or other official publications of an
institution of higher education for a full-time student
to complete the requirements for a specific program of
study.''.
(b) Institutional Refunds.--Section 484B of the Higher
Education Act of 1965 (20 U.S.C. 1091b) is amended by adding at
the end the following:
``(f) Reservation of Funds for PROMISE Grants.--
Notwithstanding any other provision of law, the Secretary shall
reserve the funds returned to the Secretary under this section
for 1 year after the return of such funds for the purpose of
awarding PROMISE grants in accordance with subpart 4 of part A
of this title.''.

Subtitle F--Regulatory Relief

SEC. 30051. REGULATORY RELIEF.

(a) 90/10 Rule.--Section 487 of the Higher Education Act of
1965 (20 U.S.C. 1094) is amended--
(1) in subsection (a), by repealing paragraph (24);
(2) by striking subsection (d); and
(3) by redesignating subsections (e) through (j) as
subsections (d) through (i), respectively.
(b) Gainful Employment.--The Higher Education Act of 1965 (20
U.S.C. 1001 et seq.) is amended--
(1) in section 101(b)(1), by striking ``gainful
employment in'';
(2) in section 102--
(A) in subsection (b)(1)(A)(i), by striking
``gainful employment in''; and
(B) in subsection (c)(1)(A), by striking
``gainful employment in''; and
(3) in section 481(b)(1)(A)(i), by striking ``gainful
employment in''.
(c) Other Repeals.--The following regulations (including any
supplement or revision to such regulations) are repealed and
shall have no legal effect:
(1) Closed school discharges.--Sections 674.33(g),
682.402(d), and 685.214 of title 34, Code of Federal
Regulations (relating to closed school discharges), as
added or amended by the final regulations published by
the Department of Education in the Federal Register on
November 1, 2022 (87 Fed. Reg. 65904 et seq.).
(2) Borrower defense to repayment.--Subpart D of part
685 of title 34, Code of Federal Regulations (relating
to borrower defense to repayment), as added or amended
by the final regulations published by the Department of
Education in the Federal Register on November 1, 2022
(87 Fed. Reg. 65904 et seq.).
(d) Effect of Repeal.--Any regulations repealed by subsection
(c) that were in effect on June 30, 2023, are restored and
revived as if the repeal of such regulations under such
subsection had not taken effect.
(e) Prohibition.--The Secretary of Education may not
implement any rule, regulation, policy, or executive action
specified in this section (or a substantially similar rule,
regulation, policy, or executive action) unless authority for
such implementation is explicitly provided in an Act of
Congress.

Subtitle G--Limitation on Authority

SEC. 30061. LIMITATION ON AUTHORITY OF THE SECRETARY TO PROPOSE OR
ISSUE REGULATIONS AND EXECUTIVE ACTIONS.

Part G of title IV of the Higher Education Act of 1965 (20
U.S.C. 1088 et seq.) is amended by inserting after section 492
the following:

``SEC. 492A. LIMITATION ON AUTHORITY OF THE SECRETARY TO PROPOSE OR
ISSUE REGULATIONS AND EXECUTIVE ACTIONS.

``(a) Draft Regulations.--Beginning on the date of enactment
of this section, a draft regulation implementing this title (as
described in section 492(b)(1)) that is determined by the
Secretary to be economically significant shall be subject to
the following requirements (regardless of whether negotiated
rulemaking occurs):
``(1) The Secretary shall determine whether the draft
regulation, if implemented, would result in an increase
in a subsidy cost.
``(2) If the Secretary determines under paragraph (1)
that the draft regulation would result in an increase
in a subsidy cost, then the Secretary may not take any
further action with respect to such regulation.
``(b) Proposed or Final Regulations and Executive Actions.--
Beginning on the date of enactment of this section, the
Secretary may not issue a proposed rule, final regulation, or
executive action implementing this title if the Secretary
determines that the rule, regulation, or executive action--
``(1) is economically significant; and
``(2) would result in an increase in a subsidy cost.
``(c) Relationship to Other Requirements.--The analyses
required under subsections (a) and (b) shall be in addition to
any other cost analysis required under law for a regulation
implementing this title, including any cost analysis that may
be required pursuant to Executive Order 12866 (58 Fed. Reg.
51735; relating to regulatory planning and review), Executive
Order 13563 (76 Fed. Reg. 3821; relating to improving
regulation and regulatory review), or any related or successor
orders.
``(d) Definition.--In this section, the term `economically
significant', when used with respect to a draft, proposed, or
final regulation or executive action, means that the regulation
or executive action is likely, as determined by the Secretary--
``(1) to have an annual effect on the economy of
$100,000,000 or more; or
``(2) to adversely affect in a material way the
economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or
communities.''.

TITLE IV--ENERGY AND COMMERCE

Subtitle A--Energy

SEC. 41001. RESCISSIONS RELATING TO CERTAIN INFLATION REDUCTION ACT
PROGRAMS.

(a) State-based Home Energy Efficiency Contractor Training
Grants.--The unobligated balance of any amounts made available
under subsection (a) of section 50123 of Public Law 117-169 (42
U.S.C. 18795b) is rescinded.
(b) Funding for Department of Energy Loan Programs Office.--
The unobligated balance of any amounts made available under
subsection (b) of section 50141 of Public Law 117-169 (136
Stat. 2042) is rescinded.
(c) Advanced Technology Vehicle Manufacturing.--The
unobligated balance of any amounts made available under
subsection (a) of section 50142 of Public Law 117-169 (136
Stat. 2044) is rescinded.
(d) Energy Infrastructure Reinvestment Financing.--The
unobligated balance of any amounts made available under
subsection (a) of section 50144 of Public Law 117-169 (136
Stat. 2044) is rescinded.
(e) Tribal Energy Loan Guarantee Program.--The unobligated
balance of any amounts made available under subsection (a) of
section 50145 of Public Law 117-169 (136 Stat. 2045) is
rescinded.
(f) Transmission Facility Financing.--The unobligated balance
of any amounts made available under subsection (a) of section
50151 of Public Law 117-169 (42 U.S.C. 18715) is rescinded.
(g) Grants to Facilitate the Siting of Interstate Electricity
Transmission Lines.--The unobligated balance of any amounts
made available under subsection (a) of section 50152 of Public
Law 117-169 (42 U.S.C. 18715a) is rescinded.
(h) Interregional and Offshore Wind Electricity Transmission
Planning, Modeling, and Analysis.--The unobligated balance of
any amounts made available under subsection (a) of section
50153 of Public Law 117-169 (42 U.S.C. 18715b) is rescinded.
(i) Advanced Industrial Facilities Deployment Program.--The
unobligated balance of any amounts made available under
subsection (a) of section 50161 of Public Law 117-169 (42
U.S.C. 17113a) is rescinded.

SEC. 41002. FERC CERTIFICATES AND FEES FOR CERTAIN ENERGY
INFRASTRUCTURE AT INTERNATIONAL BOUNDARIES OF THE
UNITED STATES.

(a) Definitions.--In this section:
(1) Certificate of crossing.--The term ``certificate
of crossing'' means a permit for the construction,
connection, operation, or maintenance of a cross-border
segment.
(2) Commission.--The term ``Commission'' means the
Federal Energy Regulatory Commission.
(3) Covered facility.--The term ``covered facility''
means--
(A) an oil, natural gas, hydrocarbon liquids,
refined petroleum products, hydrogen, or carbon
dioxide pipeline;
(B) a pipeline for the movement of any other
energy-related product; and
(C) an electric transmission facility.
(4) Cross-border segment.--The term ``cross-border
segment'' means a segment, as determined by the
Commission, of a covered facility that is located at an
international boundary between--
(A) the United States and Canada; or
(B) the United States and Mexico.
(5) Presidential permit.--The term ``Presidential
permit'' means a permit or other approval issued or
required by the President under or pursuant to any
provision of law, including under or pursuant to any
Executive order, with respect to the construction,
connection, operation, or maintenance of a cross-border
segment.
(b) Certificate of Crossing and Fee.--
(1) In general.--The Commission shall, upon payment
of a fee in the amount of $50,000 by a person
requesting a certificate of crossing, issue to such
person such certificate of crossing.
(2) Treatment of fee.--A fee paid under this
subsection shall not be considered a fee assessed under
section 3401 of the Omnibus Budget Reconciliation Act
of 1986 (42 U.S.C. 7178).
(c) Prohibition.--Except as provided in subsection (d), no
person may construct, connect, operate, or maintain a cross-
border segment for the import or export of oil, natural gas,
hydrocarbon liquids, refined petroleum products, hydrogen,
carbon dioxide, or other energy-related products, or for the
transmission of electricity, to or from Canada or Mexico
without obtaining a certificate of crossing from the Commission
under subsection (b) for the applicable construction,
connection, operation, or maintenance.
(d) Previously Authorized Facilities.--Subsection (c) shall
not apply to the construction, connection, operation, or
maintenance of a cross-border segment with respect to which a
Presidential permit that was issued before the date of
enactment of this Act applies and is in effect.

SEC. 41003. NATURAL GAS EXPORTS AND IMPORTS.

Section 3 of the Natural Gas Act (15 U.S.C. 717b) is amended
by adding at the end the following:
``(g) Charge for Exportation or Importation of Natural Gas.--
The Secretary of Energy shall, by rule, impose and collect, for
each application to export natural gas from the United States
to a foreign country with which there is not in effect a free
trade agreement requiring national treatment for trade in
natural gas, or to import natural gas from such a foreign
country, a nonrefundable charge of $1,000,000, and, for
purposes of subsection (a), the importation or exportation of
natural gas that is proposed in an application for which such a
nonrefundable charge was imposed and collected shall be deemed
to be in the public interest, and such an application shall be
granted without modification or delay.''.

SEC. 41004. FUNDING FOR DEPARTMENT OF ENERGY LOAN GUARANTEE EXPENSES.

In addition to amounts otherwise available, there is
appropriated to the Secretary of Energy, out of any money in
the Treasury not otherwise appropriated, $5,000,000, to remain
available for a period of five years for administrative
expenses associated with carrying out section 116 of the Alaska
Natural Gas Pipeline Act (15 U.S.C. 720n).

SEC. 41005. EXPEDITED PERMITTING.

The Natural Gas Act is amended by adding after section 15 (15
U.S.C. 717n) the following:

``SEC. 15A. EXPEDITED PERMITTING.

``(a) Definitions.--In this section:
``(1) Covered application.--The term `covered
application' means an application for an authorization
under section 3 or a certificate of public convenience
and necessity under section 7, as applicable, for
activities that include construction.
``(2) Federal authorization.--The term `Federal
authorization' has the meaning given such term in
section 15(a).
``(b) Expedited Review.--
``(1) Notification of election and payment of fee.--
Prior to submitting a covered application, an applicant
may elect to obtain an expedited review of all Federal
authorizations required for the approval of such
covered application by--
``(A) submitting to the Commission a written
notification--
``(i) of the election; and
``(ii) that identifies each Federal
authorization required for the approval
of the covered application and each
Federal, State, interstate, or Tribal
agency that will consider an aspect of
each such Federal authorization; and
``(B) making a payment to the Secretary of
the Treasury in an amount that is the lesser
of--
``(i) one percent of the expected
cost of the applicable construction, as
determined by the applicant; or
``(ii) $10,000,000 (adjusted for
inflation, as the Secretary of the
Treasury determines necessary).
``(2) Submission and review of applications.--
``(A) Application.--Not later than 60 days
after the date on which an applicant elects to
obtain an expedited review under paragraph (1),
the applicant shall submit to the Commission
the covered application for which such election
for an expedited review was made, which shall
include--
``(i) the scope of the applicable
activities, including capital
investment, siting, temporary
construction, and final workforce
numbers;
``(ii) the industrial sector of the
applicant, as classified by the North
American Industry Classification
System; and
``(iii) a list of the statutes and
regulations that are relevant to the
covered application.
``(B) Approval.--
``(i) Standard deadline.--Except as
provided in clause (ii), not later than
one year after the date on which an
applicant submits a covered application
pursuant to subparagraph (A)--
``(I) each Federal, State,
interstate, or Tribal agency
identified under paragraph
(1)(A)(ii) shall--
``(aa) review the
relevant Federal
authorization
identified under such
paragraph; and
``(bb) subject to any
conditions determined
by such agency to be
necessary to comply
with the requirements
of the Federal law
under which such
approval is required,
approve such Federal
authorization; and
``(II) the Commission shall--
``(aa) review the
covered application;
and
``(bb) subject to any
conditions determined
by the Commission to be
necessary to comply
with the requirements
of this Act, approve
the covered
application.
``(ii) Extended deadline.--
``(I) Extension.--With
respect to a covered
application submitted pursuant
to subparagraph (A), the
Commission may approve a
request by an agency identified
under paragraph (1)(A)(ii) for
an extension of the one-year
deadline imposed by clause (i)
of this subparagraph for a
period of 6 months if the
Commission receives consent
from the relevant applicant.
``(II) Applicability.--If the
Commission approves a request
for an extension under
subclause (I), such extension
shall apply to the applicable
covered application and the
Federal authorization for which
the extension was requested.
``(C) Effect of failure to meet deadline.--
``(i) Deemed approval.--Any covered
application submitted pursuant to
subparagraph (A), or Federal
authorization that is required with
respect to such covered application,
that is not approved by the applicable
deadline under subparagraph (B) shall
be deemed approved in perpetuity,
notwithstanding any procedural
requirements relating to such approval
under the Federal law under which such
approval was required (including any
requirements applicable to the
effective period of a Federal
authorization).
``(ii) Compliance.--A person carrying
out activities under a covered
application or Federal authorization
that has been deemed approved under
clause (i) shall comply with the
requirements of the Federal law under
which such approval was required (other
than with respect to any procedural
requirements relating to such approval,
including any requirements relating to
the effective period of the Federal
authorization).
``(c) Judicial Review.--
``(1) Reviewable claims.--
``(A) In general.--Notwithstanding any other
provision of law, no court shall have
jurisdiction to review a claim with respect to
the approval of a covered application or
Federal authorization under subparagraph (B) or
(C)(i) of subsection (b)(2), except for a claim
under chapter 7 of title 5, United States Code,
filed not later than 180 days after the date of
such approval by--
``(i) the applicant; or
``(ii) a person who has suffered, or
likely and imminently will suffer,
direct and irreparable economic harm
from the approval.
``(B) Claims by certain non-applicants.--An
association may only bring a claim on behalf of
one or more of its members pursuant to
subparagraph (A)(ii) if each member of the
association has suffered, or likely and
imminently will suffer, the harm described in
subparagraph (A)(ii).
``(2) Standard of review.--If an applicant or other
person brings a claim described in paragraph (1) with
respect to the approval of a covered application or
Federal authorization under subsection (b)(2)(B), the
court shall hold unlawful and set aside any agency
actions, findings, and conclusions in accordance with
section 706(2) of title 5, United States Code, except
that, for purposes of the application of subparagraph
(E) of such section, the court shall apply such
subparagraph by substituting `clear and convincing
evidence' for `substantial evidence'.
``(3) Exclusive jurisdiction.--Notwithstanding any
other provision of law, the United States Court of
Appeals for the District of Columbia Circuit shall have
original and exclusive jurisdiction over any claim--
``(A) alleging the invalidity of subsection
(b); or
``(B) that an agency action relating to a
covered application or Federal authorization
under subsection (b) is beyond the scope of
authority conferred by the Federal law under
which such agency action is made.''.

SEC. 41006. CARBON DIOXIDE, HYDROGEN, AND PETROLEUM PIPELINE
PERMITTING.

The Natural Gas Act is amended by inserting after section 7
(15 U.S.C. 717f) the following:

``SEC. 7A. CARBON DIOXIDE, HYDROGEN, AND PETROLEUM PIPELINE PERMITTING.

``(a) Covered Pipeline Defined.--In this section, the term
`covered pipeline' means--
``(1) a pipeline or pipeline facility for the
transportation of carbon dioxide that is regulated
under chapter 601 of title 49, United States Code,
pursuant to section 60102(i) of such chapter;
``(2) a gas pipeline facility, as such term is
defined in section 60101 of title 49, United States
Code, for the transportation of hydrogen that is
regulated under chapter 601 of such title; or
``(3) a hazardous liquid pipeline facility, as such
term is defined in section 60101 of title 49, United
States Code, for the transportation of petroleum or a
petroleum product that is regulated under chapter 601
of such title.
``(b) Application and Fee.--Any person may submit to the
Commission--
``(1) an application for a license authorizing the
whole or any part of the operation, sale, service,
construction, extension, or acquisition of a covered
pipeline, which application shall be made in the same
manner as, and in accordance with the requirements for,
an application for a certificate of public convenience
and necessity under section 7(d); and
``(2) a fee in the amount of $10,000,000 for the
consideration of such application.
``(c) Procedure.--
``(1) In general.--With respect to each application
for which a fee is submitted under subsection (b), the
Commission shall--
``(A) consider the application in accordance
with the procedures applicable to an
application for a certificate of public
convenience and necessity under the matter
preceding the proviso in section 7(c)(1)(B),
including the procedure provided in section
7(e); and
``(B) in accordance with section 7(e), issue
the license for which the application was
submitted or deny such application.
``(2) Necessary modifications.--For purposes of this
section, the Commission may modify procedures in place
under section 7 as the Commission determines necessary
to apply such procedures to the consideration,
issuance, or denial of an application under this
section.
``(d) Effect of License.--Notwithstanding any other provision
of law, if the Commission issues a license under subsection
(c)(1) of this section and the licensee is in compliance with
such license, no requirement of State or local law that
requires approval of the location of the covered pipeline with
respect to which the license is issued may be enforced against
the licensee.
``(e) Application to Other Provisions.--
``(1) Extension of facilities; abandonment of
service.--For purposes of section 7--
``(A) subsection (b) of such section shall be
applied with respect to this section by
substituting `licensee under section 7A' for
`natural-gas company';
``(B) subsection (c)(2) of such section shall
be applied with respect to this section--
``(i) by substituting `licensee under
section 7A' for `natural-gas company';
and
``(ii) by substituting `petroleum or
a petroleum product' for `natural gas'
each place it appears;
``(C) subsection (f)(1) shall be applied with
respect to this section--
``(i) by substituting `license under
section 7A' for `authorization under
this section'; and
``(ii) by substituting `licensee
under section 7A' for `natural-gas
company';
``(D) subsection (f)(2) shall be applied with
respect to this section--
``(i) by substituting `transported
liquid or gas is consumed' for `gas is
consumed'; and
``(ii) by substituting `a liquid or
gas to another licensee under section
7A' for `natural gas to another natural
gas company';
``(E) subsection (g) shall be applied with
respect to this section--
``(i) by substituting `licenses under
section 7A' for `certificates of public
convenience and necessity'; and
``(ii) by substituting `licensee
under section 7A' for `natural-gas
company';
``(F) subsection (h) of such section shall be
applied with respect to this section--
``(i) by substituting `licensee under
section 7A' for `holder of a
certificate of public convenience and
necessity'; and
``(ii) by substituting `to carry out
an activity authorized by the license
issued under such section' for `to
construct, operate, and maintain a pipe
line or pipe lines for the
transportation of natural gas, and the
necessary land or other property, in
addition to right-of-way, for the
location of compressor stations,
pressure apparatus, or other stations
or equipment necessary to the proper
operation of such pipe line or pipe
lines'.
``(2) Process coordination; hearings; rules of
procedure.--For purposes of applying section 15 with
respect to this section, each reference to an
application in subsection (a) of such section shall be
considered to be a reference to an application for a
license under this section.
``(3) Rehearing; court review of orders.--For
purposes of section 19--
``(A) subsection (b) of such section shall be
applied with respect to this section by
substituting `person who submitted the relevant
application and paid a fee under section 7A'
for `natural gas company'; and
``(B) subsection (d) of such section shall be
applied with respect to this section by
substituting `covered pipeline with respect to
which an application and fee has been submitted
under section 7A' for `facility subject to
section 3 or section 7' each place it appears.
``(4) Enforcement of act; regulations and orders.--
For purposes of section 20(d), paragraph (1) of such
section shall be applied with respect to this section
by substituting `company that is a licensee under
section 7A' for `natural gas company'.''.

SEC. 41007. DE-RISKING COMPENSATION PROGRAM.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to the Secretary for fiscal
year 2026, out of any money in the Treasury not otherwise
appropriated, $10,000,000, to remain available through
September 30, 2034, to carry out this section: Provided, That
no disbursements may be made under this section after September
30, 2034.
(b) De-Risking Compensation Program.--
(1) Establishment.--There is established in the
Department of Energy a program, to be known as the De-
Risking Compensation Program, to provide compensation
to sponsors, with respect to covered energy projects,
that suffer unrecoverable losses due to qualifying
Federal actions.
(2) Eligibility.--A sponsor may enroll in the program
with respect to a covered energy project if--
(A) all approvals or permits required or
authorized under Federal law for the covered
energy project have been received, regardless
of whether a court order subsequently remands
or vacates such approvals or permits;
(B) the sponsor commenced construction of the
covered energy project or made capital
expenditures with respect to the covered energy
project in reliance on such approvals or
permits; and
(C) at the time of enrollment, no qualifying
Federal action has been issued or taken that
has an effect described in subsection (g)(4)(B)
on the covered energy project.
(3) Application.--A sponsor may apply to enroll with
respect to a covered energy project in the program by
submitting to the Secretary an application containing
such information as the Secretary may require.
(4) Enrollment.--Not later than 90 days after the
date on which the Secretary receives an application
submitted under paragraph (3), the Secretary shall
enroll the sponsor in the program for the covered
energy project with respect to which the application
was submitted if the Secretary determines that the
sponsor meets the requirements of paragraph (2) with
respect to the covered energy project.
(c) Fees and Premiums.--
(1) Enrollment fee.--Not later than 60 days after the
date on which a sponsor is enrolled in the program
under subsection (b)(4), the sponsor shall pay to the
Secretary a one-time enrollment fee equal to 5 percent
of the sponsor capital contribution for the applicable
covered energy project.
(2) Annual premiums.--
(A) In general.--The Secretary shall
establish and annually collect a premium from
each sponsor enrolled in the program for each
covered energy project with respect to which
the sponsor is enrolled.
(B) Requirements.--A premium established and
collected from a sponsor under subparagraph (A)
shall--
(i) be equal to 1.5 percent of the
sponsor capital contribution for the
applicable covered energy project; and
(ii) be paid beginning with the year
of enrollment and continuing until the
earlier of--
(I) fiscal year 2033; or
(II) the year in which the
sponsor withdraws from the
program with respect to the
applicable covered energy
project.
(C) Adjustment.--The Secretary may adjust the
percentage required by subparagraph (B)(i) once
every two fiscal years to ensure Fund solvency,
except that--
(i) the Secretary may not vary such
percentage between sponsors or
projects; and
(ii) such percentage may not exceed 5
percent.
(D) Publication.--The Secretary shall publish
in the Federal Register not later than 60 days
prior to the start of each fiscal year a list
of each premium to be collected for the fiscal
year.
(d) Compensation.--
(1) In general.--Using amounts available in the Fund,
and subject to paragraph (5), the Secretary shall
provide compensation to a sponsor enrolled in the
program with respect to a covered energy project if--
(A) the sponsor paid the enrollment fee and
the premium for each year the sponsor was
enrolled in the program with respect to the
covered energy project; and
(B) the sponsor demonstrates, in a request
submitted to the Secretary, that a qualifying
Federal action has been issued or taken that
has an effect described in subsection (g)(4)(B)
on the covered energy project.
(2) Request for compensation.--A request under
paragraph (1) shall contain the following:
(A) Information on each Federal approval or
permit relating to the covered energy project,
including the date on which such approval or
permit was issued.
(B) A certified accounting of capital
expenditures made in reliance on each such
Federal approval or permit.
(C) A description of, and, if applicable, a
citation to, the applicable qualifying Federal
action.
(D) A causal statement showing how the
qualifying Federal action directly resulted in
unrecoverable losses or cessation of the
covered energy project and that absent the
qualifying Federal action the project would
have otherwise been viable.
(E) Any supporting economic analysis
demonstrating the financial effects of the
covered energy project being rendered unviable.
(3) Approval.--The Secretary shall approve a request
submitted under paragraph (1) and, subject to paragraph
(5), provide compensation to the applicable sponsor if
the Secretary determines that such request is complete
and in compliance with the requirements of this
section.
(4) Limitations on denials.--The Secretary may not
deny a request submitted under paragraph (1) based on--
(A) the merit of the applicable covered
energy project, as determined by the Secretary;
or
(B) the type of technology used in the
applicable covered energy project.
(5) Limitations on compensation amount.--
(A) Sponsors.--The amount of compensation
provided to a sponsor under this subsection
with respect to a covered energy project shall
not exceed the sponsor capital contribution for
the covered energy project.
(B) Available funds.--In determining the
amount of compensation to be provided to a
sponsor under this subsection--
(i) such amount may be any amount,
including zero, that is less than or
equal to the amount of the sponsor
capital contribution for the covered
energy project, regardless of the
amount of capital expenditures made by
the sponsor (as certified and included
in the request pursuant to paragraph
(2)(B)); and
(ii) the Secretary shall determine
such amount in a manner that ensures no
funds will be obligated or expended in
amounts that exceed the amounts in the
Fund at the time of approval of the
applicable request submitted under
paragraph (1).
(e) De-Risking Compensation Fund.--
(1) Establishment.--There is established a fund, to
be known as the De-Risking Compensation Fund,
consisting of such amounts as are deposited in the Fund
under this subsection or credited to the Fund under
subsection (f).
(2) Use of funds.--Amounts in the Fund--
(A) shall remain available until September
30, 2034; and
(B) may be used, without further
appropriation--
(i) to make compensation payments to
sponsors under this section; and
(ii) to administer the program.
(3) Limitation on administrative expenses.--Not more
than 3 percent of amounts in the Fund may be used to
administer the program.
(4) Deposits.--The Secretary shall deposit the fees
and premiums received under subsection (c) into the
Fund.
(f) Fund Management and Investment.--The Fund shall be
managed and invested as follows:
(1) The Fund shall be maintained and administered by
the Secretary.
(2) Amounts in the Fund shall be invested in
obligations of the United States in accordance with the
requirements of section 9702 of title 31, United States
Code.
(3) The interest on such investments shall be
credited to the Fund.
(g) Definitions.--For purposes of this section:
(1) Covered energy project.--The term ``covered
energy project'' means a project located in the United
States for the development, extraction, processing,
transportation, or use of coal, coal byproducts,
critical minerals, oil, natural gas, or nuclear energy
with a total projected capital expenditure of not less
than $30,000,000, as certified by the Secretary.
(2) Fund.--The term ``Fund'' means the De-Risking
Compensation Fund established in subsection (e)(1).
(3) Program.--The term ``program'' means the De-
Risking Compensation Program established in subsection
(b)(1).
(4) Qualifying federal action.--The term ``qualifying
Federal action'' means a regulation, administrative
decision, or executive action--
(A) issued or taken after a sponsor received
a Federal approval or permit for a covered
energy project; and
(B) that revokes such approval or permit or
cancels, delays, or renders unviable the
covered energy project regardless of whether
the regulation, administrative decision, or
executive action is responsive to a court
order.
(5) Secretary.--The term ``Secretary'' means the
Secretary of Energy.
(6) Sponsor.--The term ``sponsor'' means an entity
incorporated and headquartered in the United States
with an ownership or development interest in a covered
energy project.
(7) Sponsor capital contribution.--The term ``sponsor
capital contribution'' means the projected capital
expenditure of a sponsor for a covered energy project,
as certified by the Secretary at the time of enrollment
in the program, which shall include verifiable
development, construction, permitting, and financing
costs directly related to the covered energy project.

SEC. 41008. STRATEGIC PETROLEUM RESERVE.

(a) Appropriations.--In addition to amounts otherwise
available, there is appropriated to the Department of Energy
for fiscal year 2025, out of any money in the Treasury not
otherwise appropriated, to remain available until September 30,
2029--
(1) $218,000,000 for maintenance of, including
repairs to, storage facilities and related facilities
(as such terms are defined in section 152 of the Energy
Policy and Conservation Act (42 U.S.C. 6232)) of the
Strategic Petroleum Reserve; and
(2) $1,321,000,000 to acquire, by purchase, petroleum
products for storage in the Strategic Petroleum
Reserve.
(b) Repeal of Strategic Petroleum Reserve Drawdown and Sale
Mandate.--Section 20003 of Public Law 115-97 (42 U.S.C. 6241
note) is repealed.

SEC. 41009. RESCISSIONS OF PREVIOUSLY APPROPRIATED UNOBLIGATED FUNDS.

(a) Rescissions.--Except as provided in subsection (b), of
the unobligated balances appropriated and made available to the
Department of Energy--
(1) for the Office of the Inspector General,
$8,052,100 is rescinded;
(2) for the Office of Clean Energy Demonstrations,
$60,152,900 is rescinded;
(3) for the Office for Human Capital, $76,900 is
rescinded;
(4) for Federal Energy Management Programs,
$53,442,200 is rescinded;
(5) for State and Community Energy Programs,
$262,506,100 is rescinded;
(6) for the Office of Minority Economic Impact,
$2,783,100 is rescinded;
(7) for the Office of Energy Efficiency and Renewable
Energy, $401,850,700 is rescinded;
(8) for the Office of General Counsel, $239,400 is
rescinded;
(9) for the Office of Indian Energy Policy and
Programs, $44,701,900 is rescinded;
(10) for the Office of Management, $5,041,100 is
rescinded;
(11) for the Office of the Secretary, $1,019,400 is
rescinded;
(12) for the Office of Public Affairs, $2,594,000 is
rescinded; and
(13) for the Office of Policy, $692,400 is rescinded.
(b) Exclusions.--The unobligated amounts rescinded under
subsection (a) may not include amounts appropriated and made
available to the Department of Energy--
(1) under Public Law 117-169 (commonly referred to as
the Inflation Reduction Act of 2022);
(2) under the Infrastructure Investment and Jobs Act
(Public Law 117-58); or
(3) that were designated by the Congress as an
emergency requirement pursuant to the Balanced Budget
and Emergency Deficit Control Act of 1985 or a
concurrent resolution on the budget, section 4001(a)(1)
of S. Con. Res. 14 (117th Congress), or section 1(e) of
H. Res. 1151 (117th Congress) as engrossed in the House
of Representatives on June 8, 2022.

Subtitle B--Environment

PART 1--REPEALS AND RESCISSIONS

SEC. 42101. REPEAL AND RESCISSION RELATING TO CLEAN HEAVY-DUTY
VEHICLES.

(a) Repeal.--Section 132 of the Clean Air Act (42 U.S.C.
7432) is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 132 of the Clean Air Act (42 U.S.C.
7432) (as in effect on the day before the date of enactment of
this Act) is rescinded.

SEC. 42102. REPEAL AND RESCISSION RELATING TO GRANTS TO REDUCE AIR
POLLUTION AT PORTS.

(a) Repeal.--Section 133 of the Clean Air Act (42 U.S.C.
7433) is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 133 of the Clean Air Act (42 U.S.C.
7433) (as in effect on the day before the date of enactment of
this Act) is rescinded.

SEC. 42103. REPEAL AND RESCISSION RELATING TO GREENHOUSE GAS REDUCTION
FUND.

(a) Repeal.--Section 134 of the Clean Air Act (42 U.S.C.
7434) is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 134 of the Clean Air Act (42 U.S.C.
7434) (as in effect on the day before the date of enactment of
this Act) is rescinded.

SEC. 42104. REPEAL AND RESCISSION RELATING TO DIESEL EMISSIONS
REDUCTIONS.

(a) Repeal.--Section 60104 of Public Law 117-169 is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60104 of Public Law 117-169 (as in
effect on the day before the date of enactment of this Act) is
rescinded.

SEC. 42105. REPEAL AND RESCISSION RELATING TO FUNDING TO ADDRESS AIR
POLLUTION.

(a) Repeal.--Section 60105 of Public Law 117-169 is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60105 of Public Law 117-169 (as in
effect on the day before the date of enactment of this Act) is
rescinded.

SEC. 42106. REPEAL AND RESCISSION RELATING TO FUNDING TO ADDRESS AIR
POLLUTION AT SCHOOLS.

(a) Repeal.--Section 60106 of Public Law 117-169 is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60106 of Public Law 117-169 (as in
effect on the day before the date of enactment of this Act) is
rescinded.

SEC. 42107. REPEAL AND RESCISSION RELATING TO LOW EMISSIONS ELECTRICITY
PROGRAM.

(a) Repeal.--Section 135 of the Clean Air Act (42 U.S.C.
7435) is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 135 of the Clean Air Act (42 U.S.C.
7435) (as in effect on the day before the date of enactment of
this Act) is rescinded.

SEC. 42108. REPEAL AND RESCISSION RELATING TO FUNDING FOR SECTION
211(O) OF THE CLEAN AIR ACT.

(a) Repeal.--Section 60108 of Public Law 117-169 is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60108 of Public Law 117-169 (as in
effect on the day before the date of enactment of this Act) is
rescinded.

SEC. 42109. REPEAL AND RESCISSION RELATING TO FUNDING FOR
IMPLEMENTATION OF THE AMERICAN INNOVATION AND
MANUFACTURING ACT.

(a) Repeal.--Section 60109 of Public Law 117-169 is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60109 of Public Law 117-169 (as in
effect on the day before the date of enactment of this Act) is
rescinded.

SEC. 42110. REPEAL AND RESCISSION RELATING TO FUNDING FOR ENFORCEMENT
TECHNOLOGY AND PUBLIC INFORMATION.

(a) Repeal.--Section 60110 of Public Law 117-169 is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60110 of Public Law 117-169 (as in
effect on the day before the date of enactment of this Act) is
rescinded.

SEC. 42111. REPEAL AND RESCISSION RELATING TO GREENHOUSE GAS CORPORATE
REPORTING.

(a) Repeal.--Section 60111 of Public Law 117-169 is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60111 of Public Law 117-169 (as in
effect on the day before the date of enactment of this Act) is
rescinded.

SEC. 42112. REPEAL AND RESCISSION RELATING TO ENVIRONMENTAL PRODUCT
DECLARATION ASSISTANCE.

(a) Repeal.--Section 60112 of Public Law 117-169 (42 U.S.C.
4321 note) is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60112 of Public Law 117-169 (42 U.S.C.
4321 note) (as in effect on the day before the date of
enactment of this Act) is rescinded.

SEC. 42113. REPEAL OF FUNDING FOR METHANE EMISSIONS AND WASTE REDUCTION
INCENTIVE PROGRAM FOR PETROLEUM AND NATURAL GAS
SYSTEMS.

(a) Repeal and Rescission.--Subsections (a) and (b) of
section 136 of the Clean Air Act (42 U.S.C. 7436) are repealed
and the unobligated balances of amounts made available under
those subsections (as in effect on the day before the date of
enactment of this Act) are rescinded.
(b) Conforming Amendments.--Section 136 of the Clean Air Act
(42 U.S.C. 7436) is amended--
(1) by redesignating subsections (c) through (i) as
subsections (a) through (g), respectively;
(2) by striking ``subsection (c)'' each place it
appears and inserting ``subsection (a)'';
(3) by striking ``subsection (d)'' each place it
appears and inserting ``subsection (b)'';
(4) by striking ``subsection (f)'' each place it
appears and inserting ``subsection (d)'';
(5) in subsection (e) (as so redesignated), by
striking ``calendar year 2024'' and inserting
``calendar year 2034''; and
(6) in subsection (f) (as so redesignated)--
(A) by striking ``subsections (e) and (f)''
and inserting ``subsections (c) and (d)''; and
(B) by striking ``including data collected
pursuant to subsection (a)(4),''.

SEC. 42114. REPEAL AND RESCISSION RELATING TO GREENHOUSE GAS AIR
POLLUTION PLANS AND IMPLEMENTATION GRANTS.

(a) Repeal.--Section 137 of the Clean Air Act (42 U.S.C.
7437) is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 137 of the Clean Air Act (42 U.S.C.
7437) (as in effect on the day before the date of enactment of
this Act) is rescinded.

SEC. 42115. REPEAL AND RESCISSION RELATING TO ENVIRONMENTAL PROTECTION
AGENCY EFFICIENT, ACCURATE, AND TIMELY REVIEWS.

(a) Repeal.--Section 60115 of Public Law 117-169 is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60115 of Public Law 117-169 (as in
effect on the day before the date of enactment of this Act) is
rescinded.

SEC. 42116. REPEAL AND RESCISSION RELATING TO LOW-EMBODIED CARBON
LABELING FOR CONSTRUCTION MATERIALS.

(a) Repeal.--Section 60116 of Public Law 117-169 (42 U.S.C.
4321 note) is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 60116 of Public Law 117-169 (42 U.S.C.
4321 note) (as in effect on the day before the date of
enactment of this Act) is rescinded.

SEC. 42117. REPEAL AND RESCISSION RELATING TO ENVIRONMENTAL AND CLIMATE
JUSTICE BLOCK GRANTS.

(a) Repeal.--Section 138 of the Clean Air Act (42 U.S.C.
7438) is repealed.
(b) Rescission.--The unobligated balance of any amounts made
available under section 138 of the Clean Air Act (42 U.S.C.
7438) (as in effect on the day before the date of enactment of
this Act) is rescinded.

PART 2--REPEAL OF EPA RULE RELATING TO MULTI-POLLUTANT EMISSIONS
STANDARDS

SEC. 42201. REPEAL OF EPA RULE RELATING TO MULTI-POLLUTANT EMISSIONS
STANDARDS FOR LIGHT- AND MEDIUM-DUTY VEHICLES.

The final rule issued by the Environmental Protection Agency
relating to ``Multi-Pollutant Emissions Standards for Model
Years 2027 and Later Light-Duty and Medium-Duty Vehicles'' (89
Fed. Reg. 27842 (April 18, 2024)) shall have no force or
effect.

PART 3--REPEAL OF NHTSA RULE RELATING TO CAFE STANDARDS

SEC. 42301. REPEAL OF NHTSA RULE RELATING TO CAFE STANDARDS FOR
PASSENGER CARS AND LIGHT TRUCKS.

The final rule issued by the National Highway Traffic Safety
Administration relating to ``Corporate Average Fuel Economy
Standards for Passenger Cars and Light Trucks for Model Years
2027 and Beyond and Fuel Efficiency Standards for Heavy-Duty
Pickup Trucks and Vans for Model Years 2030 and Beyond'' (89
Fed. Reg. 52540 (June 24, 2024)) shall have no force or effect.

Subtitle C--Communications

PART 1--SPECTRUM AUCTIONS

SEC. 43101. IDENTIFICATION AND AUCTION OF SPECTRUM.

(a) Identification.--
(1) In general.--Not later than 2 years after the
date of the enactment of this Act, the Assistant
Secretary and the Commission shall identify, from
spectrum in the covered band that is allocated for
Federal use, non-Federal use, or shared Federal and
non-Federal use, a total of not less than 600 megahertz
of spectrum for reallocation for non-Federal use on an
exclusive, licensed basis for mobile broadband
services, fixed broadband services, mobile and fixed
broadband services, or a combination thereof.
(2) Withdrawal or modification of federal government
assignments.--The President, acting through the
Assistant Secretary, shall--
(A) withdraw or modify the assignments to
Federal Government stations of spectrum
identified under paragraph (1) as necessary for
the Commission to comply with subsection (b);
and
(B) not later than 30 days after completing
any necessary withdrawal or modification under
subparagraph (A), notify the Commission that
the withdrawal or modification is complete.
(3) Rule of construction.--Nothing in this subsection
may be construed to change the respective authorities
of the Assistant Secretary and the Commission with
respect to spectrum allocated for Federal use, non-
Federal use, or shared Federal and non-Federal use.
(b) Auction.--
(1) In general.--The Commission shall, through 1 or
more systems of competitive bidding under section
309(j) of the Communications Act of 1934 (47 U.S.C.
309(j)), grant licenses for the use of the spectrum
identified under subsection (a) on an exclusive,
licensed basis for mobile broadband services, fixed
broadband services, mobile and fixed broadband
services, or a combination thereof.
(2) Schedule.--Notwithstanding paragraph (15)(A) of
section 309(j) of the Communications Act of 1934 (47
U.S.C. 309(j)), the Commission shall auction spectrum
under paragraph (1) of this subsection according to the
following schedule:
(A) Not later than 3 years after the date of
the enactment of this Act, the Commission shall
complete 1 or more systems of competitive
bidding for not less than 200 megahertz of such
spectrum.
(B) Not later than 6 years after the date of
the enactment of this Act, the Commission shall
complete 1 or more systems of competitive
bidding for any remaining spectrum required to
be auctioned under paragraph (1) after
compliance with subparagraph (A) of this
paragraph.
(c) Auction Proceeds to Cover 110 Percent of Federal
Relocation or Sharing Costs.--Nothing in this section may be
construed to relieve the Commission from the requirements of
section 309(j)(16)(B) of the Communications Act of 1934 (47
U.S.C. 309(j)(16)(B)).
(d) Auction Authority.--Section 309(j)(11) of the
Communications Act of 1934 (47 U.S.C. 309(j)(11)) is amended by
striking ``grant a license or permit under this subsection
shall expire March 9, 2023'' and all that follows and inserting
``complete a system of competitive bidding under this
subsection shall expire September 30, 2034.''.
(e) Definitions.--In this section:
(1) Assistant secretary.--The term ``Assistant
Secretary'' means the Assistant Secretary of Commerce
for Communications and Information.
(2) Commission.--The term ``Commission'' means the
Federal Communications Commission.
(3) Covered band.--
(A) In general.--The term ``covered band''
means the band of frequencies between 1.3
gigahertz and 10 gigahertz, inclusive.
(B) Exclusion.--The term ``covered band''
does not include the following:
(i) The band of frequencies between
3.1 gigahertz and 3.45 gigahertz,
inclusive.
(ii) The band of frequencies between
5.925 gigahertz and 7.125 gigahertz,
inclusive.

PART 2--ARTIFICIAL INTELLIGENCE AND INFORMATION TECHNOLOGY
MODERNIZATION

SEC. 43201. ARTIFICIAL INTELLIGENCE AND INFORMATION TECHNOLOGY
MODERNIZATION INITIATIVE.

(a) Appropriation of Funds.--There is hereby appropriated to
the Department of Commerce for fiscal year 2025, out of any
funds in the Treasury not otherwise appropriated, $500,000,000,
to remain available until September 30, 2035, to modernize and
secure Federal information technology systems through the
deployment of commercial artificial intelligence, the
deployment of automation technologies, and the replacement of
antiquated business systems in accordance with subsection (b).
(b) Authorized Uses.--The Secretary of Commerce shall use the
funds appropriated under subsection (a) for the following:
(1) To replace or modernize, within the Department of
Commerce, legacy business systems with state-of-the-art
commercial artificial intelligence systems and
automated decision systems.
(2) To facilitate, within the Department of Commerce,
the adoption of artificial intelligence models that
increase operational efficiency and service delivery.
(3) To improve, within the Department of Commerce,
the cybersecurity posture of Federal information
technology systems through modernized architecture,
automated threat detection, and integrated artificial
intelligence solutions.
(c) Moratorium.--
(1) In general.--Except as provided in paragraph (2),
no State or political subdivision thereof may enforce
any law or regulation regulating artificial
intelligence models, artificial intelligence systems,
or automated decision systems during the 10-year period
beginning on the date of the enactment of this Act.
(2) Rule of construction.--Paragraph (1) may not be
construed to prohibit the enforcement of any law or
regulation that--
(A) the primary purpose and effect of which
is to remove legal impediments to, or
facilitate the deployment or operation of, an
artificial intelligence model, artificial
intelligence system, or automated decision
system;
(B) the primary purpose and effect of which
is to streamline licensing, permitting,
routing, zoning, procurement, or reporting
procedures in a manner that facilitates the
adoption of artificial intelligence models,
artificial intelligence systems, or automated
decision systems;
(C) does not impose any substantive design,
performance, data-handling, documentation,
civil liability, taxation, fee, or other
requirement on artificial intelligence models,
artificial intelligence systems, or automated
decision systems unless such requirement--
(i) is imposed under Federal law; or
(ii) in the case of a requirement
imposed under a generally applicable
law, is imposed in the same manner on
models and systems, other than
artificial intelligence models,
artificial intelligence systems, and
automated decision systems, that
provide comparable functions to
artificial intelligence models,
artificial intelligence systems, or
automated decision systems; and
(D) does not impose a fee or bond unless--
(i) such fee or bond is reasonable
and cost-based; and
(ii) under such fee or bond,
artificial intelligence models,
artificial intelligence systems, and
automated decision systems are treated
in the same manner as other models and
systems that perform comparable
functions.
(d) Definitions.--In this section:
(1) Artificial intelligence.--The term ``artificial
intelligence'' has the meaning given such term in
section 5002 of the National Artificial Intelligence
Initiative Act of 2020 (15 U.S.C. 9401).
(2) Artificial intelligence model.--The term
``artificial intelligence model'' means a software
component of an information system that implements
artificial intelligence technology and uses
computational, statistical, or machine-learning
techniques to produce outputs from a defined set of
inputs.
(3) Artificial intelligence system.--The term
``artificial intelligence system'' means any data
system, software, hardware, application, tool, or
utility that operates, in whole or in part, using
artificial intelligence.
(4) Automated decision system.--The term ``automated
decision system'' means any computational process
derived from machine learning, statistical modeling,
data analytics, or artificial intelligence that issues
a simplified output, including a score, classification,
or recommendation, to materially influence or replace
human decision making.

Subtitle D--Health

PART 1--MEDICAID

Subpart A--Reducing Fraud and Improving Enrollment Processes

SEC. 44101. MORATORIUM ON IMPLEMENTATION OF RULE RELATING TO
ELIGIBILITY AND ENROLLMENT IN MEDICARE SAVINGS
PROGRAMS.

The Secretary of Health and Human Services shall not, during
the period beginning on the date of the enactment of this
section and ending January 1, 2035, implement, administer, or
enforce the provisions of the final rule published by the
Centers for Medicare & Medicaid Services on September 21, 2023,
and titled ``Streamlining Medicaid; Medicare Savings Program
Eligibility Determination and Enrollment'' (88 Fed. Reg.
65230).

SEC. 44102. MORATORIUM ON IMPLEMENTATION OF RULE RELATING TO
ELIGIBILITY AND ENROLLMENT FOR MEDICAID, CHIP, AND
THE BASIC HEALTH PROGRAM.

The Secretary of Health and Human Services shall not, during
the period beginning on the date of the enactment of this
section and ending January 1, 2035, implement, administer, or
enforce the provisions of the final rule published by the
Centers for Medicare & Medicaid Services on April 2, 2024, and
titled ``Medicaid Program; Streamlining the Medicaid,
Children's Health Insurance Program, and Basic Health Program
Application, Eligibility Determination, Enrollment, and Renewal
Processes'' (89 Fed. Reg. 22780).

SEC. 44103. ENSURING APPROPRIATE ADDRESS VERIFICATION UNDER THE
MEDICAID AND CHIP PROGRAMS.

(a) Medicaid.--
(1) In general.--Section 1902 of the Social Security
Act (42 U.S.C. 1396a) is amended--
(A) in subsection (a)--
(i) in paragraph (86), by striking
``and'' at the end;
(ii) in paragraph (87), by striking
the period and inserting ``; and''; and
(iii) by inserting after paragraph
(87) the following new paragraph:
``(88) provide--
``(A) beginning not later than January 1,
2027, in the case of 1 of the 50 States and the
District of Columbia, for a process to
regularly obtain address information for
individuals enrolled under such plan (or a
waiver of such plan) in accordance with
subsection (vv); and
``(B) beginning not later than October 1,
2029--
``(i) for the State to submit to the
system established by the Secretary
under subsection (uu), with respect to
an individual enrolled or seeking to
enroll under such plan, not less
frequently than once each month and
during each determination or
redetermination of the eligibility of
such individual for medical assistance
under such plan (or waiver of such
plan)--
``(I) the social security
number of such individual, if
such individual has a social
security number and is required
to provide such number to
enroll under such plan (or
waiver); and
``(II) such other information
with respect to such individual
as determined necessary by the
Secretary for purposes of
preventing individuals from
simultaneously being enrolled
under State plans (or waivers
of such plans) of multiple
States;
``(ii) for the use of such system to
prevent such simultaneous enrollment;
and
``(iii) in the case that such system
indicates that an individual enrolled
or seeking to enroll under such plan
(or wavier of such plan) is enrolled
under a State plan (or waiver of such a
plan) of another State, for the taking
of appropriate action (as determined by
the Secretary) to identify whether such
an individual resides in the State and
disenroll an individual from the State
plan of such State if such individual
does not reside in such State (unless
such individual meets such an exception
as the Secretary may specify).''; and
(B) by adding at the end the following new
subsections:
``(uu) Prevention of Enrollment Under Multiple State Plans.--
``(1) In general.--Not later than October 1, 2029,
the Secretary shall establish a system to be utilized
by the Secretary and States to prevent an individual
from being simultaneously enrolled under the State
plans (or waivers of such plans) of multiple States.
Such system shall--
``(A) provide for the receipt of information
submitted by a State under subsection
(a)(88)(B)(i); and
``(B) not less than once each month, notify
or transmit information to a State (or allow
the Secretary to notify or transmit information
to a State) regarding whether an individual
enrolled or seeking to enroll under the State
plan of such State (or waiver of such plan) is
enrolled under the State plan (or waiver of
such plan) of another State.
``(2) Standards.--The Secretary shall establish such
standards as determined necessary by the Secretary to
limit and protect information submitted under such
system and ensure the privacy of such information,
consistent with subsection (a)(7).
``(3) Implementation funding.--There are appropriated
to the Secretary, out of amounts in the Treasury not
otherwise appropriated, in addition to amounts
otherwise available--
``(A) for fiscal year 2026, $10,000,000 for
purposes of establishing the system required
under this subsection, to remain available
until expended; and
``(B) for fiscal year 2029, $20,000,000 for
purposes of maintaining such system, to remain
available until expended.
``(vv) Process to Obtain Enrollee Address Information.--
``(1) In general.--For purposes of subsection
(a)(88)(A), a process to regularly obtain address
information for individuals enrolled under a State plan
(or a waiver of such plan) shall obtain address
information from reliable data sources described in
paragraph (2) and take such actions as the Secretary
shall specify with respect to any changes to such
address based on such information.
``(2) Reliable data sources described.--For purposes
of paragraph (1), the reliable data sources described
in this paragraph are the following:
``(A) Mail returned to the State by the
United States Postal Service with a forwarding
address.
``(B) The National Change of Address Database
maintained by the United States Postal Service.
``(C) A managed care entity (as defined in
section 1932(a)(1)(B)) or prepaid inpatient
health plan or prepaid ambulatory health plan
(as such terms are defined in section
1903(m)(9)(D)) that has a contract under the
State plan if the address information is
provided to such entity or plan directly from,
or verified by such entity or plan directly
with, such individual.
``(D) Other data sources as identified by the
State and approved by the Secretary.''.
(2) Conforming amendments.--
(A) PARIS.--Section 1903(r)(3) of the Social
Security Act (42 U.S.C. 1396b(r)(3)) is
amended--
(i) by striking ``In order'' and
inserting ``(A) In order'';
(ii) by striking ``through the
Public'' and inserting ``through--
``(i) the Public'';
(iii) by striking the period at the
end and inserting ``; and
``(ii) beginning October 1, 2029, the system
established by the Secretary under section
1902(uu).''; and
(iv) by adding at the end the
following new subparagraph:
``(B) Beginning October 1, 2029, the Secretary may
determine that a State is not required to have in
operation an eligibility determination system which
provides for data matching through the system described
in subparagraph (A)(i) to meet the requirements of this
paragraph.''.
(B) Managed care.--Section 1932 of the Social
Security Act (42 U.S.C. 1396u-2) is amended by
adding at the end the following new subsection:
``(j) Transmission of Address Information.--Beginning January
1, 2027, each contract under a State plan with a managed care
entity (as defined in section 1932(a)(1)(B)) or with a prepaid
inpatient health plan or prepaid ambulatory health plan (as
such terms are defined in section 1903(m)(9)(D)), shall provide
that such entity or plan shall promptly transmit to the State
any address information for an individual enrolled with such
entity or plan that is provided to such entity or plan directly
from, or verified by such entity or plan directly with, such
individual.''.
(b) CHIP.--
(1) In general.--Section 2107(e)(1) of the Social
Security Act (42 U.S.C. 1397gg(e)(1)) is amended--
(A) by redesignating subparagraphs (H)
through (U) as subparagraphs (I) through (V),
respectively; and
(B) by inserting after subparagraph (G) the
following new subparagraph:
``(H) Section 1902(a)(88) (relating to
address information for enrollees and
prevention of simultaneous enrollments).''.
(2) Managed care.--Section 2103(f)(3) of the Social
Security Act (42 U.S.C. 1397cc(f)(3)) is amended by
striking ``and (e)'' and inserting ``(e), and (j)''.

SEC. 44104. MODIFYING CERTAIN STATE REQUIREMENTS FOR ENSURING DECEASED
INDIVIDUALS DO NOT REMAIN ENROLLED.

Section 1902 of the Social Security Act (42 U.S.C. 1396a), as
amended by section 44103, is further amended--
(1) in subsection (a)--
(A) in paragraph (87), by striking ``; and''
and inserting a semicolon;
(B) in paragraph (88), by striking the period
at the end and inserting ``; and''; and
(C) by inserting after paragraph (88) the
following new paragraph:
``(89) provide that the State shall comply with the
eligibility verification requirements under subsection
(ww), except that this paragraph shall apply only in
the case of the 50 States and the District of
Columbia.''; and
(2) by adding at the end the following new
subsection:
``(ww) Verification of Certain Eligibility Criteria.--
``(1) In general.--For purposes of subsection
(a)(89), the eligibility verification requirements,
beginning January 1, 2028, are as follows:
``(A) Quarterly screening to verify enrollee
status.--The State shall, not less frequently
than quarterly, review the Death Master File
(as such term is defined in section 203(d) of
the Bipartisan Budget Act of 2013) to determine
whether any individuals enrolled for medical
assistance under the State plan (or waiver of
such plan) are deceased.
``(B) Disenrollment under state plan.--If the
State determines, based on information obtained
from the Death Master File, that an individual
enrolled for medical assistance under the State
plan (or waiver of such plan) is deceased, the
State shall--
``(i) treat such information as
factual information confirming the
death of a beneficiary for purposes of
section 431.213(a) of title 42, Code of
Federal Regulations (or any successor
regulation);
``(ii) disenroll such individual from
the State plan (or waiver of such
plan); and
``(iii) discontinue any payments for
medical assistance under this title
made on behalf of such individual
(other than payments for any items or
services furnished to such individual
prior to the death of such individual).
``(C) Reinstatement of coverage in the event
of error.--If a State determines that an
individual was misidentified as deceased based
on information obtained from the Death Master
File and was erroneously disenrolled from
medical assistance under the State plan (or
waiver of such plan) based on such
misidentification, the State shall immediately
re-enroll such individual under the State plan
(or waiver of such plan), retroactive to the
date of such disenrollment.
``(2) Rule of construction.--Nothing under this
subsection shall be construed to preclude the ability
of a State to use other electronic data sources to
timely identify potentially deceased beneficiaries, so
long as the State is also in compliance with the
requirements of this subsection (and all other
requirements under this title relating to Medicaid
eligibility determination and redetermination).''.

SEC. 44105. MEDICAID PROVIDER SCREENING REQUIREMENTS.

Section 1902(kk)(1) of the Social Security Act (42 U.S.C.
1396a(kk)(1)) is amended--
(1) by striking ``The State'' and inserting:
``(A) In general.--The State''; and
(2) by adding at the end the following new
subparagraph:
``(B) Additional provider screening.--
Beginning January 1, 2028, as part of the
enrollment (or reenrollment or revalidation of
enrollment) of a provider or supplier under
this title, and not less frequently than
monthly during the period that such provider or
supplier is so enrolled, the State conducts a
check of any database or similar system
developed pursuant to section 6401(b)(2) of the
Patient Protection and Affordable Care Act to
determine whether the Secretary has terminated
the participation of such provider or supplier
under title XVIII, or whether any other State
has terminated the participation of such
provider or supplier under such other State's
State plan under this title (or waiver of the
plan), or such other State's State child health
plan under title XXI (or waiver of the
plan).''.

SEC. 44106. ADDITIONAL MEDICAID PROVIDER SCREENING REQUIREMENTS.

Section 1902(kk)(1) of the Social Security Act (42 U.S.C.
1396a(kk)(1)), as amended by section 44105, is further amended
by adding at the end the following new subparagraph:
``(C) Provider screening against death master
file.--Beginning January 1, 2028, as part of
the enrollment (or reenrollment or revalidation
of enrollment) of a provider or supplier under
this title, and not less frequently than
quarterly during the period that such provider
or supplier is so enrolled, the State conducts
a check of the Death Master File (as such term
is defined in section 203(d) of the Bipartisan
Budget Act of 2013) to determine whether such
provider or supplier is deceased.''.

SEC. 44107. REMOVING GOOD FAITH WAIVER FOR PAYMENT REDUCTION RELATED TO
CERTAIN ERRONEOUS EXCESS PAYMENTS UNDER MEDICAID.

(a) In General.--Section 1903(u)(1) of the Social Security
Act (42 U.S.C. 1396b(u)(1)) is amended--
(1) in subparagraph (B)--
(A) by striking ``The Secretary'' and
inserting ``(i) Subject to clause (ii), the
Secretary''; and
(B) by adding at the end the following new
clause:
``(ii) The amount waived under clause (i) for a
fiscal year may not exceed an amount equal to the
difference between--
``(I) the amount of the reduction required
under subparagraph (A) for such fiscal year
(without application of this subparagraph); and
``(II) the sum of the erroneous excess
payments for medical assistance described in
subclauses (I) and (III) of subparagraph (D)(i)
made for such fiscal year.'';
(2) in subparagraph (C), by striking ``he'' in each
place it appears and inserting ``the Secretary'' in
each such place; and
(3) in subparagraph (D)(i)--
(A) in subclause (I), by striking ``and'' at
the end;
(B) in subclause (II), by striking the period
at the end and inserting ``, and''; and
(C) by adding at the end the following new
subclause:
``(III) payments (other than payments described in
subclause (I)) for items and services furnished to an
eligible individual who is not eligible for medical
assistance under the State plan (or a waiver of such
plan) with respect to such items and services.''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply beginning with respect to fiscal year 2030.

SEC. 44108. INCREASING FREQUENCY OF ELIGIBILITY REDETERMINATIONS FOR
CERTAIN INDIVIDUALS.

Section 1902(e)(14) of the Social Security Act (42 U.S.C.
1396a(e)(14)) is amended by adding at the end the following new
subparagraph:
``(L) Frequency of eligibility
redeterminations for certain individuals.--
Beginning on October 1, 2027, in the case of an
individual enrolled under subsection
(a)(10)(A)(i)(VIII), a State shall redetermine
the eligibility of such individual for medical
assistance under the State plan of such State
(or a waiver of such plan) once every 6
months.''.

SEC. 44109. REVISING HOME EQUITY LIMIT FOR DETERMINING ELIGIBILITY FOR
LONG-TERM CARE SERVICES UNDER THE MEDICAID PROGRAM.

(a) Revising Home Equity Limit.--Section 1917(f)(1) of the
Social Security Act (42 U.S.C. 1396p(f)(1)) is amended--
(1) in subparagraph (B)--
(A) by striking ``A State'' and inserting
``(i) A State'';
(B) in clause (i), as inserted by
subparagraph (A)--
(i) by striking ```$500,000''' and
inserting ``the amount specified in
subparagraph (A)''; and
(ii) by inserting ``, in the case of
an individual's home that is located on
a lot that is zoned for agricultural
use,'' after ``apply subparagraph
(A)''; and
(C) by adding at the end the following new
clause:
``(ii) A State may elect, without regard to the
requirements of section 1902(a)(1) (relating to
statewideness) and section 1902(a)(10)(B) (relating to
comparability), to apply subparagraph (A), in the case
of an individual's home that is not described in clause
(i), by substituting for the amount specified in such
subparagraph, an amount that exceeds such amount, but
does not exceed $1,000,000.''; and
(2) in subparagraph (C)--
(A) by inserting ``(other than the amount
specified in subparagraph (B)(ii) (relating to
certain non-agricultural homes))'' after
``specified in this paragraph''; and
(B) by adding at the end the following new
sentence: ``In the case that application of the
preceding sentence would result in a dollar
amount (other than the amount specified in
subparagraph (B)(i) (relating to certain
agricultural homes)) exceeding $1,000,000, such
amount shall be deemed to be equal to
$1,000,000.''.
(b) Clarification.--Section 1902 of the Social Security Act
(42 U.S.C. 1396a) is amended--
(1) in subsection (r)(2), by adding at the end the
following new subparagraph:
``(C) This paragraph shall not be construed as permitting a
State to determine the eligibility of an individual for medical
assistance with respect to nursing facility services or other
long-term care services without application of the limit under
section 1917(f)(1).''; and
(2) in subsection (e)(14)(D)(iv)--
(A) by striking ``Subparagraphs'' and
inserting
``(I) In general.--
Subparagraphs''; and
(B) by adding at the end the following new
subclause:
``(II) Application of home
equity interest limit.--Section
1917(f) shall apply for
purposes of determining the
eligibility of an individual
for medical assistance with
respect to nursing facility
services or other long-term
care services.''.
(c) Effective Date.--The amendments made by subsection (a)
shall apply beginning on January 1, 2028.

SEC. 44110. PROHIBITING FEDERAL FINANCIAL PARTICIPATION UNDER MEDICAID
AND CHIP FOR INDIVIDUALS WITHOUT VERIFIED
CITIZENSHIP, NATIONALITY, OR SATISFACTORY
IMMIGRATION STATUS.

(a) In General.--
(1) Medicaid.--Section 1903(i)(22) of the Social
Security Act (42 U.S.C. 1396b(i)(22)) is amended--
(A) by adding ``and'' at the end;
(B) by striking ``to amounts'' and inserting
``to--
``(A) amounts''; and
(C) by adding at the end the following new
subparagraph:
``(B) in the case that the State elects under
section 1902(a)(46)(C) to provide for making
medical assistance available to an individual
during--
``(i) the period in which the
individual is provided the reasonable
opportunity to present satisfactory
documentary evidence of citizenship or
nationality under section
1902(ee)(2)(C) or subsection (x)(4);
``(ii) the 90-day period described in
section 1902(ee)(1)(B)(ii)(II); or
``(iii) the period in which the
individual is provided the reasonable
opportunity to submit evidence
indicating a satisfactory immigration
status under section 1137(d)(4),
amounts expended for such medical assistance,
unless the citizenship or nationality of such
individual or the satisfactory immigration
status of such individual (as applicable) is
verified by the end of such period;''.
(2) CHIP.--Section 2107(e)(1)(N) of the Social
Security Act (42 U.S.C. 1397gg(e)(1)(N)) is amended by
striking ``and (17)'' and inserting ``(17), and (22)''.
(b) Eliminating State Requirement to Provide Medical
Assistance During Reasonable Opportunity Period.--
(1) Documentary evidence of citizenship or
nationality.--Section 1903(x)(4) of the Social Security
Act (42 U.S.C. 1396b(x)) is amended--
(A) by striking ``under clauses (i) and (ii)
of section 1137(d)(4)(A)'' and inserting
``under section 1137(d)(4)''; and
(B) by inserting ``, except that the State
shall not be required to make medical
assistance available to such individual during
the period in which such individual is provided
such reasonable opportunity if the State has
not elected the option under section
1902(a)(46)(C)'' before the period at the end.
(2) Social security data match.--Section 1902(ee) of
the Social Security Act (42 U.S.C. 1396a(ee)) is
amended--
(A) in paragraph (1)(B)(ii)--
(i) in subclause (II), by striking
``(and continues to provide the
individual with medical assistance
during such 90-day period)'' and
inserting ``and, if the State has
elected the option under subsection
(a)(46)(C), continues to provide the
individual with medical assistance
during such 90-day period''; and
(ii) in subclause (III), by inserting
``, or denies eligibility for medical
assistance under this title for such
individual, as applicable'' after
``under this title''; and
(B) in paragraph (2)(C)--
(i) by striking ``under clauses (i)
and (ii) of section 1137(d)(4)(A)'' and
inserting ``under section 1137(d)(4)'';
and
(ii) by inserting ``, except that the
State shall not be required to make
medical assistance available to such
individual during the period in which
such individual is provided such
reasonable opportunity if the State has
not elected the option under section
1902(a)(46)(C)'' before the period at
the end.
(3) Individuals with satisfactory immigration
status.--Section 1137(d)(4) of the Social Security Act
(42 U.S.C. 1320b-7(d)(4)) is amended--
(A) in subparagraph (A)(ii), by inserting
``(except that such prohibition on delay,
denial, reduction, or termination of
eligibility for benefits under the Medicaid
program under title XIX shall apply only if the
State has elected the option under section
1902(a)(46)(C))'' after ``has been provided'';
and
(B) in subparagraph (B)(ii), by inserting
``(except that such prohibition on delay,
denial, reduction, or termination of
eligibility for benefits under the Medicaid
program under title XIX shall apply only if the
State has elected the option under section
1902(a)(46)(C))'' after ``status''.
(c) Option to Continue Providing Medical Assistance During
Reasonable Opportunity Period.--
(1) Medicaid.--Section 1902(a)(46) of the Social
Security Act (42 U.S.C. 1396a(a)(46)) is amended--
(A) in subparagraph (A), by striking ``and''
at the end;
(B) in subparagraph (B)(ii), by adding
``and'' at the end; and
(C) by inserting after subparagraph (B)(ii)
the following new subparagraph:
``(C) provide, at the option of the State, for making
medical assistance available--
``(i) to an individual described in
subparagraph (B) during the period in which
such individual is provided the reasonable
opportunity to present satisfactory documentary
evidence of citizenship or nationality under
subsection (ee)(2)(C) or section 1903(x)(4), or
during the 90-day period described in
subsection (ee)(1)(B)(ii)(II); or
``(ii) to an individual who is not a citizen
or national of the United States during the
period in which such individual is provided the
reasonable opportunity to submit evidence
indicating a satisfactory immigration status
under section 1137(d)(4);''.
(2) CHIP.--Section 2105(c)(9) of the Social Security
Act (42 U.S.C. 1397ee(c)(9)) is amended by adding at
the end the following new subparagraph:
``(C) Option to continue providing child
health assistance during reasonable opportunity
period.--Section 1902(a)(46)(C) shall apply to
States under this title in the same manner as
it applies to a State under title XIX.''.
(d) Effective Date.--The amendments made by this section
shall apply beginning October 1, 2026.

SEC. 44111. REDUCING EXPANSION FMAP FOR CERTAIN STATES PROVIDING
PAYMENTS FOR HEALTH CARE FURNISHED TO CERTAIN
INDIVIDUALS.

Section 1905 of the Social Security Act (42 U.S.C. 1395d) is
amended--
(1) in subsection (y)--
(A) in paragraph (1)(E), by inserting ``(or,
for calendar quarters beginning on or after
October 1, 2027, in the case such State is a
specified State with respect to such calendar
quarter, 80 percent)'' after ``thereafter'';
and
(B) in paragraph (2), by adding at the end
the following new subparagraph:
``(C) Specified state.--The term `specified
State' means, with respect to a quarter, a
State that--
``(i) provides any form of financial
assistance during such quarter, in
whole or in part, whether or not made
under a State plan (or waiver of such
plan) under this title or under another
program established by the State, and
regardless of the source of funding for
such assistance, to or on behalf of an
alien who is not a qualified alien or
otherwise lawfully residing in the
United States for the purchasing of
health insurance coverage (as defined
in section 2791(b)(1) of the Public
Health Service Act) for an alien who is
not a qualified alien or otherwise
lawfully residing in the United States;
or
``(ii) provides any form of
comprehensive health benefits coverage
during such quarter, whether or not
under a State plan (or wavier of such
plan) under this title or under another
program established by the State, and
regardless of the source of funding for
such coverage, to an alien who is not a
qualified alien or otherwise lawfully
residing in the United States.
``(D) Immigration terms.--
``(i) Alien.--The term `alien' has
the meaning given such term in section
101(a) of the Immigration and
Nationality Act.
``(ii) Qualified alien.--The term
`qualified alien' has the meaning given
such term in section 431 of the
Personal Responsibility and Work
Opportunity Reconciliation Act of 1996,
except that--
``(I) the reference to `at
the time the alien applies for,
receives, or attempts to
receive a Federal public
benefit' in subsection (b) of
such section shall be treated
as a reference to `at the time
the alien is provided
comprehensive health benefits
coverage described in clause
(ii) of section 1905(y)(C) of
the Social Security Act or is
provided with financial
assistance described in clause
(i) of such section, as
applicable'; and
``(II) the references to `(in
the opinion of the agency
providing such benefits)' in
subsection (c) of such section
shall be treated as references
to `(in the opinion of the
State in which such
comprehensive health benefits
coverage or such financial
assistance is provided, as
applicable)'.''; and
(2) in subsection (z)(2)--
(A) in subparagraph (A), by striking ``for
such year'' and inserting ``for such quarter'';
and
(B) in subparagraph (B)(i)--
(i) in the matter preceding subclause
(I), by striking ``for a year'' and
inserting ``for a calendar quarter in a
year''; and
(ii) in subclause (II), by striking
``for the year'' and inserting ``for
the quarter for the State''.

Subpart B--Preventing Wasteful Spending

SEC. 44121. MORATORIUM ON IMPLEMENTATION OF RULE RELATING TO STAFFING
STANDARDS FOR LONG-TERM CARE FACILITIES UNDER THE
MEDICARE AND MEDICAID PROGRAMS.

The Secretary of Health and Human Services shall not, during
the period beginning on the date of the enactment of this
section and ending January 1, 2035, implement, administer, or
enforce the provisions of the final rule published by the
Centers for Medicare & Medicaid Services on May 10, 2024, and
titled ``Medicare and Medicaid Programs; Minimum Staffing
Standards for Long-Term Care Facilities and Medicaid
Institutional Payment Transparency Reporting'' (89 Fed. Reg.
40876).

SEC. 44122. MODIFYING RETROACTIVE COVERAGE UNDER THE MEDICAID AND CHIP
PROGRAMS.

(a) In General.--Section 1902(a)(34) of the Social Security
Act (42 U.S.C. 1396a(a)(34)) is amended--
(1) by striking ``him'' and inserting ``the
individual'';
(2) by striking ``the third month'' and inserting
``the month'';
(3) by striking ``he'' and inserting ``the
individual''; and
(4) by striking ``his'' and inserting ``the
individual's''.
(b) Definition of Medical Assistance.--Section 1905(a) of the
Social Security Act (42 U.S.C. 1396d(a)) is amended by striking
``in or after the third month before the month in which the
recipient makes application for assistance'' and inserting ``in
or after the month before the month in which the recipient
makes application for assistance''.
(c) CHIP.--Section 2102(b)(1)(B) of the Social Security Act
(42 U.S.C. 1397bb(b)(1)(B)) is amended--
(1) in clause (iv), by striking ``and'' at the end;
(2) in clause (v), by striking the period and
inserting ``; and''; and
(3) by adding at the end the following new clause:
``(vi) shall, in the case that the
State elects to provide child health or
pregnancy-related assistance to an
individual for any period prior to the
month in which the individual made
application for such assistance (or
application was made on behalf of the
individual), provide that such
assistance is not made available to
such individual for items and services
included under the State child health
plan (or waiver of such plan) that are
furnished before the month preceding
the month in which such individual made
application (or application was made on
behalf of such individual) for such
assistance.''.
(d) Effective Date.--The amendments made by this section
shall apply to medical assistance and child health and
pregnancy-related assistance with respect to individuals whose
eligibility for such medical assistance or child health
assistance is based on an application made on or after October
1, 2026.

SEC. 44123. ENSURING ACCURATE PAYMENTS TO PHARMACIES UNDER MEDICAID.

(a) In General.--Section 1927(f) of the Social Security Act
(42 U.S.C. 1396r-8(f)) is amended--
(1) in paragraph (1)(A)--
(A) by redesignating clause (ii) as clause
(iii); and
(B) by striking ``and'' after the semicolon
at the end of clause (i) and all that precedes
it through ``(1)'' and inserting the following:
``(1) Determining pharmacy actual acquisition
costs.--The Secretary shall conduct a survey of retail
community pharmacy drug prices and applicable non-
retail pharmacy drug prices to determine national
average drug acquisition cost benchmarks (as such term
is defined by the Secretary) as follows:
``(A) Use of vendor.--The Secretary may
contract services for--
``(i) with respect to retail
community pharmacies, the determination
of retail survey prices of the national
average drug acquisition cost for
covered outpatient drugs that represent
a nationwide average of consumer
purchase prices for such drugs, net of
all discounts, rebates, and other price
concessions (to the extent any
information with respect to such
discounts, rebates, and other price
concessions is available) based on a
monthly survey of such pharmacies;
``(ii) with respect to applicable
non-retail pharmacies--
``(I) the determination of
survey prices, separate from
the survey prices described in
clause (i), of the non-retail
national average drug
acquisition cost for covered
outpatient drugs that represent
a nationwide average of
consumer purchase prices for
such drugs, net of all
discounts, rebates, and other
price concessions (to the
extent any information with
respect to such discounts,
rebates, and other price
concessions is available) based
on a monthly survey of such
pharmacies; and
``(II) at the discretion of
the Secretary, for each type of
applicable non-retail pharmacy,
the determination of survey
prices, separate from the
survey prices described in
clause (i) or subclause (I) of
this clause, of the national
average drug acquisition cost
for such type of pharmacy for
covered outpatient drugs that
represent a nationwide average
of consumer purchase prices for
such drugs, net of all
discounts, rebates, and other
price concessions (to the
extent any information with
respect to such discounts,
rebates, and other price
concessions is available) based
on a monthly survey of such
pharmacies; and'';
(2) in subparagraph (B) of paragraph (1), by striking
``subparagraph (A)(ii)'' and inserting ``subparagraph
(A)(iii)'';
(3) in subparagraph (D) of paragraph (1), by striking
clauses (ii) and (iii) and inserting the following:
``(ii) The vendor must update the
Secretary no less often than monthly on
the survey prices for covered
outpatient drugs.
``(iii) The vendor must
differentiate, in collecting and
reporting survey data, for all cost
information collected, whether a
pharmacy is a retail community pharmacy
or an applicable non-retail pharmacy,
including whether such pharmacy is an
affiliate (as defined in subsection
(k)(14)), and, in the case of an
applicable non-retail pharmacy, which
type of applicable non-retail pharmacy
it is using the relevant pharmacy type
indicators included in the guidance
required by subsection (d)(2) of
section 44123 of the Act titled `An Act
to provide for reconciliation pursuant
to title II of H. Con. Res. 14'.'';
(4) by adding at the end of paragraph (1) the
following:
``(F) Survey reporting.--In order to meet the
requirement of section 1902(a)(54), a State
shall require that any retail community
pharmacy or applicable non-retail pharmacy in
the State that receives any payment,
reimbursement, administrative fee, discount,
rebate, or other price concession related to
the dispensing of covered outpatient drugs to
individuals receiving benefits under this
title, regardless of whether such payment,
reimbursement, administrative fee, discount,
rebate, or other price concession is received
from the State or a managed care entity or
other specified entity (as such terms are
defined in section 1903(m)(9)(D)) directly or
from a pharmacy benefit manager or another
entity that has a contract with the State or a
managed care entity or other specified entity
(as so defined), shall respond to surveys
conducted under this paragraph.
``(G) Survey information.--Information on
national drug acquisition prices obtained under
this paragraph shall be made publicly available
in a form and manner to be determined by the
Secretary and shall include at least the
following:
``(i) The monthly response rate to
the survey including a list of
pharmacies not in compliance with
subparagraph (F).
``(ii) The sampling methodology and
number of pharmacies sampled monthly.
``(iii) Information on price
concessions to pharmacies, including
discounts, rebates, and other price
concessions, to the extent that such
information may be publicly released
and has been collected by the Secretary
as part of the survey.
``(H) Penalties.--
``(i) In general.--Subject to clauses
(ii), (iii), and (iv), the Secretary
shall enforce the provisions of this
paragraph with respect to a pharmacy
through the establishment of civil
money penalties applicable to a retail
community pharmacy or an applicable
non-retail pharmacy.
``(ii) Basis for penalties.--The
Secretary shall impose a civil money
penalty established under this
subparagraph on a retail community
pharmacy or applicable non-retail
pharmacy if--
``(I) the retail pharmacy or
applicable non-retail pharmacy
refuses or otherwise fails to
respond to a request for
information about prices in
connection with a survey under
this subsection;
``(II) knowingly provides
false information in response
to such a survey; or
``(III) otherwise fails to
comply with the requirements
established under this
paragraph.
``(iii) Parameters for penalties.--
``(I) In general.--A civil
money penalty established under
this subparagraph may be
assessed with respect to each
violation, and with respect to
each non-compliant retail
community pharmacy (including a
pharmacy that is part of a
chain) or non-compliant
applicable non-retail pharmacy
(including a pharmacy that is
part of a chain), in an amount
not to exceed $100,000 for each
such violation.
``(II) Considerations.--In
determining the amount of a
civil money penalty imposed
under this subparagraph, the
Secretary may consider the
size, business structure, and
type of pharmacy involved, as
well as the type of violation
and other relevant factors, as
determined appropriate by the
Secretary.
``(iv) Rule of application.--The
provisions of section 1128A (other than
subsections (a) and (b)) shall apply to
a civil money penalty under this
subparagraph in the same manner as such
provisions apply to a civil money
penalty or proceeding under section
1128A(a).
``(I) Limitation on use of applicable non-
retail pharmacy pricing information.--No State
shall use pricing information reported by
applicable non-retail pharmacies under
subparagraph (A)(ii) to develop or inform
payment methodologies for retail community
pharmacies.'';
(5) in paragraph (2)--
(A) in subparagraph (A), by inserting ``,
including payment rates and methodologies for
determining ingredient cost reimbursement under
managed care entities or other specified
entities (as such terms are defined in section
1903(m)(9)(D)),'' after ``under this title'';
and
(B) in subparagraph (B), by inserting ``and
the basis for such dispensing fees'' before the
semicolon;
(6) by redesignating paragraph (4) as paragraph (5);
(7) by inserting after paragraph (3) the following
new paragraph:
``(4) Oversight.--
``(A) In general.--The Inspector General of
the Department of Health and Human Services
shall conduct periodic studies of the survey
data reported under this subsection, as
appropriate, including with respect to
substantial variations in acquisition costs or
other applicable costs, as well as with respect
to how internal transfer prices and related
party transactions may influence the costs
reported by pharmacies that are affiliates (as
defined in subsection (k)(13)) or are owned by,
controlled by, or related under a common
ownership structure with a wholesaler,
distributor, or other entity that acquires
covered outpatient drugs relative to costs
reported by pharmacies not affiliated with such
entities. The Inspector General shall provide
periodic updates to Congress on the results of
such studies, as appropriate, in a manner that
does not disclose trade secrets or other
proprietary information.
``(B) Appropriation.--There is appropriated
to the Inspector General of the Department of
Health and Human Services, out of any money in
the Treasury not otherwise appropriated,
$5,000,000 for fiscal year 2026, to remain
available until expended, to carry out this
paragraph.''; and
(8) in paragraph (5), as so redesignated--
(A) by inserting ``, and $8,000,000 for each
of fiscal years 2026 through 2033,'' after
``2010''; and
(B) by inserting ``Funds appropriated under
this paragraph for each of fiscal years 2026
through 2033 shall remain available until
expended.'' after the period.
(b) Definitions.--Section 1927(k) of the Social Security Act
(42 U.S.C. 1396r-8(k)) is amended--
(1) in the matter preceding paragraph (1), by
striking ``In the section'' and inserting ``In this
section''; and
(2) by adding at the end the following new
paragraphs:
``(12) Applicable non-retail pharmacy.--The term
`applicable non-retail pharmacy' means a pharmacy that
is licensed as a pharmacy by the State and that is not
a retail community pharmacy, including a pharmacy that
dispenses prescription medications to patients
primarily through mail and specialty pharmacies. Such
term does not include nursing home pharmacies, long-
term care facility pharmacies, hospital pharmacies,
clinics, charitable or not-for-profit pharmacies,
government pharmacies, or low dispensing pharmacies (as
defined by the Secretary).
``(13) Affiliate.--The term `affiliate' means any
entity that is owned by, controlled by, or related
under a common ownership structure with a pharmacy
benefit manager or a managed care entity or other
specified entity (as such terms are defined in section
1903(m)(9)(D)).''.
(c) Effective Date.--
(1) In general.--Subject to paragraph (2), the
amendments made by this section shall apply beginning
on the first day of the first quarter that begins on or
after the date that is 6 months after the date of
enactment of this section.
(2) Delayed application to applicable non-retail
pharmacies.--The pharmacy survey requirements
established by the amendments to section 1927(f) of the
Social Security Act (42 U.S.C. 1396r-8(f)) made by this
section shall apply to retail community pharmacies
beginning on the effective date described in paragraph
(1), but shall not apply to applicable non-retail
pharmacies until the first day of the first quarter
that begins on or after the date that is 18 months
after the date of enactment of this section.
(d) Identification of Applicable Non-retail Pharmacies.--
(1) In general.--Not later than January 1, 2027, the
Secretary of Health and Human Services shall, in
consultation with stakeholders as appropriate, publish
guidance specifying pharmacies that meet the definition
of applicable non-retail pharmacies (as such term is
defined in subsection (k)(12) of section 1927 of the
Social Security Act (42 U.S.C. 1396r-8), as added by
subsection (b)), and that will be subject to the survey
requirements under subsection (f)(1) of such section,
as amended by subsection (a).
(2) Inclusion of pharmacy type indicators.--The
guidance published under paragraph (1) shall include
pharmacy type indicators to distinguish between
different types of applicable non-retail pharmacies,
such as pharmacies that dispense prescriptions
primarily through the mail and pharmacies that dispense
prescriptions that require special handling or
distribution. An applicable non-retail pharmacy may be
identified through multiple pharmacy type indicators.
(e) Implementation.--
(1) In general.--Notwithstanding any other provision
of law, the Secretary of Health and Human Services may
implement the amendments made by this section by
program instruction or otherwise.
(2) Nonapplication of administrative procedure act.--
Implementation of the amendments made by this section
shall be exempt from the requirements of section 553 of
title 5, United States Code.
(f) Nonapplication of Paperwork Reduction Act.--Chapter 35 of
title 44, United States Code, shall not apply to any data
collection undertaken by the Secretary of Health and Human
Services under section 1927(f) of the Social Security Act (42
U.S.C. 1396r-8(f)), as amended by this section.

SEC. 44124. PREVENTING THE USE OF ABUSIVE SPREAD PRICING IN MEDICAID.

(a) In General.--Section 1927 of the Social Security Act (42
U.S.C. 1396r-8) is amended--
(1) in subsection (e), by adding at the end the
following new paragraph:
``(6) Transparent prescription drug pass-through
pricing required.--
``(A) In general.--A contract between the
State and a pharmacy benefit manager (referred
to in this paragraph as a `PBM'), or a contract
between the State and a managed care entity or
other specified entity (as such terms are
defined in section 1903(m)(9)(D) and
collectively referred to in this paragraph as
the `entity') that includes provisions making
the entity responsible for coverage of covered
outpatient drugs dispensed to individuals
enrolled with the entity, shall require that
payment for such drugs and related
administrative services (as applicable),
including payments made by a PBM on behalf of
the State or entity, is based on a transparent
prescription drug pass-through pricing model
under which--
``(i) any payment made by the entity
or the PBM (as applicable) for such a
drug--
``(I) is limited to--
``(aa) ingredient
cost; and
``(bb) a professional
dispensing fee that is
not less than the
professional dispensing
fee that the State
would pay if the State
were making the payment
directly in accordance
with the State plan;
``(II) is passed through in
its entirety (except as reduced
under Federal or State laws and
regulations in response to
instances of waste, fraud, or
abuse) by the entity or PBM to
the pharmacy or provider that
dispenses the drug; and
``(III) is made in a manner
that is consistent with
sections 447.502, 447.512,
447.514, and 447.518 of title
42, Code of Federal Regulations
(or any successor regulation)
as if such requirements applied
directly to the entity or the
PBM, except that any payment by
the entity or the PBM for the
ingredient cost of such drug
purchased by a covered entity
(as defined in subsection
(a)(5)(B)) may exceed the
actual acquisition cost (as
defined in 447.502 of title 42,
Code of Federal Regulations, or
any successor regulation) for
such drug if--
``(aa) such drug was
subject to an agreement
under section 340B of
the Public Health
Service Act;
``(bb) such payment
for the ingredient cost
of such drug does not
exceed the maximum
payment that would have
been made by the entity
or the PBM for the
ingredient cost of such
drug if such drug had
not been purchased by
such covered entity;
and
``(cc) such covered
entity reports to the
Secretary (in a form
and manner specified by
the Secretary), on an
annual basis and with
respect to payments for
the ingredient costs of
such drugs so purchased
by such covered entity
that are in excess of
the actual acquisition
costs for such drugs,
the aggregate amount of
such excess;
``(ii) payment to the entity or the
PBM (as applicable) for administrative
services performed by the entity or PBM
is limited to an administrative fee
that reflects the fair market value (as
defined by the Secretary) of such
services;
``(iii) the entity or the PBM (as
applicable) makes available to the
State, and the Secretary upon request
in a form and manner specified by the
Secretary, all costs and payments
related to covered outpatient drugs and
accompanying administrative services
(as described in clause (ii)) incurred,
received, or made by the entity or the
PBM, broken down (as specified by the
Secretary), to the extent such costs
and payments are attributable to an
individual covered outpatient drug, by
each such drug, including any
ingredient costs, professional
dispensing fees, administrative fees
(as described in clause (ii)), post-
sale and post-invoice fees, discounts,
or related adjustments such as direct
and indirect remuneration fees, and any
and all other remuneration, as defined
by the Secretary; and
``(iv) any form of spread pricing
whereby any amount charged or claimed
by the entity or the PBM (as
applicable) that exceeds the amount
paid to the pharmacies or providers on
behalf of the State or entity,
including any post-sale or post-invoice
fees, discounts, or related adjustments
such as direct and indirect
remuneration fees or assessments, as
defined by the Secretary, (after
allowing for an administrative fee as
described in clause (ii)) is not
allowable for purposes of claiming
Federal matching payments under this
title.
``(B) Publication of information.--The
Secretary shall publish, not less frequently
than on an annual basis and in a manner that
does not disclose the identity of a particular
covered entity or organization, information
received by the Secretary pursuant to
subparagraph (A)(iii)(III) that is broken out
by State and by each of the following
categories of covered entity within each such
State:
``(i) Covered entities described in
subparagraph (A) of section 340B(a)(4)
of the Public Health Service Act.
``(ii) Covered entities described in
subparagraphs (B) through (K) of such
section.
``(iii) Covered entities described in
subparagraph (L) of such section.
``(iv) Covered entities described in
subparagraph (M) of such section.
``(v) Covered entities described in
subparagraph (N) of such section.
``(vi) Covered entities described in
subparagraph (O) of such section.'';
and
(2) in subsection (k), as previously amended by this
subtitle, by adding at the end the following new
paragraph:
``(14) Pharmacy benefit manager.--The term `pharmacy
benefit manager' means any person or entity that,
either directly or through an intermediary, acts as a
price negotiator or group purchaser on behalf of a
State, managed care entity (as defined in section
1903(m)(9)(D)), or other specified entity (as so
defined), or manages the prescription drug benefits
provided by a State, managed care entity, or other
specified entity, including the processing and payment
of claims for prescription drugs, the performance of
drug utilization review, the processing of drug prior
authorization requests, the managing of appeals or
grievances related to the prescription drug benefits,
contracting with pharmacies, controlling the cost of
covered outpatient drugs, or the provision of services
related thereto. Such term includes any person or
entity that acts as a price negotiator (with regard to
payment amounts to pharmacies and providers for a
covered outpatient drug or the net cost of the drug) or
group purchaser on behalf of a State, managed care
entity, or other specified entity or that carries out 1
or more of the other activities described in the
preceding sentence, irrespective of whether such person
or entity calls itself a pharmacy benefit manager.''.
(b) Conforming Amendments.--Section 1903(m) of such Act (42
U.S.C. 1396b(m)) is amended--
(1) in paragraph (2)(A)(xiii)--
(A) by striking ``and (III)'' and inserting
``(III)'';
(B) by inserting before the period at the end
the following: ``, and (IV) if the contract
includes provisions making the entity
responsible for coverage of covered outpatient
drugs, the entity shall comply with the
requirements of section 1927(e)(6)''; and
(C) by moving the left margin 2 ems to the
left; and
(2) by adding at the end the following new paragraph:
``(10) No payment shall be made under this title to a
State with respect to expenditures incurred by the
State for payment for services provided by an other
specified entity (as defined in paragraph (9)(D)(iii))
unless such services are provided in accordance with a
contract between the State and such entity which
satisfies the requirements of paragraph
(2)(A)(xiii).''.
(c) Effective Date.--The amendments made by this section
shall apply to contracts between States and managed care
entities, other specified entities, or pharmacy benefit
managers that have an effective date beginning on or after the
date that is 18 months after the date of enactment of this
section.
(d) Implementation.--
(1) In general.--Notwithstanding any other provision
of law, the Secretary of Health and Human Services may
implement the amendments made by this section by
program instruction or otherwise.
(2) Nonapplication of administrative procedure act.--
Implementation of the amendments made by this section
shall be exempt from the requirements of section 553 of
title 5, United States Code.
(e) Nonapplication of Paperwork Reduction Act.--Chapter 35 of
title 44, United States Code, shall not apply to any data
collection undertaken by the Secretary of Health and Human
Services under section 1927(e) of the Social Security Act (42
U.S.C. 1396r-8(e)), as amended by this section.

SEC. 44125. PROHIBITING FEDERAL MEDICAID AND CHIP FUNDING FOR GENDER
TRANSITION PROCEDURES FOR MINORS.

(a) Medicaid.--Section 1903(i) of the Social Security Act (42
U.S.C. 1396b(i)) is amended--
(1) in paragraph (26), by striking ``; or'' and
inserting a semicolon;
(2) in paragraph (27), by striking the period at the
end and inserting ``; or'';
(3) by inserting after paragraph (27) the following
new paragraph:
``(28) with respect to any amount expended for
specified gender transition procedures (as defined in
section 1905(kk)) furnished to an individual under 18
years of age enrolled in a State plan (or waiver of
such plan).''; and
(4) in the flush left matter at the end, by striking
``and (18),'' and inserting ``(18), and (28)''.
(b) CHIP.--Section 2107(e)(1)(N) of the Social Security Act
(42 U.S.C. 1397gg(e)(1)(N)) is amended by striking ``and (17)''
and inserting ``(17), and (28)''.
(c) Specified Gender Transition Procedures Defined.--Section
1905 of the Social Security Act (42 U.S.C. 1396d) is amended by
adding at the end the following new subsection:
``(kk) Specified Gender Transition Procedures.--
``(1) In general.--For purposes of section
1903(i)(28), except as provided in paragraph (2), the
term `specified gender transition procedure' means,
with respect to an individual, any of the following
when performed for the purpose of intentionally
changing the body of such individual (including by
disrupting the body's development, inhibiting its
natural functions, or modifying its appearance) to no
longer correspond to the individual's sex:
``(A) Performing any surgery, including--
``(i) castration;
``(ii) sterilization;
``(iii) orchiectomy;
``(iv) scrotoplasty;
``(v) vasectomy;
``(vi) tubal ligation;
``(vii) hysterectomy;
``(viii) oophorectomy;
``(ix) ovariectomy;
``(x) metoidioplasty;
``(xi) clitoroplasty;
``(xii) reconstruction of the fixed
part of the urethra with or without a
metoidioplasty or a phalloplasty;
``(xiii) penectomy;
``(xiv) phalloplasty;
``(xv) vaginoplasty;
``(xvi) vaginectomy;
``(xvii) vulvoplasty;
``(xviii) reduction
thyrochondroplasty;
``(xix) chondrolaryngoplasty;
``(xx) mastectomy; and
``(xxi) any plastic, cosmetic, or
aesthetic surgery that feminizes or
masculinizes the facial or other body
features of an individual.
``(B) Any placement of chest implants to
create feminine breasts or any placement of
erection or testicular prostheses.
``(C) Any placement of fat or artificial
implants in the gluteal region.
``(D) Administering, prescribing, or
dispensing to an individual medications,
including--
``(i) gonadotropin-releasing hormone
(GnRH) analogues or other puberty-
blocking drugs to stop or delay normal
puberty; and
``(ii) testosterone, estrogen, or
other androgens to an individual at
doses that are supraphysiologic than
would normally be produced endogenously
in a healthy individual of the same age
and sex.
``(2) Exception.--Paragraph (1) shall not apply to
the following when furnished to an individual by a
health care provider with the consent of such
individual's parent or legal guardian:
``(A) Puberty suppression or blocking
prescription drugs for the purpose of
normalizing puberty for an individual
experiencing precocious puberty.
``(B) Medically necessary procedures or
treatments to correct for--
``(i) a medically verifiable disorder
of sex development, including--
``(I) 46,XX chromosomes with
virilization;
``(II) 46,XY chromosomes with
undervirilization; and
``(III) both ovarian and
testicular tissue;
``(ii) sex chromosome structure, sex
steroid hormone production, or sex
hormone action, if determined to be
abnormal by a physician through genetic
or biochemical testing;
``(iii) infection, disease, injury,
or disorder caused or exacerbated by a
previous procedure described in
paragraph (1), or a physical disorder,
physical injury, or physical illness
that would, as certified by a
physician, place the individual in
imminent danger of death or impairment
of a major bodily function unless the
procedure is performed, not including
procedures performed for the
alleviation of mental distress; or
``(iv) procedures to restore or
reconstruct the body of the individual
in order to correspond to the
individual's sex after one or more
previous procedures described in
paragraph (1), which may include the
removal of a pseudo phallus or breast
augmentation.
``(3) Sex.--For purposes of paragraph (1), the term
`sex' means either male or female, as biologically
determined and defined in paragraphs (4) and (5),
respectively.
``(4) Female.--For purposes of paragraph (3), the
term `female' means an individual who naturally has,
had, will have, or would have, but for a developmental
or genetic anomaly or historical accident, the
reproductive system that at some point produces,
transports, and utilizes eggs for fertilization.
``(5) Male.--For purposes of paragraph (3), the term
`male' means an individual who naturally has, had, will
have, or would have, but for a developmental or genetic
anomaly or historical accident, the reproductive system
that at some point produces, transports, and utilizes
sperm for fertilization.''.

SEC. 44126. FEDERAL PAYMENTS TO PROHIBITED ENTITIES.

(a) In General.--No Federal funds that are considered direct
spending and provided to carry out a State plan under title XIX
of the Social Security Act or a waiver of such a plan shall be
used to make payments to a prohibited entity for items and
services furnished during the 10-year period beginning on the
date of the enactment of this Act, including any payments made
directly to the prohibited entity or under a contract or other
arrangement between a State and a covered organization.
(b) Definitions.--In this section:
(1) Prohibited entity.--The term ``prohibited
entity'' means an entity, including its affiliates,
subsidiaries, successors, and clinics--
(A) that, as of the date of enactment of this
Act--
(i) is an organization described in
section 501(c)(3) of the Internal
Revenue Code of 1986 and exempt from
tax under section 501(a) of such Code;
(ii) is an essential community
provider described in section 156.235
of title 45, Code of Federal
Regulations (as in effect on the date
of enactment of this Act), that is
primarily engaged in family planning
services, reproductive health, and
related medical care; and
(iii) provides for abortions, other
than an abortion--
(I) if the pregnancy is the
result of an act of rape or
incest; or
(II) in the case where a
woman suffers from a physical
disorder, physical injury, or
physical illness, including a
life-endangering physical
condition caused by or arising
from the pregnancy itself, that
would, as certified by a
physician, place the woman in
danger of death unless an
abortion is performed; and
(B) for which the total amount of Federal and
State expenditures under the Medicaid program
under title XIX of the Social Security Act in
fiscal year 2024 made directly, or by a covered
organization, to the entity or to any
affiliates, subsidiaries, successors, or
clinics of the entity, or made to the entity or
to any affiliates, subsidiaries, successors, or
clinics of the entity as part of a nationwide
health care provider network, exceeded
$1,000,000.
(2) Direct spending.--The term ``direct spending''
has the meaning given that term under section 250(c) of
the Balanced Budget and Emergency Deficit Control Act
of 1985 (2 U.S.C. 900(c)).
(3) Covered organization.--The term ``covered
organization'' means a managed care entity (as defined
in section 1932(a)(1)(B) of the Social Security Act (42
U.S.C. 1396u-2(a)(1)(B))) or a prepaid inpatient health
plan or prepaid ambulatory health plan (as such terms
are defined in section 1903(m)(9)(D) of such Act (42
U.S.C. 1396b(m)(9)(D))).
(4) State.--The term ``State'' has the meaning given
such term in section 1101 of the Social Security Act
(42 U.S.C. 1301).

Subpart C--Stopping Abusive Financing Practices

SEC. 44131. SUNSETTING ELIGIBILITY FOR INCREASED FMAP FOR NEW EXPANSION
STATES.

Section 1905(ii)(3) of the Social Security Act (42 U.S.C.
1396d(ii)(3)) is amended--
(1) by striking ``which has not'' and inserting the
following: ``which--
``(A) has not'';
(2) in subparagraph (A), as so inserted, by striking
the period at the end and inserting ``; and''; and
(3) by adding at the end the following new
subparagraph:
``(B) begins to expend amounts for all such
individuals prior to January 1, 2026.''.

SEC. 44132. MORATORIUM ON NEW OR INCREASED PROVIDER TAXES.

Section 1903(w)(1)(A)(iii) of the Social Security Act (42
U.S.C. 1396b(w)(1)(A)(iii)) is amended--
(1) by striking ``or'' at the end;
(2) by striking ``if there'' and inserting ``if--
``(I) there''; and
(3) by adding at the end the following new
subclauses:
``(II) the tax is first imposed by the State
(or by a unit of local government in the State)
on or after the date of the enactment of this
subclause (other than such a tax for which the
legislation or regulations providing for the
imposition of such tax were enacted or adopted
prior to such date of enactment); or
``(III) on or after the date of the enactment
of this subclause, the State (or unit of local
government) increases the amount or rate of tax
imposed with respect to a class of health care
items or services (or with respect to a type of
provider or activity within such a class), or
increases the base of the tax such that the tax
is imposed with respect to a class of items or
services (or with respect to a type of provider
or activity within such a class) to which the
tax did not previously apply, but only to the
extent that such revenues are attributable to
such increase and only if such increase was not
provided for in legislation or regulations
enacted or adopted prior to such date of
enactment; or''.

SEC. 44133. REVISING THE PAYMENT LIMIT FOR CERTAIN STATE DIRECTED
PAYMENTS.

(a) In General.--Subject to subsection (b), the Secretary of
Health and Human Services shall revise section 438.6(c)(2)(iii)
of title 42, Code of Federal Regulations (or a successor
regulation) such that, with respect to a payment described in
such section made for a service furnished during a rating
period beginning on or after the date of the enactment of this
Act, the total payment rate for such service is limited to 100
percent of the specified total published Medicare payment rate.
(b) Grandfathering Certain Payments.--In the case of a
payment described in section 438.6(c)(2)(iii) of title 42, Code
of Federal Regulations (or a successor regulation) for which
written prior approval was made before the date of the
enactment of this Act for the rating period occurring as of
such date of enactment, or a payment so described for such
rating period for which a preprint was submitted to the
Secretary of Health and Human Services prior to such date of
enactment, the revisions described in subsection (a) shall not
apply to such payment for such rating period and for any
subsequent rating period if the amount of such payment does not
exceed the amount of such payment so approved.
(c) Definitions.--In this section:
(1) Rating period.--The term ``rating period'' has
the meaning given such term in section 438.2 of title
42, Code of Federal Regulations (or a successor
regulation).
(2) Total published medicare payment rate.--The term
``total published Medicare payment rate'' means amounts
calculated as payment for specific services that have
been developed under part A or part B of title XVIII of
the Social Security Act (42 U.S.C. 1395 et seq.).
(3) Written prior approval.--The term ``written prior
approval'' has the meaning given such term in section
438.6(c)(2)(i) of title 42, Code of Federal Regulations
(or a successor regulation).
(d) Funding.--There are appropriated out of any monies in the
Treasury not otherwise appropriated $7,000,000 for each of
fiscal years 2026 through 2033 for purposes of carrying out
this section.

SEC. 44134. REQUIREMENTS REGARDING WAIVER OF UNIFORM TAX REQUIREMENT
FOR MEDICAID PROVIDER TAX.

(a) In General.--Section 1903(w) of the Social Security Act
(42 U.S.C. 1396b(w)) is amended--
(1) in paragraph (3)(E), by inserting after clause
(ii)(II) the following new clause:
``(iii) For purposes of clause (ii)(I), a tax is not
considered to be generally redistributive if any of the
following conditions apply:
``(I) Within a permissible class, the tax rate
imposed on any taxpayer or tax rate group (as defined
in paragraph (7)(J)) explicitly defined by its
relatively lower volume or percentage of Medicaid
taxable units (as defined in paragraph (7)(H)) is lower
than the tax rate imposed on any other taxpayer or tax
rate group explicitly defined by its relatively higher
volume or percentage of Medicaid taxable units.
``(II) Within a permissible class, the tax rate
imposed on any taxpayer or tax rate group (as so
defined) based upon its Medicaid taxable units (as so
defined) is higher than the tax rate imposed on any
taxpayer or tax rate group based upon its non-Medicaid
taxable unit (as defined in paragraph (7)(I)).
``(III) The tax excludes or imposes a lower tax rate
on a taxpayer or tax rate group (as so defined) based
on or defined by any description that results in the
same effect as described in subclause (I) or (II) for a
taxpayer or tax rate group. Characteristics that may
indicate such type of exclusion include the use of
terminology to establish a tax rate group--
``(aa) based on payments or expenditures made
under the program under this title without
mentioning the term `Medicaid' (or any similar
term) to accomplish the same effect as
described in subclause (I) or (II); or
``(bb) that closely approximates a taxpayer
or tax rate group under the program under this
title, to the same effect as described in
subclause (I) or (II).''; and
(2) in paragraph (7), by adding at the end the
following new subparagraphs:
``(H) The term `Medicaid taxable unit' means a unit
that is being taxed within a health care related tax
that is applicable to the program under this title.
Such term includes a unit that is used as the basis
for--
``(i) payment under the program under this
title (such as Medicaid bed days);
``(ii) Medicaid revenue;
``(iii) costs associated with the program
under this title (such as Medicaid charges,
claims, or expenditures); and
``(iv) other units associated with the
program under this title, as determined by the
Secretary.
``(I) The term `non-Medicaid taxable unit' means a
unit that is being taxed within a health care related
tax that is not applicable to the program under this
title. Such term includes a unit that is used as the
basis for--
``(i) payment by non-Medicaid payers (such as
non-Medicaid bed days);
``(ii) non-Medicaid revenue;
``(iii) costs that are not associated with
the program under this title (such as non-
Medicaid charges, non-Medicaid claims, or non-
Medicaid expenditures); and
``(iv) other units not associated with the
program under this title, as determined by the
Secretary.
``(J) The term `tax rate group' means a group of
entities contained within a permissible class of a
health care related tax that are taxed at the same
rate.''.
(b) Effective Date.--The amendments made by this section
shall take effect upon the date of enactment of this Act,
subject to any applicable transition period determined
appropriate by the Secretary of Health and Human Services, not
to exceed 3 fiscal years.

SEC. 44135. REQUIRING BUDGET NEUTRALITY FOR MEDICAID DEMONSTRATION
PROJECTS UNDER SECTION 1115.

Section 1115 of the Social Security Act (42 U.S.C. 1315) is
amended by adding at the end the following new subsection:
``(g) Requirement of Budget Neutrality for Medicaid
Demonstration Projects.--
``(1) In general.--Beginning on the date of the
enactment of this subsection, the Secretary may not
approve an application for (or renewal or amendment of)
an experimental, pilot, or demonstration project
undertaken under subsection (a) to promote the
objectives of title XIX in a State (in this subsection
referred to as a `Medicaid demonstration project')
unless the Secretary certifies that such project is not
expected to result in an increase in the amount of
Federal expenditures compared to the amount that such
expenditures would otherwise be in the absence of such
project.
``(2) Treatment of savings.--In the event that
Federal expenditures with respect to a State under a
Medicaid demonstration project are, during an approval
period for such project, less than the amount of such
expenditures that would have otherwise been made in the
absence of such project, the Secretary shall specify
the methodology to be used with respect to any
subsequent approval period for such project for
purposes of taking the difference between such
expenditures into account.''.

Subpart D--Increasing Personal Accountability

SEC. 44141. REQUIREMENT FOR STATES TO ESTABLISH MEDICAID COMMUNITY
ENGAGEMENT REQUIREMENTS FOR CERTAIN INDIVIDUALS.

(a) In General.--Section 1902 of the Social Security Act (42
U.S.C. 1396a), as amended by sections 44103 and 44104, is
further amended by adding at the end the following new
subsection:
``(xx) Community Engagement Requirement for Applicable
Individuals.--
``(1) In general.--Beginning January 1, 2029, subject
to the succeeding provisions of this subsection, a
State shall provide, as a condition of eligibility for
medical assistance for an applicable individual, that
such individual is required to demonstrate community
engagement under paragraph (2)--
``(A) in the case of an applicable individual
who has filed an application for medical
assistance under a State plan (or a waiver of
such plan) under this title, for 1 or more (as
specified by the State) consecutive months
immediately preceding the month during which
such individual applies for such medical
assistance; and
``(B) in the case of an applicable individual
enrolled and receiving medical assistance under
a State plan (or under a waiver of such plan)
under this title, for 1 or more (as specified
by the State) months, whether or not
consecutive--
``(i) during the period between such
individual's most recent determination
(or redetermination, as applicable) of
eligibility and such individual's next
regularly scheduled redetermination of
eligibility (as verified by the State
as part of such regularly scheduled
redetermination of eligibility); or
``(ii) in the case of a State that
has elected under paragraph (4) to
conduct more frequent verifications of
compliance with the requirement to
demonstrate community engagement,
during the period between the most
recent and next such verification with
respect to such individual.
``(2) Community engagement compliance described.--
Subject to paragraph (3), an applicable individual
demonstrates community engagement under this paragraph
for a month if such individual meets 1 or more of the
following conditions with respect to such month, as
determined in accordance with criteria established by
the Secretary through regulation:
``(A) The individual works not less than 80
hours.
``(B) The individual completes not less than
80 hours of community service.
``(C) The individual participates in a work
program for not less than 80 hours.
``(D) The individual is enrolled in an
educational program at least half-time.
``(E) The individual engages in any
combination of the activities described in
subparagraphs (A) through (D), for a total of
not less than 80 hours.
``(F) The individual has a monthly income
that is not less than the applicable minimum
wage requirement under section 6 of the Fair
Labor Standards Act of 1938, multiplied by 80
hours.
``(3) Exceptions.--
``(A) Mandatory exception for certain
individuals.--The State shall deem an
applicable individual to have demonstrated
community engagement under paragraph (2) for a
month if--
``(i) for part or all of such month,
the individual--
``(I) was a specified
excluded individual (as defined
in paragraph (9)(A)(ii)); or
``(II) was--
``(aa) under the age
of 19;
``(bb) pregnant or
entitled to postpartum
medical assistance
under paragraph (5) or
(16) of subsection (e);
``(cc) entitled to,
or enrolled for,
benefits under part A
of title XVIII, or
enrolled for benefits
under part B of title
XVIII; or
``(dd) described in
any of subclauses (I)
through (VII) of
subsection
(a)(10)(A)(i); or
``(ii) at any point during the 3-
month period ending on the first day of
such month, the individual was an
inmate of a public institution.
``(B) Optional exception for short-term
hardship events.--
``(i) In general.--The State plan (or
waiver of such plan) may provide, in
the case of an applicable individual
who experiences a short-term hardship
event during a month, that the State
shall, upon the request of such
individual under procedures established
by the State (in accordance with
standards specified by the Secretary),
deem such individual to have
demonstrated community engagement under
paragraph (2) for such month.
``(ii) Short-term hardship event
defined.--For purposes of this
subparagraph, an applicable individual
experiences a short-term hardship event
during a month if, for part or all of
such month--
``(I) such individual
receives inpatient hospital
services, nursing facility
services, services in an
intermediate care facility for
individuals with intellectual
disabilities, inpatient
psychiatric hospital services,
or such other services as the
Secretary determines
appropriate;
``(II) such individual
resides in a county (or
equivalent unit of local
government)--
``(aa) in which there
exists an emergency or
disaster declared by
the President pursuant
to the National
Emergencies Act or the
Robert T. Stafford
Disaster Relief and
Emergency Assistance
Act; or
``(bb) that, subject
to a request from the
State to the Secretary,
made in such form, at
such time, and
containing such
information as the
Secretary may require,
has an unemployment
rate that is at or
above the lesser of--
``(AA) 8
percent; or
``(BB) 1.5
times the
national
unemployment
rate; or
``(III) such individual
experiences any other short-
term hardship (as defined by
the Secretary).
``(4) Option to conduct more frequent compliance
verifications.--With respect to an applicable
individual enrolled and receiving medical assistance
under a State plan (or a waiver of such plan) under
this title, the State shall verify (in accordance with
procedures specified by the Secretary) that each such
individual has met the requirement to demonstrate
community engagement under paragraph (1) during each
such individual's regularly scheduled redetermination
of eligibility, except that a State may provide for
such verifications more frequently.
``(5) Ex parte verifications.--For purposes of
verifying that an applicable individual has met the
requirement to demonstrate community engagement under
paragraph (1), the State shall, in accordance with
standards established by the Secretary, establish
processes and use reliable information available to the
State (such as payroll data) without requiring, where
possible, the applicable individual to submit
additional information.
``(6) Procedure in the case of noncompliance.--
``(A) In general.--If a State is unable to
verify that an applicable individual has met
the requirement to demonstrate community
engagement under paragraph (1) (including, if
applicable, by verifying that such individual
was deemed to have demonstrated community
engagement under paragraph (3)) the State shall
(in accordance with standards specified by the
Secretary)--
``(i) provide such individual with
the notice of noncompliance described
in subparagraph (B);
``(ii) (I) provide such individual
with a period of 30 calendar days,
beginning on the date on which such
notice of noncompliance is received by
the individual, to--
``(aa) make a satisfactory
showing to the State of
compliance with such
requirement (including, if
applicable, by showing that
such individual was deemed to
have demonstrated community
engagement under paragraph
(3)); or
``(bb) make a satisfactory
showing to the State that such
requirement does not apply to
such individual on the basis
that such individual does not
meet the definition of
applicable individual under
paragraph (9)(A); and
``(II) if such individual is enrolled
under the State plan (or a waiver of
such plan) under this title, continue
to provide such individual with medical
assistance during such 30-calendar-day
period; and
``(iii) if no such satisfactory
showing is made and the individual is
not a specified excluded individual
described in paragraph (9)(A)(ii), deny
such individual's application for
medical assistance under the State plan
(or waiver of such plan) or, as
applicable, disenroll such individual
from the plan (or waiver of such plan)
not later than the end of the month
following the month in which such 30-
calendar-day period ends, provided
that--
``(I) the State first
determines whether, with
respect to the individual,
there is any other basis for
eligibility for medical
assistance under the State plan
(or waiver of such plan) or for
another insurance affordability
program; and
``(II) the individual is
provided written notice and
granted an opportunity for a
fair hearing in accordance with
subsection (a)(3).
``(B) Notice.--The notice of noncompliance
provided to an applicable individual under
subparagraph (A)(i) shall include information
(in accordance with standards specified by the
Secretary) on--
``(i) how such individual may make a
satisfactory showing of compliance with
such requirement (as described in
subparagraph (A)(ii)) or make a
satisfactory showing that such
requirement does not apply to such
individual on the basis that such
individual does not meet the definition
of applicable individual under
paragraph (9)(A); and
``(ii) how such individual may
reapply for medical assistance under
the State plan (or a waiver of such
plan) under this title in the case that
such individuals' application is denied
or, as applicable, in the case that
such individual is disenrolled from the
plan (or waiver).
``(7) Treatment of noncompliant individuals in
relation to certain other provisions.--
``(A) Certain fmap increases.--A State shall
not be treated as not providing medical
assistance to all individuals described in
section 1902(a)(10)(A)(i)(VIII), or as not
expending amounts for all such individuals
under the State plan (or waiver of such plan),
solely because such an individual is determined
ineligible for medical assistance under the
State plan (or waiver) on the basis of a
failure to meet the requirement to demonstrate
community engagement under paragraph (1).
``(B) Other provisions.--For purposes of
section 36B(c)(2)(B) of the Internal Revenue
Code of 1986, an individual shall be deemed to
be eligible for minimum essential coverage
described in section 5000A(f)(1)(A)(ii) of such
Code for a month if such individual would have
been eligible for medical assistance under a
State plan (or a waiver of such plan) under
this title but for a failure to meet the
requirement to demonstrate community engagement
under paragraph (1).
``(8) Outreach.--
``(A) In general.--In accordance with
standards specified by the Secretary, beginning
not later than October 1, 2028 (or, if earlier,
the date that precedes January 1, 2029, by the
number of months specified by the State under
paragraph (1)(A) plus 3 months), and
periodically thereafter, the State shall notify
applicable individuals enrolled under a State
plan (or waiver) under this title of the
requirement to demonstrate community engagement
under this subsection. Such notice shall
include information on--
``(i) how to comply with such
requirement, including an explanation
of the exceptions to such requirement
under paragraph (3) and the definition
of the term `applicable individual'
under paragraph (9)(A);
``(ii) the consequences of
noncompliance with such requirement;
and
``(iii) how to report to the State
any change in the individual's status
that could result in--
``(I) the applicability of an
exception under paragraph (3)
(or the end of the
applicability of such an
exception); or
``(II) the individual
qualifying as a specified
excluded individual under
paragraph (9)(A)(ii).
``(B) Form of outreach notice.--A notice
required under subparagraph (A) shall be
delivered--
``(i) by regular mail (or, if elected
by the individual, in an electronic
format); and
``(ii) in 1 or more additional forms,
which may include telephone, text
message, an internet website, other
commonly available electronic means,
and such other forms as the Secretary
determines appropriate.
``(9) Definitions.--In this subsection:
``(A) Applicable individual.--
``(i) In general.--The term
`applicable individual' means an
individual (other than a specified
excluded individual (as defined in
clause (ii)))--
``(I) who is eligible to
enroll (or is enrolled) under
the State plan under subsection
(a)(10)(A)(i)(VIII); or
``(II) who--
``(aa) is otherwise
eligible to enroll (or
is enrolled) under a
waiver of such plan
that provides coverage
that is equivalent to
minimum essential
coverage (as described
in section
5000A(f)(1)(A) of the
Internal Revenue Code
of 1986 and as
determined in
accordance with
standards prescribed by
the Secretary in
regulations); and
``(bb) has attained
the age of 19 and is
under 65 years of age,
is not pregnant, is not
entitled to, or
enrolled for, benefits
under part A of title
XVIII, or enrolled for
benefits under part B
of title XVIII, and is
not otherwise eligible
to enroll under such
plan.
``(ii) Specified excluded
individual.--For purposes of clause
(i), the term `specified excluded
individual' means an individual, as
determined by the State (in accordance
with standards specified by the
Secretary)--
``(I) who is described in
subsection (a)(10)(A)(i)(IX);
``(II) who--
``(aa) is an Indian
or an Urban Indian (as
such terms are defined
in paragraphs (13) and
(28) of section 4 of
the Indian Health Care
Improvement Act);
``(bb) is a
California Indian
described in section
809(a) of such Act; or
``(cc) has otherwise
been determined
eligible as an Indian
for the Indian Health
Service under
regulations promulgated
by the Secretary;
``(III) who is the parent,
guardian, or caretaker relative
of a disabled individual or a
dependent child;
``(IV) who is a veteran with
a disability rated as total
under section 1155 of title 38,
United States Code;
``(V) who is medically frail
or otherwise has special
medical needs (as defined by
the Secretary), including an
individual--
``(aa) who is blind
or disabled (as defined
in section 1614);
``(bb) with a
substance use disorder;
``(cc) with a
disabling mental
disorder;
``(dd) with a
physical, intellectual
or developmental
disability that
significantly impairs
their ability to
perform 1 or more
activities of daily
living;
``(ee) with a serious
and complex medical
condition; or
``(ff) subject to the
approval of the
Secretary, with any
other medical condition
identified by the State
that is not otherwise
identified under this
clause;
``(VI) who--
``(aa) is in
compliance with any
requirements imposed by
the State pursuant to
section 407; or
``(bb) is a member of
a household that
receives supplemental
nutrition assistance
program benefits under
the Food and Nutrition
Act of 2008 and is not
exempt from a work
requirement under such
Act;
``(VII) who is participating
in a drug addiction or
alcoholic treatment and
rehabilitation program (as
defined in section 3(h) of the
Food and Nutrition Act of
2008);
``(VIII) who is an inmate of
a public institution; or
``(IX) who meets such other
criteria as the Secretary
determines appropriate.
``(B) Educational program.--The term
`educational program' means--
``(i) an institution of higher
education (as defined in section 101 of
the Higher Education Act of 1965);
``(ii) a program of career and
technical education (as defined in
section 3 of the Carl D. Perkins Career
and Technical Education Act of 2006);
or
``(iii) any other educational program
that meets such criteria as the
Secretary determines appropriate.
``(C) State.--The term `State' means 1 of the
50 States or the District of Columbia.
``(D) Work program.--The term `work program'
has the meaning given such term in section
6(o)(1) of the Food and Nutrition Act of 2008.
``(10) Prohibiting waiver of community engagement
requirements.--Notwithstanding section 1115(a), the
provisions of this subsection may not be waived.''.
(b) Conforming Amendment.--Section 1902(a)(10)(A)(i)(VIII) of
the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(VIII)) is
amended by striking ``subject to subsection (k)'' and inserting
``subject to subsections (k) and (xx)''.
(c) Rulemaking.--Not later than July 1, 2027, the Secretary
of Health and Human Services shall promulgate regulations for
purposes of carrying out the amendments made by this section.
(d) Grants to States.--
(1) In general.--The Secretary of Health and Human
Services shall, out of amounts appropriated under
paragraph (3), award to each State a grant equal to the
amount specified in paragraph (2) for such State for
purposes of establishing systems necessary to carry out
the provisions of, and amendments made by, this
section.
(2) Amount specified.--For purposes of paragraph (2),
the amount specified in this paragraph is an amount
that bears the same ratio to the amount appropriated
under paragraph (3) as the number of applicable
individuals (as defined in section 1902(xx) of the
Social Security Act, as added by subsection (a))
residing in such State bears to the total number of
such individuals residing in all States.
(3) Funding.--There are appropriated, out of any
monies in the Treasury not otherwise appropriated,
$100,000,000 for fiscal year 2026 for purposes of
awarding grants under paragraph (1).
(4) Definition.--In this subsection, the term
``State'' means 1 of the 50 States and the District of
Columbia.
(e) Implementation Funding.--For the purposes of carrying out
the provisions of, and the amendments made by, this section,
there are appropriated, out of any monies in the Treasury not
otherwise appropriated, to the Secretary of Health and Human
Services, $50,000,000 for fiscal year 2026, to remain available
until expended.

SEC. 44142. MODIFYING COST SHARING REQUIREMENTS FOR CERTAIN EXPANSION
INDIVIDUALS UNDER THE MEDICAID PROGRAM.

(a) In General.--Section 1916 of the Social Security Act (42
U.S.C. 1396o) is amended--
(1) in subsection (a), in the matter preceding
paragraph (1), by inserting ``(other than, beginning
October 1, 2028, specified individuals (as defined in
subsection (k)(3)))'' after ``individuals''; and
(2) by adding at the end the following new
subsection:
``(k) Special Rules for Certain Expansion Individuals.--
``(1) Premiums.--Beginning October 1, 2028, the State
plan shall provide that in the case of a specified
individual (as defined in paragraph (3)) who is
eligible under the plan, no enrollment fee, premium, or
similar charge will be imposed under the plan.
``(2) Required imposition of cost sharing.--
``(A) In general.--Subject to subparagraph
(B) and subsection (j), in the case of a
specified individual, the State plan shall,
beginning October 1, 2028, provide for the
imposition of such deductions, cost sharing, or
similar charges determined appropriate by the
State (in an amount greater than $0) with
respect to medical assistance furnished to such
an individual.
``(B) Limitations.--
``(i) Exclusion of certain
services.--In no case may a deduction,
cost sharing, or similar charge be
imposed under the State plan with
respect to services described in any of
subparagraphs (B) through (J) of
subsection (a)(2) furnished to a
specified individual.
``(ii) Item and service limitation.--
``(I) In general.--Except as
provided in subclause (II), in
no case may a deduction, cost
sharing, or similar charge
imposed under the State plan
with respect to an item or
service furnished to a
specified individual exceed
$35.
``(II) Special rules for
prescription drugs.--In no case
may a deduction, cost sharing,
or similar charge imposed under
the State plan with respect to
a prescription drug furnished
to a specified individual
exceed the limit that would be
applicable under paragraph
(2)(A)(i) or (2)(B) of section
1916A(c) with respect to such
drug and individual if such
drug so furnished were subject
to cost sharing under such
section.
``(iii) Maximum limit on cost
sharing.--The total aggregate amount of
deductions, cost sharing, or similar
charges imposed under the State plan
for all individuals in the family may
not exceed 5 percent of the family
income of the family involved, as
applied on a quarterly or monthly basis
(as specified by the State).
``(C) Cases of nonpayment.--Notwithstanding
subsection (e) or any other provision of law, a
State may permit a provider participating under
the State plan to require, as a condition for
the provision of care, items, or services to a
specified individual entitled to medical
assistance under this title for such care,
items, or services, the payment of any
deductions, cost sharing, or similar charges
authorized to be imposed with respect to such
care, items, or services. Nothing in this
subparagraph shall be construed as preventing a
provider from reducing or waiving the
application of such deductions, cost sharing,
or similar charges on a case-by-case basis.
``(3) Specified individual defined.--For purposes of
this subsection, the term `specified individual' means
an individual enrolled under section
1902(a)(10)(A)(i)(VIII) who has a family income (as
determined in accordance with section 1902(e)(14)) that
exceeds the poverty line (as defined in section
2110(c)(5)) applicable to a family of the size
involved.''.
(b) Conforming Amendments.--
(1) Required application.--Section 1902(a)(14) of the
Social Security Act (42 U.S.C. 1396a(a)(14)) is amended
by inserting ``and provide for imposition of such
deductions, cost sharing, or similar charges for
medical assistance furnished to specified individuals
(as defined in paragraph (3) of section 1916(k)) in
accordance with paragraph (2) of such section'' after
``section 1916''.
(2) Nonapplicability of alternative cost sharing.--
Section 1916A(a)(1) of the Social Security Act (42
U.S.C. 1396o-1(a)(1)) is amended, in the second
sentence, by striking ``or (j)'' and inserting ``(j),
or (k)''.

PART 2--AFFORDABLE CARE ACT

SEC. 44201. ADDRESSING WASTE, FRAUD, AND ABUSE IN THE ACA EXCHANGES.

(a) Changes to Enrollment Periods for Enrolling in
Exchanges.--Section 1311 of the Patient Protection and
Affordable Care Act (42 U.S.C. 18031) is amended--
(1) in subsection (c)(6)--
(A) by striking subparagraph (A);
(B) by striking ``The Secretary'' and
inserting the following:
``(A) In general.--The Secretary'';
(C) by redesignating subparagraphs (B)
through (D) as clauses (i) through (iii),
respectively, and adjusting the margins
accordingly;
(D) in clause (i), as so redesignated, by
striking ``periods, as determined by the
Secretary for calendar years after the initial
enrollment period;'' and inserting the
following: ``periods for plans offered in the
individual market--
``(I) for enrollment for plan
years beginning before January
1, 2026, as determined by the
Secretary; and
``(II) for enrollment for
plan years beginning on or
after January 1, 2026,
beginning on November 1 and
ending on December 15 of the
preceding calendar year;'';
(E) in clause (ii), as so redesignated, by
inserting ``subject to subparagraph (B),''
before ``special enrollment periods
specified''; and
(F) by adding at the end the following new
subparagraph:
``(B) Prohibited special enrollment period.--
With respect to plan years beginning on or
after January 1, 2026, the Secretary may not
require an Exchange to provide for a special
enrollment period for an individual on the
basis of the relationship of the income of such
individual to the poverty line, other than a
special enrollment period based on a change in
circumstances or the occurrence of a specific
event.''; and
(2) in subsection (d), by adding at the end the
following new paragraphs:
``(8) Prohibited enrollment periods.--An Exchange may
not provide for, with respect to enrollment for plan
years beginning on or after January 1, 2026--
``(A) an annual open enrollment period other
than the period described in subparagraph
(A)(i) of subsection (c)(6); or
``(B) a special enrollment period described
in subparagraph (B) of such subsection.
``(9) Verification of eligibility for special
enrollment periods.--
``(A) In general.--With respect to enrollment
for plan years beginning on or after January 1,
2026, an Exchange shall verify that each
individual seeking to enroll in a qualified
health plan offered by the Exchange during a
special enrollment period selected under
subparagraph (B) is eligible to enroll during
such special enrollment period prior to
enrolling such individual in such plan.
``(B) Selected special enrollment periods.--
For purposes of subparagraph (A), an Exchange
shall select one or more special enrollment
periods for a plan year with respect to which
such Exchange shall conduct the verification
required under subparagraph (A) such that the
Exchange conducts such verification for not
less than 75 percent of all individuals
enrolling in a qualified health plan offered by
the Exchange during any special enrollment
period with respect to such plan year.''.
(b) Verifying Income for Individuals Enrolling in a Qualified
Health Plan Through an Exchange.--
(1) In general.--Section 1411(e)(4) of the Patient
Protection and Affordable Care Act (42 U.S.C.
18081(e)(4)) is amended--
(A) by redesignating subparagraph (C) as
subparagraph (E); and
(B) by inserting after subparagraph (B) the
following new subparagraphs:
``(C) Requiring verification of income and
family size when tax data is unavailable.--For
plan years beginning on or after January 1,
2026, for purposes of subparagraph (A), in the
case that the Exchange requests data from the
Secretary of the Treasury regarding an
individual's household income and the Secretary
of the Treasury does not return such data, such
information may not be verified solely on the
basis of the attestation of such individual
with respect to such household income, and the
Exchange shall take the actions described in
subparagraph (A).
``(D) Requiring verification of income in the
case of certain income discrepancies.--
``(i) In general.--Subject to clause
(iii), for plan years beginning on or
after January 1, 2026, for purposes of
subparagraph (A), in the case that a
specified income discrepancy described
in clause (ii) of this subparagraph
exists with respect to the information
provided by an applicant under
subsection (b)(3), the household income
of such individual shall be treated as
inconsistent with information in the
records maintained by persons under
subsection (c), or as not verified
under subsection (d), and the Exchange
shall take the actions described in
such subparagraph (A).
``(ii) Specified income
discrepancy.--For purposes of clause
(i), a specified income discrepancy
exists with respect to the information
provided by an applicant under
subsection (b)(3) if--
``(I) the applicant attests
to a projected annual household
income that would qualify such
applicant to be an applicable
taxpayer under section
36B(c)(1)(A) of the Internal
Revenue Code of 1986 with
respect to the taxable year
involved;
``(II) the Exchange receives
data from the Secretary of the
Treasury or the Commissioner of
Social Security, or other
reliable, third party data,
that indicates that the
household income of such
applicant is less than the
household income that would
qualify such applicant to be an
applicable taxpayer under such
section 36B(c)(1)(A) with
respect to the taxable year
involved;
``(III) such attested
projected annual household
income exceeds the income
reflected in the data described
in subclause (II) by a
reasonable threshold
established by the Exchange and
approved by the Secretary
(which shall be not less than
10 percent, and may also be a
dollar amount); and
``(IV) the Exchange has not
assessed or determined based on
the data described in subclause
(II) that the household income
of the applicant meets the
applicable income-based
eligibility standard for the
Medicaid program under title
XIX of the Social Security Act
or the State children's health
insurance program under title
XXI of such Act.
``(iii) Exclusion of certain
individuals ineligible for medicaid.--
This subparagraph shall not apply in
the case of an applicant who is an
alien lawfully present in the United
States, who is not eligible for the
Medicaid program under title XIX of the
Social Security Act by reason of such
alien status.''.
(2) Requiring individuals on whose behalf advance
payments of the premium tax credits are made to file
and reconcile on an annual basis.--Section 1412(b) of
the Patient Protection and Affordable Care Act (42
U.S.C. 18082(b)) is amended by adding at the end the
following new paragraph:
``(3) Annual requirement to file and reconcile.--
``(A) In general.--For plan years beginning
on or after January 1, 2026, in the case of an
individual with respect to whom any advance
payment of the premium tax credit allowable
under section 36B of the Internal Revenue Code
of 1986 was made under this section to the
issuer of a qualified health plan for the
relevant prior tax year, an advance
determination of eligibility for such premium
tax credit may not be made under this
subsection with respect to such individual and
such plan year if the Exchange determines,
based on information provided by the Secretary
of the Treasury, that such individual--
``(i) has not filed an income tax
return, as required under sections 6011
and 6012 of such Code (and implementing
regulations), for the relevant prior
tax year; or
``(ii) as necessary, has not
reconciled (in accordance with
subsection (f) of such section 36B) the
advance payment of the premium tax
credit made with respect to such
individual for such relevant prior tax
year.
``(B) Relevant prior tax year.--For purposes
of subparagraph (A), the term `relevant prior
tax year' means, with respect to the advance
determination of eligibility made under this
subsection with respect to an individual, the
taxable year for which tax return data would be
used for purposes of verifying the household
income and family size of such individual (as
described in section 1411(b)(3)(A)).
``(C) Preliminary attestation.--If an
individual subject to subparagraph (A) attests
that such individual has fulfilled the
requirements to file an income tax return for
the relevant prior tax year and, as necessary,
to reconcile the advance payment of the premium
tax credit made with respect to such individual
for such relevant prior tax year (as described
in clauses (i) and (ii) of such subparagraph),
the Secretary may make an initial advance
determination of eligibility with respect to
such individual and may delay for a reasonable
period (as determined by the Secretary) any
determination based on information provided by
the Secretary of the Treasury that such
individual has not fulfilled such requirements.
``(D) Notice.--If the Secretary determines
that an individual did not meet the
requirements described in subparagraph (A) with
respect to the relevant prior tax year and
notifies the Exchange of such determination,
the Exchange shall comply with the notification
requirement described in section
155.305(f)(4)(i) of title 45, Code of Federal
Regulations (as in effect with respect to plan
year 2025).''.
(3) Removing automatic extension of period to resolve
income inconsistencies.--The Secretary of Health and
Human Services shall revise section 155.315(f) of title
45, Code of Federal Regulations (or any successor
regulation), to remove paragraph (7) of such section
such that, with respect to enrollment for plan years
beginning on or after January 1, 2026, in the case that
an Exchange established under subtitle D of title I of
the Patient Protection and Affordable Care Act (42
U.S.C. 18021 et seq.) provides an individual applying
for enrollment in a qualified health plan with a 90-day
period to resolve an inconsistency in the application
of such individual pursuant to section
1411(e)(4)(A)(ii)(II) of such Act, the Exchange may not
provide for an automatic extension to such 90-day
period on the basis that such individual is required to
present satisfactory documentary evidence to verify
household income.
(c) Revising Rules on Allowable Variation in Actuarial Value
of Health Plans.--The Secretary of Health and Human Services
shall--
(1) revise section 156.140(c) of title 45, Code of
Federal Regulations (or a successor regulation), to
provide that, for plan years beginning on or after
January 1, 2026, the allowable variation in the
actuarial value of a health plan applicable under such
section shall be the allowable variation for such plan
applicable under such section for plan year 2022;
(2) revise section 156.200(b)(3) of title 45, Code of
Federal Regulations (or a successor regulation), to
provide that, for plan years beginning on or after
January 1, 2026, the requirement for a qualified health
plan issuer described in such section is that the
issuer ensures that each qualified health plan complies
with benefit design standards, as defined in section
156.20 of such title; and
(3) revise section 156.400 of title 45, Code of
Federal Regulations (or a successor regulation), to
provide that, for plan years beginning on or after
January 1, 2026, the term ``de minimis variation for a
silver plan variation'' means a minus 1 percentage
point and plus 1 percentage point allowable actuarial
value variation.
(d) Updating Premium Adjustment Percentage Methodology.--
Section 1302(c)(4) of the Patient Protection and Affordable
Care Act (42 U.S.C. 18022(c)(4)) is amended--
(1) by striking ``For purposes'' and inserting:
``(A) In general.--For purposes''; and
(2) by adding at the end the following new
subparagraph:
``(B) Update to methodology.--For calendar
years beginning with 2026, the premium
adjustment percentage under this paragraph for
such calendar year shall be determined
consistent with the methodology published in
the Federal Register on April 25, 2019 (84 Fed.
Reg. 17537 through 17541).''.
(e) Eliminating the Fixed-dollar and Gross-percentage
Thresholds Applicable to Exchange Enrollments.--The Secretary
of Health and Human Services shall revise section 155.400(g) of
title 45, Code of Federal Regulations (or a successor
regulation) to eliminate, for plan years beginning on or after
January 1, 2026, the gross premium percentage-based premium
payment threshold policy described in paragraph (2) of such
section and the fixed-dollar premium payment threshold policy
described in paragraph (3) of such section.
(f) Prohibiting Automatic Reenrollment From Bronze to Silver
Level Qualified Health Plans Offered by Exchanges.--The
Secretary of Health and Human Services shall revise section
155.335(j) of title 45, Code of Federal Regulations (or any
successor regulation) to remove paragraph (4) of such section
such that, with respect to reenrollments for plan years
beginning on or after January 1, 2026, an Exchange established
under subtitle D of title I of the Patient Protection and
Affordable Care Act (42 U.S.C. 18021 et seq.) may not reenroll
an individual who was enrolled in a bronze level qualified
health plan in a silver level qualified health plan (as such
terms are defined in section 1301(a) and described in 1302(d)
of such Act) unless otherwise permitted under section
155.335(j) of title 45, Code of Federal Regulations, as in
effect on the day before the date of the enactment of this
section.
(g) Reducing Advance Payments of Premium Tax Credits for
Certain Individuals Reenrolled in Exchanges.--Section 1412 of
the Patient Protection and Affordable Care Act (42 U.S.C.
18082) is amended--
(1) in subsection (a)(3), by inserting ``, subject to
subsection (c)(2)(C),'' after ``qualified health
plans''; and
(2) in subsection (c)(2)--
(A) in subparagraph (A), by striking ``The''
and inserting ``Subject to subparagraph (C),
the''; and
(B) by adding at the end the following new
subparagraph:
``(C) Reduction in advance payment for
specified reenrolled individuals.--
``(i) In general.--The amount of an
advance payment made under subparagraph
(A) to reduce the premium payable for a
qualified health plan that provides
coverage to a specified reenrolled
individual for an applicable month
shall be an amount equal to the amount
that would otherwise be made under such
subparagraph reduced by $5 (or such
higher amount as the Secretary
determines appropriate).
``(ii) Definitions.--In this
subparagraph:
``(I) Applicable month.--The
term `applicable month' means,
with respect to a specified
reenrolled individual, any
month during a plan year
beginning on or after January
1, 2027 (or, in the case of an
individual reenrolled in a
qualified health plan by an
Exchange established pursuant
to section 1321(c), January 1,
2026) if, prior to the first
day of such month, such
individual has failed to
confirm or update such
information as is necessary to
redetermine the eligibility of
such individual for such plan
year pursuant to section
1411(f).
``(II) Specified reenrolled
individual.--The term
`specified reenrolled
individual' means an individual
who is reenrolled in a
qualified health plan and with
respect to whom the advance
payment made under subparagraph
(A) would, without application
of any reduction under this
subparagraph, reduce the
premium payable for a qualified
health plan that provides
coverage to such an individual
to $0.''.
(h) Prohibiting Coverage of Gender Transition Procedures as
an Essential Health Benefit Under Plans Offered by Exchanges.--
(1) In general.--Section 1302(b)(2) of the Patient
Protection and Affordable Care Act (42 U.S.C.
18022(b)(2)) is amended by adding at the end the
following new subparagraph:
``(C) Gender transition procedures.--For plan
years beginning on or after January 1, 2027,
the essential health benefits defined pursuant
to paragraph (1) may not include items and
services furnished for a gender transition
procedure.''.
(2) Gender transition procedure defined.--Section
1304 of the Patient Protection and Affordable Care Act
(42 U.S.C. 18024) is amended by adding at the end the
following new subsection:
``(f) Gender Transition Procedure.--
``(1) In general.--In this title, except as provided
in paragraph (2), the term `gender transition
procedure' means, with respect to an individual, any of
the following when performed for the purpose of
intentionally changing the body of such individual
(including by disrupting the body's development,
inhibiting its natural functions, or modifying its
appearance) to no longer correspond to the individual's
sex:
``(A) Performing any surgery, including--
``(i) castration;
``(ii) sterilization;
``(iii) orchiectomy;
``(iv) scrotoplasty;
``(v) vasectomy;
``(vi) tubal ligation;
``(vii) hysterectomy;
``(viii) oophorectomy;
``(ix) ovariectomy;
``(x) metoidioplasty;
``(xi) clitoroplasty;
``(xii) reconstruction of the fixed
part of the urethra with or without a
metoidioplasty or a phalloplasty;
``(xiii) penectomy;
``(xiv) phalloplasty;
``(xv) vaginoplasty;
``(xvi) vaginectomy;
``(xvii) vulvoplasty;
``(xviii) reduction
thyrochondroplasty;
``(xix) chondrolaryngoplasty;
``(xx) mastectomy; and
``(xxi) any plastic, cosmetic, or
aesthetic surgery that feminizes or
masculinizes the facial or other body
features of an individual.
``(B) Any placement of chest implants to
create feminine breasts or any placement of
erection or testicular prosetheses.
``(C) Any placement of fat or artificial
implants in the gluteal region.
``(D) Administering, prescribing, or
dispensing to an individual medications,
including--
``(i) gonadotropin-releasing hormone
(GnRH) analogues or other puberty-
blocking drugs to stop or delay normal
puberty; and
``(ii) testosterone, estrogen, or
other androgens to an individual at
doses that are supraphysiologic than
would normally be produced endogenously
in a healthy individual of the same age
and sex.
``(2) Exception.--Paragraph (1) shall not apply to
the following:
``(A) Puberty suppression or blocking
prescription drugs for the purpose of
normalizing puberty for an individual
experiencing precocious puberty.
``(B) Medically necessary procedures or
treatments to correct for--
``(i) a medically verifiable disorder
of sex development, including--
``(I) 46,XX chromosomes with
virilization;
``(II) 46,XY chromosomes with
undervirilization; and
``(III) both ovarian and
testicular tissue;
``(ii) sex chromosome structure, sex
steroid hormone production, or sex
hormone action, if determined to be
abnormal by a physician through genetic
or biochemical testing;
``(iii) infection, disease, injury,
or disorder caused or exacerbated by a
previous procedure described in
paragraph (1), or a physical disorder,
physical injury, or physical illness
that would, as certified by a
physician, place the individual in
imminent danger of death or impairment
of a major bodily function unless the
procedure is performed, not including
procedures performed for the
alleviation of mental distress; or
``(iv) procedures to restore or
reconstruct the body of the individual
in order to correspond to the
individual's sex after one or more
previous procedures described in
paragraph (1), which may include the
removal of a pseudo phallus or breast
augmentation.
``(3) Sex.--For purposes of this subsection, the term
`sex' means either male or female, as biologically
determined and defined by subparagraph (A) and
subparagraph (B).
``(A) Female.--The term `female' means an
individual who naturally has, had, will have,
or would have, but for a developmental or
genetic anomaly or historical accident, the
reproductive system that at some point
produces, transports, and utilizes eggs for
fertilization.
``(B) Male.--The term `male' means an
individual who naturally has, had, will have,
or would have, but for a developmental or
genetic anomaly or historical accident, the
reproductive system that at some point
produces, transports, and utilizes sperm for
fertilization.''.
(i) Clarifying Lawful Presence for Purposes of the
Exchanges.--
(1) In general.--Section 1312(f) of the Patient
Protection and Affordable Care Act (42 U.S.C. 18032(f))
is amended by adding at the end the following new
paragraph:
``(4) Clarification of lawful presence.--In this
title, the term `alien lawfully present in the United
States' does not include an alien granted deferred
action under the Deferred Action for Childhood Arrivals
process pursuant to the memorandum of the Department of
Homeland Security entitled `Exercising Prosecutorial
Discretion with Respect to Individuals Who Came to the
United States as Children' issued on June 15, 2012.''.
(2) Cost-sharing reductions.--Section 1402(e)(2) of
the Patient Protection and Affordable Care Act (42
U.S.C. 18071(e)(2)) is amended by adding at the end the
following new sentence: ``For purposes of this section,
an individual shall not be treated as lawfully present
if the individual is an alien granted deferred action
under the Deferred Action for Childhood Arrivals
process pursuant to the memorandum of the Department of
Homeland Security entitled `Exercising Prosecutorial
Discretion with Respect to Individuals Who Came to the
United States as Children' issued on June 15, 2012.''.
(3) Payment prohibition.--Section 1412(d) of the
Patient Protection and Affordable Care Act (42 U.S.C.
18082(d)) is amended by adding at the end the following
new sentence: ``For purposes of the previous sentence,
an individual shall not be treated as lawfully present
if the individual is an alien granted deferred action
under the Deferred Action for Childhood Arrivals
process pursuant to the memorandum of the Department of
Homeland Security entitled `Exercising Prosecutorial
Discretion with Respect to Individuals Who Came to the
United States as Children' issued on June 15, 2012.''.
(4) Effective date.--The amendments made by this
section shall apply with respect to plan years
beginning on or after January 1, 2026.
(j) Ensuring Appropriate Application of Guaranteed Issue
Requirements in Case of Nonpayment of Past Premiums.--
(1) In general.--Section 2702 of the Public Health
Service Act (42 U.S.C. 300gg-1) is amended by adding at
the end the following new subsection:
``(e) Nonpayment of Past Premiums.--
``(1) In general.--A health insurance issuer offering
individual health insurance coverage may, to the extent
allowed under State law, deny such coverage in the case
of an individual who owes any amount for premiums for
individual health insurance coverage offered by such
issuer (or by a health insurance issuer in the same
controlled group (as defined in paragraph (3)) as such
issuer) in which such individual was previously
enrolled.
``(2) Attribution of initial premium payment to owed
amount.--A health insurance issuer offering individual
health insurance coverage may, in the case of an
individual described in paragraph (1) and to the extent
allowed under State law, attribute the initial premium
payment for such coverage applicable to such individual
to the amount owed by such individual for premiums for
individual health insurance coverage offered by such
issuer (or by a health insurance issuer in the same
controlled group as such issuer) in which such
individual was previously enrolled.
``(3) Controlled group defined.--For purposes of this
subsection, the term `controlled group' means a group
of of two or more persons that is treated as a single
employer under section 52(a), 52(b), 414(m), or 414(o)
of the Internal Revenue Code of 1986.''.
(2) Effective date.--The amendment made by paragraph
(1) shall apply with respect to plan years beginning on
or after January 1, 2026.

PART 3--IMPROVING AMERICANS' ACCESS TO CARE

SEC. 44301. EXPANDING AND CLARIFYING THE EXCLUSION FOR ORPHAN DRUGS
UNDER THE DRUG PRICE NEGOTIATION PROGRAM.

(a) In General.--Section 1192(e) of the Social Security Act
(42 U.S.C. 1320f-1(e)) is amended--
(1) in paragraph (1), by adding at the end the
following new subparagraph:
``(C) Treatment of former orphan drugs.--In
calculating the amount of time that has elapsed
with respect to the approval of a drug or
licensure of a biological product under
subparagraph (A)(ii) and subparagraph (B)(ii),
respectively, the Secretary shall not take into
account any period during which such drug or
product was a drug described in paragraph
(3)(A).''; and
(2) in paragraph (3)(A)--
(A) by striking ``only one rare disease or
condition'' and inserting ``one or more rare
diseases or conditions''; and
(B) by striking ``such disease or condition''
and inserting ``one or more rare diseases or
conditions (as such term is defined in section
526(a)(2) of the Federal Food, Drug, and
Cosmetic Act)''.
(b) Application.--The amendments made by subsection (a) shall
apply with respect to initial price applicability years (as
defined in section 1191(b) of the Social Security Act (42
U.S.C. 1320f(b))) beginning on or after January 1, 2028.

SEC. 44302. STREAMLINED ENROLLMENT PROCESS FOR ELIGIBLE OUT-OF-STATE
PROVIDERS UNDER MEDICAID AND CHIP.

(a) In General.--Section 1902(kk) of the Social Security Act
(42 U.S.C. 1396a(kk)) is amended by adding at the end the
following new paragraph:
``(10) Streamlined enrollment process for eligible
out-of-state providers.--
``(A) In general.--The State--
``(i) adopts and implements a process
to allow an eligible out-of-State
provider to enroll under the State plan
(or a waiver of such plan) to furnish
items and services to, or order,
prescribe, refer, or certify
eligibility for items and services for,
qualifying individuals without the
imposition of screening or enrollment
requirements by such State that exceed
the minimum necessary for such State to
provide payment to an eligible out-of-
State provider under such State plan
(or a waiver of such plan), such as the
provider's name and National Provider
Identifier (and such other information
specified by the Secretary); and
``(ii) provides that an eligible out-
of-State provider that enrolls as a
participating provider in the State
plan (or a waiver of such plan) through
such process shall be so enrolled for a
5-year period, unless the provider is
terminated or excluded from
participation during such period.
``(B) Definitions.--In this paragraph:
``(i) Eligible out-of-state
provider.--The term `eligible out-of-
State provider' means, with respect to
a State, a provider--
``(I) that is located in any
other State;
``(II) that--
``(aa) was determined
by the Secretary to
have a limited risk of
fraud, waste, and abuse
for purposes of
determining the level
of screening to be
conducted under section
1866(j)(2), has been so
screened under such
section 1866(j)(2), and
is enrolled in the
Medicare program under
title XVIII; or
``(bb) was determined
by the State agency
administering or
supervising the
administration of the
State plan (or a waiver
of such plan) of such
other State to have a
limited risk of fraud,
waste, and abuse for
purposes of determining
the level of screening
to be conducted under
paragraph (1) of this
subsection, has been so
screened under such
paragraph (1), and is
enrolled under such
State plan (or a waiver
of such plan); and
``(III) that has not been--
``(aa) excluded from
participation in any
Federal health care
program pursuant to
section 1128 or 1128A;
``(bb) excluded from
participation in the
State plan (or a waiver
of such plan) pursuant
to part 1002 of title
42, Code of Federal
Regulations (or any
successor regulation),
or State law; or
``(cc) terminated
from participating in a
Federal health care
program or the State
plan (or a waiver of
such plan) for a reason
described in paragraph
(8)(A).
``(ii) Qualifying individual.--The
term `qualifying individual' means an
individual under 21 years of age who is
enrolled under the State plan (or
waiver of such plan).
``(iii) State.--The term `State'
means 1 of the 50 States or the
District of Columbia.''.
(b) Conforming Amendments.--
(1) Section 1902(a)(77) of the Social Security Act
(42 U.S.C. 1396a(a)(77)) is amended by inserting
``enrollment,'' after ``screening,''.
(2) The subsection heading for section 1902(kk) of
such Act (42 U.S.C. 1396a(kk)) is amended by inserting
``Enrollment,'' after ``Screening,''.
(3) Section 2107(e)(1)(G) of such Act (42 U.S.C.
1397gg(e)(1)(G)) is amended by inserting
``enrollment,'' after ``screening,''.
(c) Effective Date.--The amendments made by this section
shall apply beginning on the date that is 4 years after the
date of enactment of this Act.

SEC. 44303. DELAYING DSH REDUCTIONS.

(a) In General.--Section 1923(f) of the Social Security Act
(42 U.S.C. 1396r-4(f)) is amended--
(1) in paragraph (7)(A)--
(A) in clause (i)--
(i) in the matter preceding subclause
(I), by striking ``2026 through 2028''
and inserting ``2029 through 2031'';
and
(ii) in subclause (II), by striking
``or period''; and
(B) in clause (ii), by striking ``2026
through 2028'' and inserting ``2029 through
2031''; and
(2) in paragraph (8), by striking ``2027'' and
inserting ``2031''.
(b) Tennessee DSH Allotment.--Section 1923(f)(6)(A)(vi) of
the Social Security Act (42 U.S.C. 1396r-4(f)(6)(A)(vi)) is
amended--
(1) in the header, by striking ``2025'' and inserting
``2028''; and
(2) by striking ``fiscal year 2025'' and inserting
``fiscal year 2028''.

SEC. 44304. MODIFYING UPDATE TO THE CONVERSION FACTOR UNDER THE
PHYSICIAN FEE SCHEDULE UNDER THE MEDICARE PROGRAM.

Section 1848(d) of the Social Security Act (42 U.S.C. 1395w-
4(d)) is amended--
(1) in paragraph (1)--
(A) in subparagraph (A)--
(i) in the first sentence, by
striking ``and ending with 2025''; and
(ii) by striking the second sentence;
and
(B) in subparagraph (D), by striking ``(or,
beginning with 2026, applicable conversion
factor)''; and
(2) by amending paragraph (20) to read as follows:
``(20) Update for 2026 and subsequent years.--The
update to the single conversion factor established in
paragraph (1)(A)--
``(A) for 2026 is 75 percent of the
Secretary's estimate of the percentage increase
in the MEI (as defined in section 1842(i)(3))
for the year; and
``(B) for 2027 and each subsequent year is 10
percent of the Secretary's estimate of the
percentage increase in the MEI for the year.''.

SEC. 44305. MODERNIZING AND ENSURING PBM ACCOUNTABILITY.

(a) In General.--
(1) Prescription drug plans.--Section 1860D-12 of the
Social Security Act (42 U.S.C. 1395w-112) is amended by
adding at the end the following new subsection:
``(h) Requirements Relating to Pharmacy Benefit Managers.--
For plan years beginning on or after January 1, 2028:
``(1) Agreements with pharmacy benefit managers.--
Each contract entered into with a PDP sponsor under
this part with respect to a prescription drug plan
offered by such sponsor shall provide that any pharmacy
benefit manager acting on behalf of such sponsor has a
written agreement with the PDP sponsor under which the
pharmacy benefit manager, and any affiliates of such
pharmacy benefit manager, as applicable, agree to meet
the following requirements:
``(A) No income other than bona fide service
fees.--
``(i) In general.--The pharmacy
benefit manager and any affiliate of
such pharmacy benefit manager shall not
derive any remuneration with respect to
any services provided on behalf of any
entity or individual, in connection
with the utilization of covered part D
drugs, from any such entity or
individual other than bona fide service
fees, subject to clauses (ii) and
(iii).
``(ii) Incentive payments.--For the
purposes of this subsection, an
incentive payment (as determined by the
Secretary) paid by a PDP sponsor to a
pharmacy benefit manager (or an
affiliate of such pharmacy benefit
manager) that is performing services on
behalf of such sponsor shall be deemed
a `bona fide service fee' (even if such
payment does not otherwise meet the
definition of such term under paragraph
(7)(B)) if such payment is a flat
dollar amount, is consistent with fair
market value (as specified by the
Secretary), is related to services
actually performed by the pharmacy
benefit manager or affiliate of such
pharmacy benefit manager, on behalf of
the PDP sponsor making such payment, in
connection with the utilization of
covered part D drugs, and meets
additional requirements, if any, as
determined appropriate by the
Secretary.
``(iii) Clarification on rebates and
discounts used to lower costs for
covered part d drugs.--Rebates,
discounts, and other price concessions
received by a pharmacy benefit manager
or an affiliate of a pharmacy benefit
manager from manufacturers, even if
such price concessions are calculated
as a percentage of a drug's price,
shall not be considered a violation of
the requirements of clause (i) if they
are fully passed through to a PDP
sponsor and are compliant with all
regulatory and subregulatory
requirements related to direct and
indirect remuneration for manufacturer
rebates under this part, including in
cases where a PDP sponsor is acting as
a pharmacy benefit manager on behalf of
a prescription drug plan offered by
such PDP sponsor.
``(iv) Evaluation of remuneration
arrangements.--Components of subsets of
remuneration arrangements (such as fees
or other forms of compensation paid to
or retained by the pharmacy benefit
manager or affiliate of such pharmacy
benefit manager), as determined
appropriate by the Secretary, between
pharmacy benefit managers or affiliates
of such pharmacy benefit managers, as
applicable, and other entities involved
in the dispensing or utilization of
covered part D drugs (including PDP
sponsors, manufacturers, pharmacies,
and other entities as determined
appropriate by the Secretary) shall be
subject to review by the Secretary, in
consultation with the Office of the
Inspector General of the Department of
Health and Human Services, as
determined appropriate by the
Secretary. The Secretary, in
consultation with the Office of the
Inspector General, shall review whether
remuneration under such arrangements is
consistent with fair market value (as
specified by the Secretary) through
reviews and assessments of such
remuneration, as determined
appropriate.
``(v) Disgorgement.--The pharmacy
benefit manager shall disgorge any
remuneration paid to such pharmacy
benefit manager or an affiliate of such
pharmacy benefit manager in violation
of this subparagraph to the PDP
sponsor.
``(vi) Additional requirements.--The
pharmacy benefit manager shall--
``(I) enter into a written
agreement with any affiliate of
such pharmacy benefit manager,
under which the affiliate shall
identify and disgorge any
remuneration described in
clause (v) to the pharmacy
benefit manager; and
``(II) attest, subject to any
requirements determined
appropriate by the Secretary,
that the pharmacy benefit
manager has entered into a
written agreement described in
subclause (I) with any relevant
affiliate of the pharmacy
benefit manager.
``(B) Transparency regarding guarantees and
cost performance evaluations.--The pharmacy
benefit manager shall--
``(i) define, interpret, and apply,
in a fully transparent and consistent
manner for purposes of calculating or
otherwise evaluating pharmacy benefit
manager performance against pricing
guarantees or similar cost performance
measurements related to rebates,
discounts, price concessions, or net
costs, terms such as--
``(I) `generic drug', in a
manner consistent with the
definition of the term under
section 423.4 of title 42, Code
of Federal Regulations, or a
successor regulation;
``(II) `brand name drug', in
a manner consistent with the
definition of the term under
section 423.4 of title 42, Code
of Federal Regulations, or a
successor regulation;
``(III) `specialty drug';
``(IV) `rebate'; and
``(V) `discount';
``(ii) identify any drugs, claims, or
price concessions excluded from any
pricing guarantee or other cost
performance measure in a clear and
consistent manner; and
``(iii) where a pricing guarantee or
other cost performance measure is based
on a pricing benchmark other than the
wholesale acquisition cost (as defined
in section 1847A(c)(6)(B)) of a drug,
calculate and provide a wholesale
acquisition cost-based equivalent to
the pricing guarantee or other cost
performance measure.
``(C) Provision of information.--
``(i) In general.--Not later than
July 1 of each year, beginning in 2028,
the pharmacy benefit manager shall
submit to the PDP sponsor, and to the
Secretary, a report, in accordance with
this subparagraph, and shall make such
report available to such sponsor at no
cost to such sponsor in a format
specified by the Secretary under
paragraph (5). Each such report shall
include, with respect to such PDP
sponsor and each plan offered by such
sponsor, the following information with
respect to the previous plan year:
``(I) A list of all drugs
covered by the plan that were
dispensed including, with
respect to each such drug--
``(aa) the brand
name, generic or non-
proprietary name, and
National Drug Code;
``(bb) the number of
plan enrollees for whom
the drug was dispensed,
the total number of
prescription claims for
the drug (including
original prescriptions
and refills, counted as
separate claims), and
the total number of
dosage units of the
drug dispensed;
``(cc) the number of
prescription claims
described in item (bb)
by each type of
dispensing channel
through which the drug
was dispensed,
including retail, mail
order, specialty
pharmacy, long term
care pharmacy, home
infusion pharmacy, or
other types of
pharmacies or
providers;
``(dd) the average
wholesale acquisition
cost, listed as cost
per day's supply, cost
per dosage unit, and
cost per typical course
of treatment (as
applicable);
``(ee) the average
wholesale price for the
drug, listed as price
per day's supply, price
per dosage unit, and
price per typical
course of treatment (as
applicable);
``(ff) the total out-
of-pocket spending by
plan enrollees on such
drug after application
of any benefits under
the plan, including
plan enrollee spending
through copayments,
coinsurance, and
deductibles;
``(gg) total rebates
paid by the
manufacturer on the
drug as reported under
the Detailed DIR Report
(or any successor
report) submitted by
such sponsor to the
Centers for Medicare &
Medicaid Services;
``(hh) all other
direct or indirect
remuneration on the
drug as reported under
the Detailed DIR Report
(or any successor
report) submitted by
such sponsor to the
Centers for Medicare &
Medicaid Services;
``(ii) the average
pharmacy reimbursement
amount paid by the plan
for the drug in the
aggregate and
disaggregated by
dispensing channel
identified in item
(cc);
``(jj) the average
National Average Drug
Acquisition Cost
(NADAC); and
``(kk) total
manufacturer-derived
revenue, inclusive of
bona fide service fees,
attributable to the
drug and retained by
the pharmacy benefit
manager and any
affiliate of such
pharmacy benefit
manager.
``(II) In the case of a
pharmacy benefit manager that
has an affiliate that is a
retail, mail order, or
specialty pharmacy, with
respect to drugs covered by
such plan that were dispensed,
the following information:
``(aa) The percentage
of total prescriptions
that were dispensed by
pharmacies that are an
affiliate of the
pharmacy benefit
manager for each drug.
``(bb) The
interquartile range of
the total combined
costs paid by the plan
and plan enrollees, per
dosage unit, per course
of treatment, per 30-
day supply, and per 90-
day supply for each
drug dispensed by
pharmacies that are not
an affiliate of the
pharmacy benefit
manager and that are
included in the
pharmacy network of
such plan.
``(cc) The
interquartile range of
the total combined
costs paid by the plan
and plan enrollees, per
dosage unit, per course
of treatment, per 30-
day supply, and per 90-
day supply for each
drug dispensed by
pharmacies that are an
affiliate of the
pharmacy benefit
manager and that are
included in the
pharmacy network of
such plan.
``(dd) The lowest
total combined cost
paid by the plan and
plan enrollees, per
dosage unit, per course
of treatment, per 30-
day supply, and per 90-
day supply, for each
drug that is available
from any pharmacy
included in the
pharmacy network of
such plan.
``(ee) The difference
between the average
acquisition cost of the
affiliate, such as a
pharmacy or other
entity that acquires
prescription drugs,
that initially acquires
the drug and the amount
reported under
subclause (I)(jj) for
each drug.
``(ff) A list
inclusive of the brand
name, generic or non-
proprietary name, and
National Drug Code of
covered part D drugs
subject to an agreement
with a covered entity
under section 340B of
the Public Health
Service Act for which
the pharmacy benefit
manager or an affiliate
of the pharmacy benefit
manager had a contract
or other arrangement
with such a covered
entity in the service
area of such plan.
``(III) Where a drug approved
under section 505(c) of the
Federal Food, Drug, and
Cosmetic Act (referred to in
this subclause as the `listed
drug') is covered by the plan,
the following information:
``(aa) A list of
currently marketed
generic drugs approved
under section 505(j) of
the Federal Food, Drug,
and Cosmetic Act
pursuant to an
application that
references such listed
drug that are not
covered by the plan,
are covered on the same
formulary tier or a
formulary tier
typically associated
with higher cost-
sharing than the listed
drug, or are subject to
utilization management
that the listed drug is
not subject to.
``(bb) The estimated
average beneficiary
cost-sharing under the
plan for a 30-day
supply of the listed
drug.
``(cc) Where a
generic drug listed
under item (aa) is on a
formulary tier
typically associated
with higher cost-
sharing than the listed
drug, the estimated
average cost-sharing
that a beneficiary
would have paid for a
30-day supply of each
of the generic drugs
described in item (aa),
had the plan provided
coverage for such drugs
on the same formulary
tier as the listed
drug.
``(dd) A written
justification for
providing more
favorable coverage of
the listed drug than
the generic drugs
described in item (aa).
``(ee) The number of
currently marketed
generic drugs approved
under section 505(j) of
the Federal Food, Drug,
and Cosmetic Act
pursuant to an
application that
references such listed
drug.
``(IV) Where a reference
product (as defined in section
351(i) of the Public Health
Service Act) is covered by the
plan, the following
information:
``(aa) A list of
currently marketed
biosimilar biological
products licensed under
section 351(k) of the
Public Health Service
Act pursuant to an
application that refers
to such reference
product that are not
covered by the plan,
are covered on the same
formulary tier or a
formulary tier
typically associated
with higher cost-
sharing than the
reference product, or
are subject to
utilization management
that the reference
product is not subject
to.
``(bb) The estimated
average beneficiary
cost-sharing under the
plan for a 30-day
supply of the reference
product.
``(cc) Where a
biosimilar biological
product listed under
item (aa) is on a
formulary tier
typically associated
with higher cost-
sharing than the
reference product, the
estimated average cost-
sharing that a
beneficiary would have
paid for a 30-day
supply of each of the
biosimilar biological
products described in
item (aa), had the plan
provided coverage for
such products on the
same formulary tier as
the reference product.
``(dd) A written
justification for
providing more
favorable coverage of
the reference product
than the biosimilar
biological product
described in item (aa).
``(ee) The number of
currently marketed
biosimilar biological
products licensed under
section 351(k) of the
Public Health Service
Act, pursuant to an
application that refers
to such reference
product.
``(V) Total gross spending on
covered part D drugs by the
plan, not net of rebates, fees,
discounts, or other direct or
indirect remuneration.
``(VI) The total amount
retained by the pharmacy
benefit manager or an affiliate
of such pharmacy benefit
manager in revenue related to
utilization of covered part D
drugs under that plan,
inclusive of bona fide service
fees.
``(VII) The total spending on
covered part D drugs net of
rebates, fees, discounts, or
other direct and indirect
remuneration by the plan.
``(VIII) An explanation of
any benefit design parameters
under such plan that encourage
plan enrollees to fill
prescriptions at pharmacies
that are an affiliate of such
pharmacy benefit manager, such
as mail and specialty home
delivery programs, and retail
and mail auto-refill programs.
``(IX) The following
information:
``(aa) A list of all
brokers, consultants,
advisors, and auditors
that receive
compensation from the
pharmacy benefit
manager or an affiliate
of such pharmacy
benefit manager for
referrals, consulting,
auditing, or other
services offered to PDP
sponsors related to
pharmacy benefit
management services.
``(bb) The amount of
compensation provided
by such pharmacy
benefit manager or
affiliate to each such
broker, consultant,
advisor, and auditor.
``(cc) The
methodology for
calculating the amount
of compensation
provided by such
pharmacy benefit
manager or affiliate,
for each such broker,
consultant, advisor,
and auditor.
``(X) A list of all
affiliates of the pharmacy
benefit manager.
``(XI) A summary document
submitted in a standardized
template developed by the
Secretary that includes such
information described in
subclauses (I) through (X).
``(ii) Written explanation of
contracts or agreements with drug
manufacturers.--
``(I) In general.--The
pharmacy benefit manager shall,
not later than 30 days after
the finalization of any
contract or agreement between
such pharmacy benefit manager
or an affiliate of such
pharmacy benefit manager and a
drug manufacturer (or
subsidiary, agent, or entity
affiliated with such drug
manufacturer) that makes
rebates, discounts, payments,
or other financial incentives
related to one or more covered
part D drugs or other
prescription drugs, as
applicable, of the manufacturer
directly or indirectly
contingent upon coverage,
formulary placement, or
utilization management
conditions on any other covered
part D drugs or other
prescription drugs, as
applicable, submit to the PDP
sponsor a written explanation
of such contract or agreement.
``(II) Requirements.--A
written explanation under
subclause (I) shall--
``(aa) include the
manufacturer subject to
the contract or
agreement, all covered
part D drugs and other
prescription drugs, as
applicable, subject to
the contract or
agreement and the
manufacturers of such
drugs, and a high-level
description of the
terms of such contract
or agreement and how
such terms apply to
such drugs; and
``(bb) be certified
by the Chief Executive
Officer, Chief
Financial Officer, or
General Counsel of such
pharmacy benefit
manager, or affiliate
of such pharmacy
benefit manager, as
applicable, or an
individual delegated
with the authority to
sign on behalf of one
of these officers, who
reports directly to the
officer.
``(III) Definition of other
prescription drugs.--For
purposes of this clause, the
term `other prescription drugs'
means prescription drugs
covered as supplemental
benefits under this part or
prescription drugs paid outside
of this part.
``(D) Audit rights.--
``(i) In general.--Not less than once
a year, at the request of the PDP
sponsor, the pharmacy benefit manager
shall allow for an audit of the
pharmacy benefit manager to ensure
compliance with all terms and
conditions under the written agreement
described in this paragraph and the
accuracy of information reported under
subparagraph (C).
``(ii) Auditor.--The PDP sponsor
shall have the right to select an
auditor. The pharmacy benefit manager
shall not impose any limitations on the
selection of such auditor.
``(iii) Provision of information.--
The pharmacy benefit manager shall make
available to such auditor all records,
data, contracts, and other information
necessary to confirm the accuracy of
information provided under subparagraph
(C), subject to reasonable restrictions
on how such information must be
reported to prevent redisclosure of
such information.
``(iv) Timing.--The pharmacy benefit
manager must provide information under
clause (iii) and other information,
data, and records relevant to the audit
to such auditor within 6 months of the
initiation of the audit and respond to
requests for additional information
from such auditor within 30 days after
the request for additional information.
``(v) Information from affiliates.--
The pharmacy benefit manager shall be
responsible for providing to such
auditor information required to be
reported under subparagraph (C) or
under clause (iii) of this subparagraph
that is owned or held by an affiliate
of such pharmacy benefit manager.
``(2) Enforcement.--
``(A) In general.--Each PDP sponsor shall--
``(i) disgorge to the Secretary any
amounts disgorged to the PDP sponsor by
a pharmacy benefit manager under
paragraph (1)(A)(v);
``(ii) require, in a written
agreement with any pharmacy benefit
manager acting on behalf of such
sponsor or affiliate of such pharmacy
benefit manager, that such pharmacy
benefit manager or affiliate reimburse
the PDP sponsor for any civil money
penalty imposed on the PDP sponsor as a
result of the failure of the pharmacy
benefit manager or affiliate to meet
the requirements of paragraph (1) that
are applicable to the pharmacy benefit
manager or affiliate under the
agreement; and
``(iii) require, in a written
agreement with any such pharmacy
benefit manager acting on behalf of
such sponsor or affiliate of such
pharmacy benefit manager, that such
pharmacy benefit manager or affiliate
be subject to punitive remedies for
breach of contract for failure to
comply with the requirements applicable
under paragraph (1).
``(B) Reporting of alleged violations.--The
Secretary shall make available and maintain a
mechanism for manufacturers, PDP sponsors,
pharmacies, and other entities that have
contractual relationships with pharmacy benefit
managers or affiliates of such pharmacy benefit
managers to report, on a confidential basis,
alleged violations of paragraph (1)(A) or
subparagraph (C).
``(C) Anti-retaliation and anti-coercion.--
Consistent with applicable Federal or State
law, a PDP sponsor shall not--
``(i) retaliate against an individual
or entity for reporting an alleged
violation under subparagraph (B); or
``(ii) coerce, intimidate, threaten,
or interfere with the ability of an
individual or entity to report any such
alleged violations.
``(3) Certification of compliance.--
``(A) In general.--Each PDP sponsor shall
furnish to the Secretary (at a time and in a
manner specified by the Secretary) an annual
certification of compliance with this
subsection, as well as such information as the
Secretary determines necessary to carry out
this subsection.
``(B) Implementation.--Notwithstanding any
other provision of law, the Secretary may
implement this paragraph by program instruction
or otherwise.
``(4) Rule of construction.--Nothing in this
subsection shall be construed as--
``(A) prohibiting flat dispensing fees or
reimbursement or payment for ingredient costs
(including customary, industry-standard
discounts directly related to drug acquisition
that are retained by pharmacies or wholesalers)
to entities that acquire or dispense
prescription drugs; or
``(B) modifying regulatory requirements or
sub-regulatory program instruction or guidance
related to pharmacy payment, reimbursement, or
dispensing fees.
``(5) Standard formats.--
``(A) In general.--Not later than June 1,
2027, the Secretary shall specify standard,
machine-readable formats for pharmacy benefit
managers to submit annual reports required
under paragraph (1)(C)(i).
``(B) Implementation.--Notwithstanding any
other provision of law, the Secretary may
implement this paragraph by program instruction
or otherwise.
``(6) Confidentiality.--
``(A) In general.--Information disclosed by a
pharmacy benefit manager, an affiliate of a
pharmacy benefit manager, a PDP sponsor, or a
pharmacy under this subsection that is not
otherwise publicly available or available for
purchase shall not be disclosed by the
Secretary or a PDP sponsor receiving the
information, except that the Secretary may
disclose the information for the following
purposes:
``(i) As the Secretary determines
necessary to carry out this part.
``(ii) To permit the Comptroller
General to review the information
provided.
``(iii) To permit the Director of the
Congressional Budget Office to review
the information provided.
``(iv) To permit the Executive
Director of the Medicare Payment
Advisory Commission to review the
information provided.
``(v) To the Attorney General for the
purposes of conducting oversight and
enforcement under this title.
``(vi) To the Inspector General of
the Department of Health and Human
Services in accordance with its
authorities under the Inspector General
Act of 1978 (section 406 of title 5,
United States Code), and other
applicable statutes.
``(B) Restriction on use of information.--The
Secretary, the Comptroller General, the
Director of the Congressional Budget Office,
and the Executive Director of the Medicare
Payment Advisory Commission shall not report on
or disclose information disclosed pursuant to
subparagraph (A) to the public in a manner that
would identify--
``(i) a specific pharmacy benefit
manager, affiliate, pharmacy,
manufacturer, wholesaler, PDP sponsor,
or plan; or
``(ii) contract prices, rebates,
discounts, or other remuneration for
specific drugs in a manner that may
allow the identification of specific
contracting parties or of such specific
drugs.
``(7) Definitions.--For purposes of this subsection:
``(A) Affiliate.--The term `affiliate' means,
with respect to any pharmacy benefit manager or
PDP sponsor, any entity that, directly or
indirectly--
``(i) owns or is owned by, controls
or is controlled by, or is otherwise
related in any ownership structure to
such pharmacy benefit manager or PDP
sponsor; or
``(ii) acts as a contractor,
principal, or agent to such pharmacy
benefit manager or PDP sponsor, insofar
as such contractor, principal, or agent
performs any of the functions described
under subparagraph (C).
``(B) Bona fide service fee.--The term `bona
fide service fee' means a fee that is
reflective of the fair market value (as
specified by the Secretary, through notice and
comment rulemaking) for a bona fide, itemized
service actually performed on behalf of an
entity, that the entity would otherwise perform
(or contract for) in the absence of the service
arrangement and that is not passed on in whole
or in part to a client or customer, whether or
not the entity takes title to the drug. Such
fee must be a flat dollar amount and shall not
be directly or indirectly based on, or
contingent upon--
``(i) drug price, such as wholesale
acquisition cost or drug benchmark
price (such as average wholesale
price);
``(ii) the amount of discounts,
rebates, fees, or other direct or
indirect remuneration with respect to
covered part D drugs dispensed to
enrollees in a prescription drug plan,
except as permitted pursuant to
paragraph (1)(A)(ii);
``(iii) coverage or formulary
placement decisions or the volume or
value of any referrals or business
generated between the parties to the
arrangement; or
``(iv) any other amounts or
methodologies prohibited by the
Secretary.
``(C) Pharmacy benefit manager.--The term
`pharmacy benefit manager' means any person or
entity that, either directly or through an
intermediary, acts as a price negotiator or
group purchaser on behalf of a PDP sponsor or
prescription drug plan, or manages the
prescription drug benefits provided by such
sponsor or plan, including the processing and
payment of claims for prescription drugs, the
performance of drug utilization review, the
processing of drug prior authorization
requests, the adjudication of appeals or
grievances related to the prescription drug
benefit, contracting with network pharmacies,
controlling the cost of covered part D drugs,
or the provision of related services. Such term
includes any person or entity that carries out
one or more of the activities described in the
preceding sentence, irrespective of whether
such person or entity calls itself a `pharmacy
benefit manager'.''.
(2) MA-PD plans.--Section 1857(f)(3) of the Social
Security Act (42 U.S.C. 1395w-27(f)(3)) is amended by
adding at the end the following new subparagraph:
``(F) Requirements relating to pharmacy
benefit managers.--For plan years beginning on
or after January 1, 2028, section 1860D-
12(h).''.
(3) Nonapplication of paperwork reduction act.--
Chapter 35 of title 44, United States Code, shall not
apply to the implementation of this subsection.
(4) Funding.--
(A) Secretary.--In addition to amounts
otherwise available, there is appropriated to
the Centers for Medicare & Medicaid Services
Program Management Account, out of any money in
the Treasury not otherwise appropriated,
$113,000,000 for fiscal year 2025, to remain
available until expended, to carry out this
subsection.
(B) OIG.--In addition to amounts otherwise
available, there is appropriated to the
Inspector General of the Department of Health
and Human Services, out of any money in the
Treasury not otherwise appropriated,
$20,000,000 for fiscal year 2025, to remain
available until expended, to carry out this
subsection.
(b) GAO Study and Report on Price-Related Compensation Across
the Supply Chain.--
(1) Study.--The Comptroller General of the United
States (in this subsection referred to as the
``Comptroller General'') shall conduct a study
describing the use of compensation and payment
structures related to a prescription drug's price
within the retail prescription drug supply chain in
part D of title XVIII of the Social Security Act (42
U.S.C. 1395w-101 et seq.). Such study shall summarize
information from Federal agencies and industry experts,
to the extent available, with respect to the following:
(A) The type, magnitude, other features (such
as the pricing benchmarks used), and prevalence
of compensation and payment structures related
to a prescription drug's price, such as
calculating fee amounts as a percentage of a
prescription drug's price, between
intermediaries in the prescription drug supply
chain, including--
(i) pharmacy benefit managers;
(ii) PDP sponsors offering
prescription drug plans and Medicare
Advantage organizations offering MA-PD
plans;
(iii) drug wholesalers;
(iv) pharmacies;
(v) manufacturers;
(vi) pharmacy services administrative
organizations;
(vii) brokers, auditors, consultants,
and other entities that--
(I) advise PDP sponsors
offering prescription drug
plans and Medicare Advantage
organizations offering MA-PD
plans regarding pharmacy
benefits; or
(II) review PDP sponsor and
Medicare Advantage organization
contracts with pharmacy benefit
managers; and
(viii) other service providers that
contract with any of the entities
described in clauses (i) through (vii)
that may use price-related compensation
and payment structures, such as rebate
aggregators (or other entities that
negotiate or process price concessions
on behalf of pharmacy benefit managers,
plan sponsors, or pharmacies).
(B) The primary business models and
compensation structures for each category of
intermediary described in subparagraph (A).
(C) Variation in price-related compensation
structures between affiliated entities (such as
entities with common ownership, either full or
partial, and subsidiary relationships) and
unaffiliated entities.
(D) Potential conflicts of interest among
contracting entities related to the use of
prescription drug price-related compensation
structures, such as the potential for fees or
other payments set as a percentage of a
prescription drug's price to advantage
formulary selection, distribution, or
purchasing of prescription drugs with higher
prices.
(E) Notable differences, if any, in the use
and level of price-based compensation
structures over time and between different
market segments, such as under part D of title
XVIII of the Social Security Act (42 U.S.C.
1395w-101 et seq.) and the Medicaid program
under title XIX of such Act (42 U.S.C. 1396 et
seq.).
(F) The effects of drug price-related
compensation structures and alternative
compensation structures on Federal health care
programs and program beneficiaries, including
with respect to cost-sharing, premiums, Federal
outlays, biosimilar and generic drug adoption
and utilization, drug shortage risks, and the
potential for fees set as a percentage of a
drug's price to advantage the formulary
selection, distribution, or purchasing of drugs
with higher prices.
(G) Other issues determined to be relevant
and appropriate by the Comptroller General.
(2) Report.--Not later than 2 years after the date of
enactment of this section, the Comptroller General
shall submit to Congress a report containing the
results of the study conducted under paragraph (1),
together with recommendations for such legislation and
administrative action as the Comptroller General
determines appropriate.
(c) MedPAC Reports on Agreements With Pharmacy Benefit
Managers With Respect to Prescription Drug Plans and MA-PD
Plans.--
(1) In general.--The Medicare Payment Advisory
Commission shall submit to Congress the following
reports:
(A) Initial report.--Not later than the first
March 15 occurring after the date that is 2
years after the date on which the Secretary
makes the data available to the Commission, a
report regarding agreements with pharmacy
benefit managers with respect to prescription
drug plans and MA-PD plans. Such report shall
include, to the extent practicable--
(i) a description of trends and
patterns, including relevant averages,
totals, and other figures for the types
of information submitted;
(ii) an analysis of any differences
in agreements and their effects on plan
enrollee out-of-pocket spending and
average pharmacy reimbursement, and
other impacts; and
(iii) any recommendations the
Commission determines appropriate.
(B) Final report.--Not later than 2 years
after the date on which the Commission submits
the initial report under subparagraph (A), a
report describing any changes with respect to
the information described in subparagraph (A)
over time, together with any recommendations
the Commission determines appropriate.
(2) Funding.--In addition to amounts otherwise
available, there is appropriated to the Medicare
Payment Advisory Commission, out of any money in the
Treasury not otherwise appropriated, $1,000,000 for
fiscal year 2026, to remain available until expended,
to carry out this subsection.

TITLE V--COMMITTEE ON FINANCIAL SERVICES

SEC. 50001. GREEN AND RESILIENT RETROFIT PROGRAM FOR MULTIFAMILY FAMILY
HOUSING.

The unobligated balance of amounts made available under
section 30002(a) of Public Law 117-169 (commonly referred to as
the ``Inflation Reduction Act''; 136 Stat. 2027) are rescinded.

SEC. 50002. PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD.

(a) During the period beginning on the date of enactment of
this Act and ending on the transfer date--
(1) all intellectual property retained by the Public
Company Accounting Oversight Board (``Board'') in
support of its programs for registration, standard-
setting, and inspection shall be shared with the
Securities and Exchange Commission (``Commission'');
and
(2) pending enforcement and disciplinary actions of
the Board shall be referred to the Commission or other
regulators in accordance with section 105 of the
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215).
(b) Effective on the transfer date--
(1) all unobligated fees collected under section
109(d) of the Sarbanes-Oxley Act of 2002 shall be
transferred to the general fund of the Treasury, and
the Commission may not collect fees under such section
109(d);
(2) the duties and powers of the Board in effect as
of the day before the transfer date, other than those
described in section 107 of the Sarbanes-Oxley Act of
2002 (15 U.S.C. 7217), shall be transferred to the
Commission;
(3) the Commission may not use funds to carry out
section 107 of the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7217) for activities related to overseeing the
Board;
(4) the Board shall transfer all intellectual
property described in subsection (a)(1) to the
Commission;
(5) existing processes and regulations of the Board,
including existing Board auditing standards, shall
continue in effect unless modified through rule making
by the Commission; and
(6) any reference to the Board in any law,
regulation, document, record, map, or other paper of
the United States shall be deemed a reference to the
Commission.
(c) Any employee of the Board as of the date of enactment of
this Act may--
(1) be offered equivalent positions on the Commission
staff, as determined by the Commission, and submit to
the Commission's standard employment policies; and
(2) receive pay that is not higher than the highest
paid employee of similarly situated employees of the
Commission.
(d) In this section, the term ``transfer date'' means the
date established by the Commission for purposes of this
section, except that such date may not be later than the date
that is 1 year after the date of enactment of this Act.

SEC. 50003. BUREAU OF CONSUMER FINANCIAL PROTECTION.

Section 1017(a)(2) of the Consumer Financial Protection Act
of 2010 (12 U.S.C. 5497(a)(2)) is amended--
(1) in subparagraph (A)(iii)--
(A) by striking ``12 percent'' and inserting
``5 percent''; and
(B) by striking ``2013'' and inserting
``2025''; and
(2) by striking subparagraph (C) and inserting the
following:
``(C) Limitation on unobligated balances.--
With respect to a fiscal year, the amount of
unobligated balances of the Bureau may not
exceed 5 percent of the dollar amount referred
to in subparagraph (A)(iii), as adjusted under
subparagraph (B). The Director shall transfer
any excess amount of such unobligated balances
to the general fund of the Treasury.''.

SEC. 50004. CONSUMER FINANCIAL CIVIL PENALTY FUND.

Section 1017(d) of the Consumer Financial Protection Act of
2010 (12 U.S.C. 5497(d)) is amended--
(1) in paragraph (2)--
(A) in the first sentence, by inserting
``direct'' before ``victims''; and
(B) by striking the second sentence; and
(2) by adding at the end the following:
``(3) Treatment of excess amounts.--With respect to a
civil penalty described under paragraph (1), if the
Bureau makes payments to all of the direct victims of
activities for which that civil penalty was imposed,
the Bureau shall transfer all amounts that remain in
the Civil Penalty Fund with respect to that civil
penalty to the general fund of the Treasury.''.

SEC. 50005. FINANCIAL RESEARCH FUND.

Section 155 of the Financial Stability Act of 2010 (12 U.S.C.
5345) is amended by adding at the end the following:
``(e) Limitation on Assessments and the Financial Research
Fund.--
``(1) Limitation on assessments.--Assessments may not
be collected under subsection (d) if the assessments
would result in--
``(A) the Financial Research Fund exceeding
the average annual budget amount; or
``(B) the total assessments collected during
a single fiscal year exceeding the average
annual budget amount.
``(2) Transfer of excess funds.--Any amounts in the
Financial Research Fund exceeding the average annual
budget amount shall be deposited into the general fund
of the Treasury.
``(3) Average annual budget amount defined.--In this
subsection the term `average annual budget amount'
means the annual average, over the 3 most recently
completed fiscal years, of the expenses of the Council
in carrying out the duties and responsibilities of the
Council that were paid by the Office using amounts
obtained through assessments under subsection (d).''.

TITLE VI--COMMITTEE ON HOMELAND SECURITY

SEC. 60001. BORDER BARRIER SYSTEM CONSTRUCTION, INVASIVE SPECIES, AND
BORDER SECURITY FACILITIES IMPROVEMENTS.

In addition to amounts otherwise available, there is
appropriated to the Commissioner of U.S. Customs and Border
Protection for fiscal year 2025, out of any money in the
Treasury not otherwise appropriated, to remain available until
September 30, 2029, the following:
(1) $46,500,000,000 for necessary expenses relating
to the following:
(A) Construction, installation, or
improvement of primary, waterborne, and
secondary barriers.
(B) Access roads.
(C) Barrier system attributes, including
cameras, lights, sensors, roads, and other
detection technology.
(2) $50,000,000 for necessary expenses relating to
eradication and removal of the carrizo cane plant, salt
cedar, or any other invasive plant species that impedes
border security operations along the Rio Grande River.
(3) $5,000,000,000 for necessary expenses relating to
lease, acquisition, construction, or improvement of
U.S. Customs and Border Protection facilities and
checkpoints in the vicinity of the southwest, northern,
and maritime borders.

SEC. 60002. U.S. CUSTOMS AND BORDER PROTECTION PERSONNEL AND FLEET
VEHICLES.

(a) CBP Personnel.--In addition to amounts otherwise
available, there is appropriated to the Commissioner of U.S.
Customs and Border Protection for fiscal year 2025, out of any
money in the Treasury not otherwise appropriated,
$4,100,000,000, to remain available until September 30, 2029,
to hire and train additional Border Patrol agents, Office of
Field Operations Officers, Air and Marine agents, rehired
annuitants, and U.S. Customs and Border Protection support
personnel.
(b) Restrictions.--None of the funds made available by
subsection (a) may be used to recruit, hire, or train personnel
for the duties of processing coordinators.
(c) CBP Retention and Hiring Bonuses.--In addition to amounts
otherwise available, there is appropriated to the Commissioner
of U.S. Customs and Border Protection for fiscal year 2025, out
of any money in the Treasury not otherwise appropriated,
$2,052,630,000, to remain available until September 30, 2029,
to provide annual retention bonuses or signing bonuses to
eligible Border Patrol agents, Office of Field Operations
Officers, and Air and Marine agents.
(d) CBP Vehicles.--In addition to amounts otherwise
available, there is appropriated to the Commissioner of U.S.
Customs and Border Protection for fiscal year 2025, out of any
money in the Treasury not otherwise appropriated, $813,000,000,
to remain available until September 30, 2029, for the lease or
acquisition of additional marked patrol units.
(e) FLETC.--In addition to amounts otherwise available, there
is appropriated to the Director of the Federal Law Enforcement
Training Center for fiscal year 2025, out of any money in the
Treasury not otherwise appropriated--
(1) $285,000,000, to remain available until September
30, 2029, to support the training of newly hired
Federal law enforcement personnel employed by the
Department of Homeland Security; and
(2) $465,000,000, to remain available until September
30, 2029, for procurement and construction,
improvements, and related expenses of the Federal Law
Enforcement Training Centers facilities.
(f) Border Security Workforce Recruitment and Applicant
Sourcing.--In addition to amounts otherwise available, there is
appropriated to the Commissioner of U.S. Customs and Border
Protection for fiscal year 2025, out of any money in the
Treasury not otherwise appropriated, $600,000,000, to remain
available until September 30, 2029, for marketing, recruiting,
applicant sourcing and vetting, and operational mobility
programs for border security personnel.

SEC. 60003. U.S. CUSTOMS AND BORDER PROTECTION TECHNOLOGY, NATIONAL
VETTING CENTER, AND OTHER EFFORTS TO ENHANCE BORDER
SECURITY.

(a) CBP Technology.--In addition to amounts otherwise
available, there is appropriated to the Commissioner of U.S.
Customs and Border Protection for fiscal year 2025, out of any
money in the Treasury not otherwise appropriated, to remain
available until September 30, 2029, the following:
(1) $1,076,317,000 for necessary expenses relating to
procurement and integration of new non-intrusive
inspection equipment and associated civil works,
artificial intelligence, integration, and machine
learning, as well as other mission support, to combat
the entry of illicit narcotics along the southwest,
northern, and maritime borders.
(2) $2,766,000,000 for necessary expenses relating to
upgrades and procurement of border surveillance
technologies along the southwest, northern, and
maritime borders.
(3) $673,000,000 for necessary expenses, including
the deployment of technology, relating to the biometric
entry and exit system under section 7208 of the
Intelligence Reform and Terrorism Prevention Act of
2004 (8 U.S.C. 1365b).
(b) Restrictions.--None of the funds made available pursuant
to subsection (a)(2) may be used for the procurement or
deployment of surveillance towers that have not been--
(1) tested, and
(2) accepted,
by the Federal Government to deliver autonomous capabilities.
(c) Air and Marine Operations.--In addition to amounts
otherwise available, there is appropriated to the Commissioner
of U.S. Customs and Border Protection for fiscal year 2025, out
of any money in the Treasury not otherwise appropriated,
$1,234,000,000, to remain available until September 30, 2029,
for Air and Marine Operations' upgrading and procurement of new
platforms for rapid air and marine response capabilities.
(d) National Vetting Center.--In addition to amounts
otherwise available, there is appropriated to the Commissioner
of U.S. Customs and Border Protection for fiscal year 2025, out
of any money in the Treasury not otherwise appropriated,
$16,000,000, to remain available until September 30, 2029, for
necessary expenses relating to U.S. Customs and Border
Protection's National Vetting Center to support screening,
vetting activities, and expansion of the criminal history
database of foreign nationals.
(e) Other Efforts to Combat Drug Trafficking to Enhance
Border Security.--In addition to amounts otherwise available,
there is appropriated to the Secretary of Homeland Security for
fiscal year 2025, out of any money in the Treasury not
otherwise appropriated, $500,000,000, to remain available until
September 30, 2029, for enhancing border security and
combatting trafficking, including fentanyl and its precursor
chemicals, at the southwest, northern, and maritime borders.
(f) Commemorations.--In addition to amounts otherwise
available, there is appropriated to the Secretary of Homeland
Security for fiscal year 2025, out of any money in the Treasury
not otherwise appropriated, $1,000,000, to remain available
until September 30, 2029, for commemorating efforts and events
related to border security.
(g) Definition.--In this section, the term ``autonomous''
means integrated software and hardware systems that utilize
sensors, onboard computing, and artificial intelligence to
identify items of interest that would otherwise be manually
identified by U.S. Customs and Border Protection personnel.

SEC. 60004. STATE AND LOCAL LAW ENFORCEMENT PRESIDENTIAL RESIDENCE
PROTECTION.

(a) Presidential Residence Protection.--In addition to
amounts otherwise available, there is appropriated to the
Administrator of the Federal Emergency Management Agency, for
fiscal year 2025, out of any money in the Treasury not
otherwise appropriated, $300,000,000, to remain available until
September 30, 2029, for the reimbursement of extraordinary law
enforcement personnel costs for protection activities directly
and demonstrably associated with any residence of the President
that is designated pursuant to section 3 of the Presidential
Protection Assistance Act of 1976 (Public Law 94-524) to be
secured by the United States Secret Service.
(b) Availability.--Funds under subsection (a) shall be
available only for costs that a State or local agency--
(1) incurred or incurs on or after July 1, 2024;
(2) can demonstrate to the Administrator of the
Federal Emergency Management Agency as being--
(A) in excess of the costs of normal and
typical law enforcement operations;
(B) directly attributable to the provision of
protection described in such subsection; and
(C) associated with a non-governmental
property designated pursuant to section 3 of
the Presidential Protection Assistance Act of
1976 (Public Law 94-524) to be secured by the
United States Secret Service; and
(3) certifies to the Administrator as being for
protection activities requested by the Director of the
United States Secret Service.

SEC. 60005. STATE HOMELAND SECURITY GRANT PROGRAM.

In addition to amounts otherwise available, there is
appropriated to the Administrator of the Federal Emergency
Management Agency, for fiscal year 2025, out of any money in
the Treasury, not otherwise appropriated, to be administered
under the State Homeland Security Grant Program authorized
under section 2004 of the Homeland Security Act of 2002 (6
U.S.C. 605), to enhance State, local, and Tribal security
through grants, contracts, cooperative agreements, and other
activities, of which--
(1) $500,000,000, to remain available until September
30, 2029, for State and local capabilities to detect,
identify, track, or monitor threats from unmanned
aircraft systems (as such term is defined in section
44801 of title 49, United States Code);
(2) $625,000,000, to remain available until September
30, 2029, for security, planning, and other costs
related to the 2026 FIFA World Cup;
(3) $1,000,000,000, to remain available until
September 30, 2029, for security, planning, and other
costs related to the 2028 Olympics; and
(4) $450,000,000, to remain available until September
30, 2029, for the Operation Stonegarden Grant Program.

TITLE VII--COMMITTEE ON THE JUDICIARY

Subtitle A--Immigration Matters

PART 1--IMMIGRATION FEES

SEC. 70001. APPLICABILITY OF THE IMMIGRATION LAWS.

(a) Applicability.--Notwithstanding any provision of the
immigration laws (as defined under section 101 of the
Immigration and Nationality Act), the fees under this subtitle
shall apply.
(b) Terms.--The terms used under this subtitle shall have the
meanings given such terms in section 101 of the Immigration and
Nationality Act.
(c) References to Immigration and Nationality Act.--Except as
otherwise expressly provided, whenever this subtitle references
a section or other provision, the reference shall be considered
to be to a section or other provision of the Immigration and
Nationality Act.

SEC. 70002. ASYLUM FEE.

(a) In General.--In addition to any other fee authorized by
law, the Secretary of Homeland Security or the Attorney
General, as applicable, shall impose a fee in the amount
specified in this section for a fiscal year on each alien who
files an application for asylum under section 208 of the
Immigration and Nationality Act at the time such application is
filed.
(b) Initial Amount.--The amount specified in this section for
fiscal year 2025 shall be such amount as the Secretary or
Attorney General, as applicable, may by rule provide, but in
any event not less than $1,000.
(c) Subsequent Adjustment.--Beginning in fiscal year 2026 and
each fiscal year thereafter, the amount specified in this
section for a fiscal year shall be equal to the sum of--
(1) the amount imposed under this section for the
prior fiscal year; and
(2) rounded to the next lowest multiple of $10, the
amount referred to in paragraph (1), multiplied by the
percentage (if any) by which the Consumer Price Index
for All Urban Consumers for the month of July preceding
the date on which such adjustment takes effect exceeds
the Consumer Price Index for All Urban Consumers for
the same month of the preceding calendar year.
(d) Crediting Certain Funds.--During any fiscal year, the
total amount of fees received under this section shall be
credited as follows:
(1) 50 percent of fees received from applications
filed with the Attorney General shall be credited to
the Executive Office for Immigration Review to retain
and spend without further appropriation.
(2) 50 percent of fees received from applications
filed with the Secretary of Homeland Security shall be
credited to U.S. Citizenship and Immigration Services
and deposited into the Immigration Examinations Fee
Account established under section 286(m) of the
Immigration and Nationality Act (8 U.S.C. 1356(m)) to
retain and spend without further appropriation.
(3) Any amounts not credited to the Executive Office
for Immigration Review or U.S. Citizenship and
Immigration Services shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(e) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70003. EMPLOYMENT AUTHORIZATION DOCUMENT FEES.

(a) Asylum Applicants.--
(1) In general.--In addition to any other fee
authorized by law, the Secretary of Homeland Security
shall impose on any alien who files an initial
application for employment authorization under section
208(d)(2) of the Immigration and Nationality Act a fee
in the amount specified in this subsection at the time
such initial employment authorization application is
filed. Each initial employment authorization shall be
valid for a period of not more than six months.
(2) Initial amount.-- For purposes of this
subsection, the amount specified in this subsection for
fiscal year 2025 shall be such amount as the Secretary
may by rule provide, but in any event not less than
$550.
(3) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount for a
fiscal year shall be equal to the sum of--
(A) the amount imposed under this section for
the prior fiscal year; and
(B) rounded to the next lowest multiple of
$10, the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(4) Crediting of funds.--25 percent of fees received
under this section shall be credited to U.S.
Citizenship and Immigration Services and deposited into
the Immigration Examinations Fee Account established
under section 286(m) of the Immigration and Nationality
Act (8 U.S.C. 1356(m)) to retain and spend without
further appropriation, of which 50 percent shall be
used by U.S. Citizenship and Immigration Services to
detect and prevent immigration benefit fraud. Any
amounts not credited to U.S. Citizenship and
Immigration Services under this section shall be
credited as offsetting receipts and deposited into the
general fund of the Treasury.
(5) No waiver.--A fee imposed under this subsection
shall not be waived or reduced.
(b) Parole.--
(1) In general.--In addition to any other fee
authorized by law, the Secretary of Homeland Security
shall impose on any alien paroled into the United
States a fee for any initial application for employment
authorization in an amount specified in this subsection
at the time such initial application is filed. Each
initial employment authorization shall be valid for a
period of not more than six months.
(2) Initial amount.--For purposes of this subsection,
the amount specified in this subsection for fiscal year
2025 shall be such amount as the Secretary may by rule
provide, but in any event not less than $550.
(3) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this subsection
for the prior fiscal year; and
(B) rounded to the next lowest multiple of
$10, the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(4) Crediting of funds.--The fees received under this
section shall be credited as offsetting receipts and
deposited into the general fund of the Treasury.
(5) No waiver.--A fee imposed under this subsection
shall not be waived or reduced.
(c) Temporary Protected Status.--
(1) In general.--In addition to any other fee
authorized by law, for any alien who files an initial
application for employment authorization under section
244(a)(1)(B) of the Immigration and Nationality Act,
the Secretary of Homeland Security shall impose a fee
in an amount specified in this subsection at the time
such initial application is filed. Each initial
employment authorization shall be valid for a period of
not more than six months.
(2) Initial amount.--For purposes of this subsection,
the amount specified in this subsection for fiscal year
2025 shall be such amount as the Secretary may by rule
provide, but in any event not less than $550.
(3) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this subsection
for the prior fiscal year; and
(B) rounded to the next lowest multiple of
$10, the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(4) Crediting of certain funds.--The fees received
under this section shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(5) No waiver.--A fee imposed under this subsection
shall not be waived or reduced.

SEC. 70004. PAROLE FEE.

(a) In General.--In addition to any other fee authorized by
law, the Secretary of Homeland Security shall impose a fee in
an amount specified in this section on each alien who is
paroled into the United States, except if, as established by
the alien, the alien is paroled because--
(1) the alien has a medical emergency, and--
(A) the alien cannot obtain necessary
treatment in the foreign state in which the
alien is residing; or
(B) the medical emergency is life-threatening
and there is insufficient time for the alien to
be admitted to the United States through the
normal visa process;
(2) the alien is the parent or legal guardian of an
alien described in paragraph (1) and the alien
described in paragraph (1) is a minor;
(3) the alien is needed in the United States to
donate an organ or other tissue for transplant and
there is insufficient time for the alien to be admitted
to the United States through the normal visa process;
(4) the alien has a close family member in the United
States whose death is imminent and the alien could not
arrive in the United States in time to see such family
member alive if the alien were to be admitted to the
United States through the normal visa process;
(5) the alien is seeking to attend the funeral of a
close family member and the alien could not arrive in
the United States in time to attend such funeral if the
alien were to be admitted to the United States through
the normal visa process;
(6) the alien is an adopted child with an urgent
medical condition who is in the legal custody of the
petitioner for a final adoption-related visa and whose
medical treatment is required before the expected award
of a final adoption-related visa;
(7) the alien is a lawful applicant for adjustment of
status under section 245 of the Immigration and
Nationality Act and is returning to the United States
after temporary travel abroad;
(8) the alien is returned to a contiguous country
under section 235(b)(2)(C) of the Immigration and
Nationality Act and paroled into the United States to
allow the alien to attend the alien's immigration
hearing;
(9) the alien--
(A) is a national of the Republic of Cuba and
is living in the Republic of Cuba;
(B) is the beneficiary of an approved
petition under section 203(a) of the
Immigration and Nationality Act;
(C) is an alien for whom an immigrant visa is
not immediately available;
(D) meets all eligibility requirements for an
immigrant visa;
(E) is not otherwise inadmissible; and
(F) is receiving a grant of parole in
furtherance of the commitment of the United
States to the minimum level of annual legal
migration of Cuban nationals to the United
States specified in the U.S.-Cuba Joint
Communique on Migration, done at New York
September 9, 1994, and reaffirmed in the Cuba-
United States: Joint Statement on Normalization
of Migration, Building on the Agreement of
September 9, 1994, done at New York May 2,
1995; or
(10) the Secretary of Homeland Security determines
that a significant public benefit has resulted or will
result from the parole of an alien only if--
(A) the alien has assisted or will assist the
United States Government in a law enforcement
matter;
(B) the alien's presence is required by the
Government in furtherance of such law
enforcement matter; and
(C) the alien is inadmissible, does not
satisfy the eligibility requirements for
admission as a nonimmigrant, or there is
insufficient time for the alien to be admitted
to the United States through the normal visa
process.
(b) Initial Amount.--For purposes of this section, the amount
specified in this subsection for fiscal year 2025 shall be such
amount as the Secretary may by rule provide, but in any event
not less than $1,000.
(c) Subsequent Adjustment.--Beginning in fiscal year 2026 and
each fiscal year thereafter, the amount specified in this
section for a fiscal year shall be equal to the sum of--
(1) the amount imposed under this section for the
prior fiscal year; and
(2) rounded to the next lowest multiple of $10, the
amount referred to in paragraph (1), multiplied by the
percentage (if any) by which the Consumer Price Index
for All Urban Consumers for the month of July preceding
the date on which such adjustment takes effect exceeds
the Consumer Price Index for All Urban Consumers for
the same month of the preceding calendar year.
(d) Crediting of Funds.--Fees received under this section
shall be credited as offsetting receipts and deposited in the
general fund of the Treasury.
(e) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70005. SPECIAL IMMIGRANT JUVENILE FEE.

(a) In General.--In addition to any other fee authorized by
law, the Secretary of Homeland Security shall impose a fee in
an amount specified in this section on any alien applying for
special immigrant juvenile status under section 101(a)(27)(J)
of the Immigration and Nationality Act if reunification with 1
parent or legal guardian is viable, notwithstanding abuse,
neglect, abandonment, or a similar basis found under State law
making reunification with the other parent or legal guardian
not viable.
(b) Initial Amount.--For purposes of this subsection, the
amount specified in this section for fiscal year 2025 shall be
such amount as the Secretary may by rule provide, but in any
event not less than $500.
(c) Subsequent Adjustment.--Beginning in fiscal year 2026 and
each fiscal year thereafter, the amount specified in this
section for a fiscal year shall be equal to the sum of--
(1) the amount imposed under this section for the
prior fiscal year; and
(2) rounded to the next lowest multiple of $10, the
amount referred to in paragraph (1), multiplied by the
percentage (if any) by which the Consumer Price Index
for All Urban Consumers for the month of July preceding
the date on which such adjustment takes effect exceeds
the Consumer Price Index for All Urban Consumers for
the same month of the preceding calendar year.
(d) Crediting of Funds.--Fees received under this section
shall be credited as offsetting receipts and deposited in the
general fund of the Treasury.
(e) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70006. TEMPORARY PROTECTED STATUS FEE.

(a) In General.--In addition to any other fee authorized by
law, the Secretary of Homeland Security shall impose a fee in
an amount specified in this section for the consideration of an
application for temporary protected status under section 244 of
the Immigration and Nationality Act on any alien who--
(1) has not been admitted into the United States; or
(2) has been admitted to the United States as a
nonimmigrant but at the time of application for
temporary protected status has failed--
(A) to maintain or extend the nonimmigrant
status in which the alien was admitted or to
which the status was changed under section 248
of the Immigration and Nationality Act,
including complying with the period of stay
authorized by the Secretary of Homeland
Security in connection with such status; or
(B) to comply with the conditions of such
nonimmigrant status.
(b) Initial Amount.--For purposes of this subsection, the
amount specified in this section for fiscal year 2025 shall be
such amount as the Secretary may by rule provide, but in any
event not less than $500.
(c) Subsequent Adjustment.--Beginning in fiscal year 2026 and
each fiscal year thereafter, the amount specified in this
section for a fiscal year shall be equal to the sum of--
(1) the amount imposed under this section for the
prior fiscal year; and
(2) rounded to the next lowest multiple of $10, the
amount referred to in paragraph (1), multiplied by the
percentage (if any) by which the Consumer Price Index
for All Urban Consumers for the month of July preceding
the date on which such adjustment takes effect exceeds
the Consumer Price Index for All Urban Consumers for
the same month of the preceding calendar year.
(d) Crediting of Funds.--Fees received under this section
shall be credited as offsetting receipts and deposited in the
general fund of the Treasury.
(e) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70007. UNACCOMPANIED ALIEN CHILD SPONSOR FEE.

(a) In General.--In addition to any other fee authorized by
law, before placing the child with an individual under section
235(c) of the William Wilberforce Trafficking Victims
Protection Reauthorization Act of 2008, the Secretary of Health
and Human Services shall collect from that individual a fee in
an amount specified in this section as partial reimbursement to
the Federal Government for the period during which the child
was in the custody of the Government, for processing, housing,
feeding, educating, transporting, and otherwise providing for
the care of the child.
(b) Initial Amount.--For purposes of this subsection, the
amount specified in this section for fiscal year 2025 shall be
such amount as the Secretary may by rule provide, but in any
event not less than $3,500.
(c) Subsequent Adjustment.--Beginning in fiscal year 2026 and
each fiscal year thereafter, the amount specified in this
section for a fiscal year shall be equal to the sum of--
(1) the amount imposed under this section for the
prior fiscal year; and
(2) rounded to the next lowest multiple of $10, the
amount referred to in paragraph (1), multiplied by the
percentage (if any) by which the Consumer Price Index
for All Urban Consumers for the month of July preceding
the date on which such adjustment takes effect exceeds
the Consumer Price Index for All Urban Consumers for
the same month of the preceding calendar year.
(d) Crediting of Funds.--During any fiscal year, the total
amount of fees received under this section shall be credited as
follows:
(1) 25 percent of fees received under this section
shall be credited to the Department of Health and Human
Services to retain and spend without further
appropriation and shall be used for the purpose of
conducting background checks of potential sponsors of
unaccompanied alien children and of adults residing in
potential sponsors' households, which shall include, at
a minimum--
(A) the name of the individual and all adult
residents of the individual's household;
(B) the social security number of the
individual and all adult residents of the
individual's household;
(C) the date of birth of the individual and
all adult residents of the individual's
household;
(D) the validated location of the
individual's residence where the child will be
placed;
(E) the immigration status of the individual
and all adult residents of the individual's
household;
(F) contact information for the individual
and all adult residents of the individual's
household; and
(G) the results of all background and
criminal records checks for the individual and
all adult residents of the individual's
household, which shall include at a minimum an
investigation of the public records sex
offender registry, a public records background
check, and a national criminal history check
based on fingerprints.
(2) Any amounts not credited to the Department of
Health and Human Services shall be credited as
offsetting receipts and deposited into the general fund
of the Treasury.
(e) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70008. VISA INTEGRITY FEE.

(a) Visa Integrity Fee.--
(1) In general.--In addition to any other fee
authorized by law, the Secretary of State shall impose
a fee in an amount specified in this subsection on each
alien issued a nonimmigrant visa by the State
Department upon the issuance of such alien's
nonimmigrant visa.
(2) Initial amount.--For purposes of this subsection,
the amount specified in this subsection for fiscal year
2025 shall be such amount as the Secretary may by rule
provide, but in any event not less than $250.
(3) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this section for
the prior fiscal year; and
(B) rounded to the next lowest multiple of
$1, the amount referred to in subparagraph (A),
multiplied by the percentage (if any) by which
the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(4) Crediting of funds.--The fees received under this
subsection that are not reimbursed in accordance with
subsection (b) shall be credited as offsetting receipts
and deposited in the general fund of the Treasury.
(5) No waiver.--A fee imposed under this subsection
shall not be waived or reduced.
(b) Fee Reimbursement.--The Secretary of State may reimburse
to an alien a fee imposed under this section on that alien for
the issuance of a nonimmigrant visa after the expiration of
such nonimmigrant visa's period of validity if the alien
demonstrates that--
(1) the alien has not sought admission during such
period of validity;
(2) the alien, after admission to the United States
pursuant to such nonimmigrant visa, complied with all
conditions of such nonimmigrant visa, including the
condition that an alien shall not accept unauthorized
employment, and that the alien departed the United
States not later than 5 days after the date on which
the alien was authorized to remain in the United
States; or
(3) the alien filed to extend, change, or adjust such
status within the nonimmigrant visa's period of
validity.

SEC. 70009. FORM I-94 FEE.

(a) Fee Authorized.--In addition to any other fee authorized
by law, the Secretary of Homeland Security shall impose a fee
in an amount specified in subsection (b) on any alien upon the
alien's application for a Form I-94 Arrival/Departure Record.
(b) Fee Specified.--
(1) Initial amount.--The amount specified in this
subsection for fiscal year 2025 shall be such amount as
the Secretary may by rule provide, but in any event not
less than $24.
(2) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this section for
the prior fiscal year; and
(B) the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(c) Crediting of Funds.--During any fiscal year, the total
amount of fees received under this section shall be credited as
follows:
(1) 20 percent of the fee collected under this
section for each application shall be deposited
pursuant to section 286(q)(2) of the Immigration and
Nationality Act (8 U.S.C. 1356(q)(2)) and made
available to U.S. Customs and Border Protection to
retain and spend without further appropriation for the
purpose of processing Form I-94.
(2) Any amounts not credited to U.S. Customs and
Border Protection shall be credited as offsetting
receipts and deposited in the general fund of the
Treasury.
(d) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70010. YEARLY ASYLUM FEE.

(a) Fee Authorized.--In addition to any other fee authorized
by law, for each calendar year that an alien's application for
asylum remains pending, the Secretary of Homeland Security or
the Attorney General, as applicable, shall impose a fee in an
amount specified in subsection (b) on that alien.
(b) Fee Specified.--
(1) Initial amount.--The amount specified in this
subsection for fiscal year 2025 shall be such amount as
the Secretary and the Attorney General may by rule
provide, but in any event not less than $100.
(2) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this section for
the prior fiscal year; and
(B) the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(c) Crediting of Funds.--The fees received under this section
shall be credited as offsetting receipts and deposited in the
general fund of the Treasury.
(d) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70011. FEE FOR CONTINUANCES GRANTED IN IMMIGRATION COURT
PROCEEDINGS.

(a) In General.--In addition to any other fee authorized by
law, the Attorney General shall impose a fee in an amount
specified in subsection (b) on any alien who requests and is
granted a continuance by an immigration judge for each such
continuance.
(b) Fee Specified.--
(1) Initial amount.--The amount specified in this
subsection for fiscal year 2025 shall be such amount as
the Attorney General may by rule provide, but in any
event not less than $100.
(2) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this section for
the prior fiscal year; and
(B) the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(c) Crediting of Certain Funds.--Amounts received as fees
under this section shall be credited as offsetting receipts and
deposited in the general fund of the Treasury.
(d) No Waiver.--A fee imposed under this section shall not be
waived or reduced, except no fee shall be imposed on any alien
whose request for a continuance is granted based on exceptional
circumstances (as such term is defined in section 240 of the
Immigration and Nationality Act).

SEC. 70012. FEE RELATING TO RENEWAL AND EXTENSION OF EMPLOYMENT
AUTHORIZATION FOR PAROLEES.

(a) Fee Imposed.--In addition to any other fee authorized by
law, for a parolee who seeks a renewal or extension of
employment authorization based on a grant of parole, the
Secretary of Homeland Security shall impose a fee in an amount
specified in subsection (b).
(b) Fee Specified.--
(1) Initial amount.--The amount specified in this
subsection for fiscal year 2025 shall be such amount as
the Secretary may by rule provide, but in any event not
less than $550.
(2) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this subsection
for the prior fiscal year; and
(B) rounded to the next lowest multiple of
$10, the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(c) In General.--The employment authorization for any alien
paroled into the United States, or any renewal or extension
thereof, shall be valid for a period of not more than six
months.
(d) Crediting of Funds.--The fees received under this section
shall be credited as offsetting receipts and deposited into the
general fund of the Treasury.
(e) No Waiver.--A fee imposed under this subsection shall not
be waived or reduced.

SEC. 70013. FEE RELATING TO TERMINATION, RENEWAL, AND EXTENSION OF
EMPLOYMENT AUTHORIZATION FOR ASYLUM APPLICANTS.

(a) Fee Imposed.--In addition to any other fee authorized by
law, for any alien who applies for asylum and who seeks a
renewal or extension of employment authorization based on such
application, the Secretary of Homeland Security shall impose a
fee of not less than $550 for each such renewal or extension,
in accordance with subsection (b).
(b) Employment Authorization.--The Secretary of Homeland
Security may provide employment authorization to an applicant
for asylum for a period of not more than six months. Each
renewal or extension thereof shall also be valid for a period
of not more than six months.
(c) Termination.--Each initial employment authorization, or
renewal or extension of such authorization, shall terminate as
follows:
(1) Immediately following the denial of an asylum
application by an asylum officer, unless the case is
referred to an immigration judge.
(2) On the date that is 30 days after the date on
which an immigration judge denies an asylum
application, unless the alien makes a timely appeal to
the Board of Immigration Appeals.
(3) Immediately following the denial by the Board of
Immigration Appeals of an appeal of a denial of an
asylum application.
(d) Prohibition.--The Secretary of Homeland Security shall
not grant, renew, or extend employment authorization to an
alien if the alien was previously granted employment
authorization as an applicant for asylum and the employment
authorization was terminated pursuant to a circumstance
described in subsection (c), unless a Federal Court of Appeals
remands the alien's case to the Board of Immigration Appeals.
(e) Crediting of Funds.--The total amount of fees received
under this section shall be credited as offsetting receipts and
deposited in the general fund of the Treasury.
(f) No Waiver.--A fee imposed under this subsection shall not
be waived or reduced.

SEC. 70014. FEE RELATING TO RENEWAL AND EXTENSION OF EMPLOYMENT
AUTHORIZATION FOR ALIENS GRANTED TEMPORARY
PROTECTED STATUS.

(a) Fee Imposed.--In addition to any other fee authorized by
law, for any alien who seeks a renewal or extension of
employment authorization based on a grant of temporary
protected status, the Secretary of Homeland Security shall
impose a fee in an amount specified in subsection (b) at the
time of each such renewal or extension.
(b) Fee Specified.--
(1) Initial amount.--The amount specified in this
subsection for fiscal year 2025 shall be such amount as
the Secretary may by rule provide, but in any event not
less than $550.
(2) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this subsection
for the prior fiscal year; and
(B) rounded to the next lowest multiple of
$10, the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(c) Employment Authorization.--Any employment authorization
for an alien granted temporary protected status, or any renewal
or extension thereof, shall be valid for a period of not more
than six months.
(d) Crediting of Funds.--The fees received under this section
shall be credited as offsetting receipts and deposited into the
general fund of the Treasury.
(e) No Waiver.--A fee imposed under this subsection shall not
be waived or reduced.

SEC. 70015. DIVERSITY IMMIGRANT VISA FEES.

(a) Fee for Filing a Diversity Immigrant Visa Application.--
(1) In general.--In addition to any other fee
authorized by law, the Secretary of State shall impose
on any alien who files an application for a diversity
immigrant visa as described in section 203(c) of the
Immigration and Nationality Act (8 U.S.C. 1153(c)) a
fee in the amount specified in this subsection at the
time such application is filed.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Secretary may by rule
provide, but in any event not less than $400.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(b) Fee for Aliens Who Register for the Diversity Immigrant
Visa Program.--
(1) In general.--In addition to any other fee
authorized by law, the Secretary of State shall impose
on any alien who registers for the diversity immigrant
visa program, as described in section 203(c) of the
Immigration and Nationality Act (8 U.S.C. 1153(c)) a
fee in the amount specified in this subsection at the
time of registration.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Secretary may by rule
provide, but in any event not less than $250.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) the amount referred to in clause
(i), multiplied by the percentage (if
any) by which the Consumer Price Index
for All Urban Consumers for the month
of July preceding the date on which
such adjustment takes effect exceeds
the Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(c) Crediting of Funds.--During any fiscal year, the total
amount of fees received under this section shall be credited as
follows:
(1) 10 percent of fees received shall be credited to
the Department of State to retain and spend without
further appropriation to detect and prevent fraud in
the diversity immigrant visa program and to offset
costs associated with such program.
(2) 10 percent of fees received shall be credited to
U.S. Immigration and Customs Enforcement to retain and
spend without further appropriation for the purpose of
detention and immigration enforcement and removal
operations.
(3) Any amounts not credited under this subsection to
the Department of State or U.S. Immigration and Customs
Enforcement shall be credited as offsetting receipts
and deposited into the general fund of the Treasury.
(d) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70016. EOIR FEES.

(a) Fee for Filing an Application to Adjust Status to That of
a Lawful Permanent Resident.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files with an immigration court an
application to adjust the alien's status to that of a
lawful permanent resident, or whose application to
adjust status to that of a lawful permanent resident is
adjudicated in immigration court, a fee in the amount
specified in this subsection at the time such
application is filed, or, as applicable, prior to the
adjudication of such application in immigration court.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $1,500.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Crediting certain funds.--During any fiscal year,
not more than 50 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(b) Fee for Filing an Application for Waiver of Grounds of
Inadmissibility.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files with an immigration court an
application for waiver of grounds of inadmissibility,
or whose application for waiver of grounds of
inadmissibility is adjudicated in immigration court, a
fee in the amount specified in this subsection at the
time such application is filed, or, as applicable,
prior to the adjudication of such application in
immigration court.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $1,050.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(c) Fee for Filing an Application for Temporary Protected
Status.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files with an immigration court an
application for temporary protected status, or whose
application for temporary protected status is
adjudicated in immigration court, a fee in the amount
specified in this subsection at the time such
application is filed or, as applicable, prior to the
adjudication of such application in immigration court.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $500.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(d) Fee for Filing an Appeal From a Decision of an
Immigration Judge.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files any appeal from a decision of an
immigration judge a fee in the amount specified in this
subsection at the time such appeal is filed.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $900.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Exception.--The fee described in this section
shall not apply to the appeal of a bond decision.
(4) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(e) Fee for Filing an Appeal From a Decision of an Officer of
the Department of Homeland Security.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files an appeal from a decision of an
officer of the Department of Homeland Security a fee in
the amount specified in this subsection at the time
such appeal is filed.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $900.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of Immigration and Nationality and
credited to the Executive Office for Immigration Review
to retain and spend without further appropriation. Any
amounts not credited under the previous sentence shall
be credited as offsetting receipts and deposited into
the general fund of the Treasury.
(f) Fee for Filing an Appeal From a Decision of an
Adjudicating Official in a Practitioner Disciplinary Case.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any practitioner who files an appeal from a decision of
an adjudicating official in a practitioner disciplinary
case a fee in the amount specified in this subsection
at the time such appeal is filed.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $1,325.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(g) Fee for Filing a Motion to Reopen or a Motion to
Reconsider.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files a motion to reopen or motion to
reconsider a decision of an immigration judge or the
Board of Immigration Appeals a fee in the amount
specified in this subsection at the time such motion is
filed.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $900.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Exceptions.--The fee described in this section
shall not apply to any motion that is:
(A) a motion to reopen a removal order
entered in absentia if the motion is filed
under section 240(b)(5)(C)(ii) of the
Immigration and Nationality Act; or
(B) a motion to reopen a deportation order
entered in absentia if the motion is filed
under section 242B(c)(3)(B) of the Immigration
and Nationality Act, as the section existed
prior to April 1, 1997.
(4) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(h) Fee for Filing an Application for Suspension of
Deportation.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files with an immigration court an
application for suspension of deportation a fee in the
amount specified in this subsection at the time such
application is filed.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $600.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(i) Fee for Filing an Application for Cancellation of Removal
for Certain Permanent Residents.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files with an immigration court an
application for cancellation of removal for certain
permanent residents a fee in the amount specified in
this subsection at the time such application is filed.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $600.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(j) Fee for Filing an Application for Cancellation of Removal
and Adjustment of Status for Certain Nonpermanent Residents.--
(1) In general.--In addition to any other fees
authorized by law, the Attorney General shall impose on
any alien who files with an immigration court an
application for cancellation of removal and adjustment
of status for certain nonpermanent residents a fee in
the amount specified in this subsection at the time
such application is filed.
(2) Fee specified.--
(A) Initial amount.--The amount specified in
this subsection for fiscal year 2025 shall be
such amount as the Attorney General may by rule
provide, but in any event not less than $1,500.
(B) Subsequent adjustment.--Beginning in
fiscal year 2026 and each fiscal year
thereafter, the amount specified in this
subsection for a fiscal year shall be equal to
the sum of--
(i) the amount imposed under this
subsection for the prior fiscal year;
and
(ii) rounded to the next lowest
multiple of $10, the amount referred to
in clause (i), multiplied by the
percentage (if any) by which the
Consumer Price Index for All Urban
Consumers for the month of July
preceding the date on which such
adjustment takes effect exceeds the
Consumer Price Index for All Urban
Consumers for the same month of the
preceding calendar year.
(3) Crediting certain funds.--During any fiscal year,
not more than 25 percent of the total amount of fees
received under this section shall be derived by
transfer from the Immigration Examinations Fee Account
under section 286(n) of the Immigration and Nationality
Act and credited to the Executive Office for
Immigration Review to retain and spend without further
appropriation. Any amounts not credited under the
previous sentence shall be credited as offsetting
receipts and deposited into the general fund of the
Treasury.
(k) No Waiver.--Any fee imposed under this section shall not
be waived or reduced.
(l) Condition on Funds.--No fees received under this section
shall be used to fund the Legal Orientation Program or any
successor program.

SEC. 70017. ESTA FEE.

Section 217(h)(3)(B) of the Immigration and Nationality Act
(8 U.S.C. 1187(h)(3)(B)) is amended--
(1) in clause (i)--
(A) in subclause (I), by striking ``and'' at
the end;
(B) in subclause (II)--
(i) by inserting after ``an amount''
the following ``of not less than $10'';
and
(ii) by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following:
``(III) not less than $13.'';
(2) in clause (ii)--
(A) by striking ``Amounts collected under
clause (i)(I)'' and inserting the following:
``(I) In general.--
Notwithstanding any other
provision of law, of the
amounts collected under clause
(i)(I) during a fiscal year,
not more than $20,000,000'';
(B) by inserting before the period at the end
of the first sentence the following: ``, and
the remainder of the amounts collected under
clause (i)(I) shall be credited as offsetting
receipts and deposited in the general fund of
the Treasury''; and
(C) by inserting after ``to pay the costs
incurred to administer the System.'' the
following: ``Amounts collected under clause
(i)(III) shall be credited as offsetting
receipts and deposited in the general fund of
the Treasury.'';
(3) in clause (iii), by striking ``2028'' and
inserting ``2034''; and
(4) by adding at the end the following:
``(iv) Subsequent adjustment.--
Beginning in fiscal year 2026 and each
fiscal year thereafter, the amount
specified in clause (i)(II) for a
fiscal year shall be equal to the sum
of--
``(I) the amount imposed
under this subsection for the
prior fiscal year; and
``(II) the amount referred to
in subclause (I), multiplied by
the percentage (if any) by
which the Consumer Price Index
for All Urban Consumers for the
month of July preceding the
date on which such adjustment
takes effect exceeds the
Consumer Price Index for All
Urban Consumers for the same
month of the preceding calendar
year.''.

SEC. 70018. IMMIGRATION USER FEES.

Section 286 of the Immigration and Nationality Act (8 U.S.C.
1356) is amended--
(1) in subsection (d)--
(A) by striking ``In addition to any other
fee'' and inserting the following:
``(1) In general.--In addition to any other fee'';
(B) by inserting ``and except as provided in
subsection (e),'' before ``the Attorney General
shall charge and collect'';
(C) by striking ``$7'' and inserting ``a fee
in an amount specified in paragraph (2)''; and
(D) by adding at the end the following:
``(2) Initial amount.--For purposes of this section,
the amount specified in this section for fiscal year
2025 shall be not less than $10.
``(3) Subsequent adjustment.--Beginning in fiscal
year 2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
``(A) the amount imposed under this
subsection for the prior fiscal year; and
``(B) rounded to the next lowest multiple of
$0.25, the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
``(4) Crediting of amounts.--Of amounts collected
under this subsection $1 per individual for immigration
inspection or preinspection as described in this
subsection shall be credited as offsetting receipts and
deposited in the general fund of the Treasury.
``(5) No waiver.--A fee imposed under this subsection
shall not be waived or reduced.''; and
(2) in subsection (e)--
(A) by striking paragraph (1);
(B) by redesignating paragraphs (2) and (3)
as paragraphs (1) and (2); and
(C) in paragraph (2) (as redesignated by
subparagraph (B) above), by striking ``The
Attorney General shall charge'' and all that
follows through ``this requirement shall not
apply to'' and inserting the following: ``No
fee shall be charged under subsection (d)
for''.

SEC. 70019. EVUS FEE.

(a) In General.-- In addition to any other fee authorized by
law, the Secretary of Homeland Security shall impose on any
alien subject to the Electronic Visa Update System a fee in the
amount specified in this section at the time of such alien's
enrollment in the Electronic Visa Update System.
(b) Amount.--For purposes of this section, the amount
specified in this section for fiscal year 2025 shall be such
amount as the Secretary may by rule provide, but in any event
not less than $30.
(c) Subsequent Adjustment.--Beginning in fiscal year 2026 and
each fiscal year thereafter, the amount specified in this
section for a fiscal year shall be equal to the sum of--
(1) the amount imposed under this section for the
prior fiscal year; and
(2) rounded to the next lowest multiple of $0.25, the
amount referred to in paragraph (1), multiplied by the
percentage (if any) by which the Consumer Price Index
for All Urban Consumers for the month of July preceding
the date on which such adjustment takes effect exceeds
the Consumer Price Index for All Urban Consumers for
the same month of the preceding calendar year.
(d) Crediting of Funds.--
(1) In general.--The fees received under this section
shall be deposited into the CBP Electronic Visa Update
System Account, less $5 per enrollment which shall be
credited as offsetting receipts and deposited into the
general fund of the Treasury.
(2) Establishment.--Notwithstanding any other
provision of law, there is hereby established in the
Treasury of the United States a separate account which
shall be known as the ``CBP Electronic Visa Update
System Account''.
(3) Appropriation.-- Amounts deposited in the CBP
Electronic Visa Update System Account are hereby
appropriated to make payments and offset program costs
as specified in this section without further
appropriation necessary and shall remain available
until expended for any U.S. Customs and Border
Protection costs associated with administering the
Electronic Visa Update System.
(e) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70020. FEE FOR SPONSOR OF UNACCOMPANIED ALIEN CHILD WHO FAILS TO
APPEAR IN IMMIGRATION COURT.

(a) Fee Imposed.--In addition to any other fee authorized by
law, for the sponsor of an unaccompanied alien child, the
Secretary of Health and Human Services shall impose a fee in an
amount specified in subsection (b) prior to the unaccompanied
alien child's release to such sponsor.
(b) Fee Specified.--
(1) Initial amount.--The amount specified in this
subsection for fiscal year 2025 shall be such amount as
the Secretary may by rule provide, but in any event not
less than $5,000.
(2) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this subsection
for the prior fiscal year; and
(B) rounded to the next lowest multiple of
$10, the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(c) Fee Reimbursement.--At the conclusion of an unaccompanied
alien child's immigration court proceedings as an unaccompanied
alien child, or upon the ending of such sponsor's sponsorship
of such unaccompanied alien child, the Secretary of Health and
Human Services may reimburse to a sponsor a fee imposed under
this section if such sponsor demonstrates that the
unaccompanied alien child in the care of such sponsor was not
ordered removed in absentia under section 240(b)(5) of the
Immigration and Nationality Act. In the case of a sponsor of an
unaccompanied alien child who was ordered removed in absentia
and such order was rescinded under section 240(b)(5)(C) of the
Immigration and Nationality Act, the sponsor may seek
reimbursement of the fee under this section.
(d) Crediting of Funds.--The fees received under this section
shall be credited as offsetting receipts and deposited into the
general fund of the Treasury.
(e) No Waiver.--A fee imposed under this subsection shall not
be waived or reduced.

SEC. 70021. FEE FOR ALIENS ORDERED REMOVED IN ABSENTIA.

(a) In General .--As partial reimbursement for the cost of
arresting an alien described in this section, the Secretary of
Homeland Security shall impose a fee in an amount specified in
this section on any alien who--
(1) is ordered removed in absentia under section
240(b)(5) of the Immigration and Nationality Act (8
U.S.C. 1229a(b)(5)); and
(2) is subsequently arrested by U.S. Immigration and
Customs Enforcement.
(b) Initial Amount.--For purposes of this subsection, the
amount specified in this subsection for fiscal year 2025 shall
be such amount as the Secretary may by rule provide, but in any
event not less than $5,000.
(c) Subsequent Adjustment.--Beginning in fiscal year 2026 and
each fiscal year thereafter, the amount for a fiscal year shall
be equal to the sum of--
(1) the amount imposed under this section for the
prior fiscal year; and
(2) rounded to the next lowest multiple of $10, the
amount referred to in paragraph (1), multiplied by the
percentage (if any) by which the Consumer Price Index
for All Urban Consumers for the month of July preceding
the date on which such adjustment takes effect exceeds
the Consumer Price Index for All Urban Consumers for
the same month of the preceding calendar year.
(d) Crediting of Funds.--The fees received under this section
shall be credited as offsetting receipts and deposited into the
general fund of the Treasury.
(e) No Waiver.--A fee imposed under this subsection shall not
be waived or reduced.
(f) Exception.--The fee described in this section shall not
apply to any alien who was ordered removed in absentia if such
order was rescinded under section 240(b)(5)(C) of the
Immigration and Nationality Act.

SEC. 70022. CUSTOMS AND BORDER PROTECTION INADMISSIBLE ALIEN
APPREHENSION FEE.

(a) Fee Imposed.--In addition to any other fee authorized by
law, for any inadmissible alien who is apprehended between
ports of entry by U.S. Customs and Border Protection, the
Secretary of Homeland Security shall impose a fee in an amount
specified in subsection (b) at the time of such apprehension.
(b) Fee Specified.--
(1) Initial amount.--The amount specified in this
subsection for fiscal year 2025 shall be such amount as
the Secretary may by rule provide, but in any event not
less than $5,000.
(2) Subsequent adjustment.--Beginning in fiscal year
2026 and each fiscal year thereafter, the amount
specified in this subsection for a fiscal year shall be
equal to the sum of--
(A) the amount imposed under this subsection
for the prior fiscal year; and
(B) rounded to the next lowest multiple of
$10, the amount referred to in subparagraph
(A), multiplied by the percentage (if any) by
which the Consumer Price Index for All Urban
Consumers for the month of July preceding the
date on which such adjustment takes effect
exceeds the Consumer Price Index for All Urban
Consumers for the same month of the preceding
calendar year.
(c) Crediting of Funds.--The fees received under this section
shall be credited as offsetting receipts and deposited into the
general fund of the Treasury.
(d) No Waiver.--A fee imposed under this section shall not be
waived or reduced.

SEC. 70023. AMENDMENT TO AUTHORITY TO APPLY FOR ASYLUM.

Section 208(d)(3) of the Immigration and Nationality Act (8
U.S.C. 1158(d)(3)) is amended--
(1) in the first sentence, by striking ``may'' and
inserting ``shall'';
(2) by striking ``Such fees shall not exceed'' and
all that follows; and
(3) by inserting after the first sentence ``Nothing
in this paragraph shall be construed to limit the
authority of the Attorney General to set additional
adjudication and naturalization fees in accordance with
section 286(m).''.

PART 2--USE OF FUNDS

SEC. 70100. EXECUTIVE OFFICE FOR IMMIGRATION REVIEW.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to the Executive Office for
Immigration Review for fiscal year 2025, out of any money in
the Treasury not otherwise appropriated, $1,250,000,000 to
remain available until September 30, 2029, for the purposes
described in subsection (b).
(b) Use of Funds.--Amounts made available under subsection
(a) shall only be used for purposes of--
(1) hiring the support staff necessary to support
immigration judges;
(2) hiring immigration judges; and
(3) expanding courtroom capacity and infrastructure.

SEC. 70101. ADULT ALIEN DETENTION CAPACITY AND FAMILY RESIDENTIAL
CENTERS.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to U.S. Immigration and
Customs Enforcement for fiscal year 2025, out of any money in
the Treasury not otherwise appropriated, $45,000,000,000 to
remain available until September 30, 2029, for the purposes
described in subsection (b).
(b) Use of Funds.--Amounts made available under subsection
(a) shall only be used for family residential center capacity
and single adult alien detention capacity.
(c) Duration.--The Department of Homeland Security may detain
family units of aliens at family residential centers, as
described in subsections (b) and (d), pending a decision on
whether the aliens are to be removed from the United States
and, if such aliens are ordered removed from the United States,
until such aliens are removed.
(d) Family Residential Center Defined.--In this section, the
term ``family residential center'' means a facility used by the
Department of Homeland Security to detain family units of
aliens (including alien children who are not unaccompanied
alien children) who are encountered or apprehended by the
Department of Homeland Security, regardless of whether the
facility is licensed by the State or a political subdivision of
the State in which the facility is located.
(e) Detention Standards.--To efficiently utilize the funding
appropriated by this section, the detention standards for the
single adult detention capacity described in subsection (b)
shall be set in the sole discretion of the Secretary of
Homeland Security.

SEC. 70102. RETENTION AND SIGNING BONUSES FOR U.S. IMMIGRATION AND
CUSTOMS ENFORCEMENT PERSONNEL.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to U.S. Immigration and
Customs Enforcement for fiscal year 2025, out of any money in
the Treasury not otherwise appropriated, $858,000,000 to remain
available until September 30, 2029, for the purposes described
in subsections (b) and (c).
(b) Retention Bonuses.--U.S. Immigration and Customs
Enforcement may provide retention bonuses to any U.S.
Immigration and Customs Enforcement agent, officer, or attorney
who commits to two years of additional service with U.S.
Immigration and Customs Enforcement to carry out immigration
enforcement.
(c) Signing Bonuses.--U.S. Immigration and Customs
Enforcement shall provide a signing bonus to each U.S.
Immigration and Customs Enforcement agent, officer, or attorney
who is hired on or after the date of enactment of this Act and
who commits to five years of service with U.S. Immigration and
Customs Enforcement to carry out immigration enforcement.
(d) Rules for Bonuses.--U.S. Customs and Immigration
Enforcement shall provide qualifying individuals with written
service agreements that include--
(1) the commencement and termination dates of the
required service period (or provisions for the
determination thereof);
(2) the amount of the bonus; and
(3) other terms and conditions under which the bonus
is payable, subject to the requirements of this
subsection, including--
(A) the conditions under which the agreement
may be terminated before the agreed-upon
service period has been completed; and
(B) the effect of a termination described in
subparagraph (A).

SEC. 70103. HIRING OF ADDITIONAL U.S. IMMIGRATION AND CUSTOMS
ENFORCEMENT PERSONNEL.

SEC. 70104. U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT HIRING CAPABILITY.

SEC. 70105. TRANSPORTATION AND REMOVAL OPERATIONS.

SEC. 70106. INFORMATION TECHNOLOGY INVESTMENTS.

SEC. 70107. FACILITIES UPGRADES.

SEC. 70108. FLEET MODERNIZATION.

SEC. 70109. PROMOTING FAMILY UNITY.

SEC. 70110. FUNDING SECTION 287(G) OF THE IMMIGRATION AND NATIONALITY
ACT.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to the U.S. Immigration and
Customs Enforcement for fiscal year 2025, out of any money in
the Treasury not otherwise appropriated, $650,000,000, to
remain available until September 30, 2029, for the purposes
described in subsection (b).
(b) Use of Funds.--The amounts made available under
subsection (a) shall only be used for purposes of facilitating
and implementing agreements under section 287(g) of the
Immigration and Nationality Act (8 U.S.C. 1357(g)).

SEC. 70111. COMPENSATION FOR INCARCERATION OF CRIMINAL ALIENS.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to the Department of Justice
for fiscal year 2025, out of any money in the Treasury not
otherwise appropriated, $950,000,000, to remain available until
September 30, 2029, for the purposes described in subsection
(b).
(b) Use of Funds.--The amounts made available under
subsection (a) shall only be used to compensate a State or
political subdivision of a State, as may be appropriate, with
respect to the incarceration of any alien who--
(1) has been convicted of a felony or two or more
misdemeanors; and
(2)(A) entered the United States without inspection
or at any time or place other than as designated by the
Secretary of Homeland Security;
(B) was the subject of removal proceedings at the
time he or she was taken into custody by the State or a
political subdivision of the State; or
(C) was admitted as a nonimmigrant and, at the time
he or she was taken into custody by the State or a
political subdivision of the State, has failed to
maintain the nonimmigrant status in which the alien was
admitted, or to which it was changed, or to comply with
the conditions of any such status.
(c) Limitation.--The amounts made available under subsection
(a) shall not be used to compensate any State or political
subdivision of the State if the State or political subdivision
of the State prohibits or in any way restricts a Federal,
State, or local government entity, official, or other personnel
from any of the following:
(1) Complying with the immigration laws (as defined
in section 101(a)(17) of the Immigration and
Nationality Act (8 U.S.C. 1101(a)(17)).
(2) Assisting or cooperating with Federal law
enforcement entities, officials, or other personnel
regarding the enforcement of the immigration laws.
(3) Undertaking any one of the following law
enforcement activities as they relate to information
regarding the citizenship or immigration status, lawful
or unlawful, the inadmissibility or deportability, and
the custody status, of any individual:
(A) Making inquiries to any individual to
obtain such information regarding such
individual or any other individuals.
(B) Notifying the Federal Government
regarding the presence of individuals who are
encountered by law enforcement officials or
other personnel of a State or political
subdivision of a State.
(C) Complying with requests for such
information from Federal law enforcement
entities, officials, or other personnel.

SEC. 70112. OFFICE OF THE PRINCIPAL LEGAL ADVISOR.

SEC. 70113. RETURN OF ALIENS ARRIVING FROM CONTIGUOUS TERRITORY.

SEC. 70114. STATE AND LOCAL PARTICIPATION IN HOMELAND SECURITY EFFORTS.

SEC. 70115. UNACCOMPANIED ALIEN CHILDREN CAPACITY.

SEC. 70116. DEPARTMENT OF HOMELAND SECURITY CRIMINAL AND GANG CHECKS
FOR UNACCOMPANIED ALIEN CHILDREN.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to U.S. Customs and Border
Protection for fiscal year 2025, out of any money in the
Treasury not otherwise appropriated, $20,000,000, to remain
available until September 30, 2029, for the purposes described
in subsection (b).
(b) Use of Funds.--In the case of an unaccompanied alien
child who has attained 12 years of age and is encountered by
U.S. Customs and Border Protection, the funds made available
under subsection (a) shall only be used to--
(1) contact the consulate or embassy of the country
of nationality or last habitual residence of such
unaccompanied alien child to request such unaccompanied
alien child's criminal record; and
(2) conduct an examination of such unaccompanied
alien child for gang-related tattoos and other gang-
related markings,
(c) Unaccompanied Alien Child Defined.--In this section, the
term ``unaccompanied alien child'' shall have the meaning given
such term in section 462(g) of the Homeland Security Act of
2002.

SEC. 70117. DEPARTMENT OF HEALTH AND HUMAN SERVICES CRIMINAL AND GANG
CHECKS FOR UNACCOMPANIED ALIEN CHILDREN.

SEC. 70118. INFORMATION ABOUT SPONSORS AND ADULT RESIDENTS OF SPONSOR
HOUSEHOLDS.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to the Office of Refugee
Resettlement for fiscal year 2025, out of any money in the
Treasury not otherwise appropriated, $50,000,000, to remain
available until September 30, 2029, for the purposes described
in subsection (b).
(b) Information About Individuals With Whom Unaccompanied
Alien Children Are Placed and Reside.--Before placing an
unaccompanied alien child with an individual pursuant to
section 235(c) of the William Wilberforce Trafficking Victims
Protection Reauthorization Act of 2008, the Secretary of Health
and Human Services shall provide to the Secretary of Homeland
Security, regarding the individual with whom the child will be
placed and all adult residents of the individual's household,
information on--
(1) the name of the individual and all adult
residents of the individual's household;
(2) the social security number of the individual and
all adult residents of the individual's household;
(3) the date of birth of the individual and all adult
residents of the individual's household;
(4) the validated location of the individual's
residence where the child will be placed;
(5) the immigration status of the individual and all
adult residents of the individual's household;
(6) contact information for the individual and all
adult residents of the individual's household; and
(7) the results of all background and criminal
records checks for the individual and all adult
residents of the individual's household, which shall
include at a minimum an investigation of the public
records sex offender registry, a public records
background check, and a national criminal history check
based on fingerprints.
(c) Unaccompanied Alien Child Defined.--In this section, the
term ``unaccompanied alien child'' shall have the meaning given
such term in section 462(g) of the Homeland Security Act of
2002.

SEC. 70119. REPATRIATION OF UNACCOMPANIED ALIEN CHILDREN.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to the Department of Homeland
Security for fiscal year 2025, out of any money in the Treasury
not otherwise appropriated, $100,000,000, to remain available
until September 30, 2029, for the purposes described in
subsection (b).
(b) Use of Funds.--Notwithstanding any other provision of
law, the funds made available under subsection (a) shall only
be used to permit a specified unaccompanied alien child to
withdraw the child's application for admission pursuant to
section 235(a)(4) of the Immigration and Nationality Act and
return such child to the child's country of nationality or
country of last habitual residence.
(c) Definitions.--In this section--
(1) Specified unaccompanied alien child.--The term
``specified unaccompanied alien child'' means an
unaccompanied alien child (as defined in section 462(g)
of the Homeland Security Act of 2002) who the Secretary
of Homeland Security determines on a case-by-case
basis--
(A) has been found by an immigration officer
at a land border or port of entry of the United
States and is inadmissible under the
Immigration and Nationality Act;
(B) has not been a victim of severe forms of
trafficking in persons, and there is no
credible evidence that such child is at risk of
being trafficked upon return to the child's
country of nationality or of last habitual
residence; and
(C) does not have a fear of returning to the
child's country of nationality or of last
habitual residence owing to a credible fear of
persecution.
(2) Severe forms of trafficking in persons.--The term
``severe forms of trafficking in persons'' shall have
the meaning given such term in section 103 of the
Trafficking Victims Protection Act of 2000.

SEC. 70120. UNITED STATES SECRET SERVICE.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to the Director of the United
States Secret Service for fiscal year 2025, out of any money in
the Treasury not otherwise appropriated, $1,170,000,000 to
remain available until September 30, 2029, for the purposes
described in subsection (b).
(b) Use of Funds.--Amounts made available under subsection
(a) shall only be used for additional United States Secret
Service resources, including personnel, training facilities,
and technology.

SEC. 70121. COMBATING DRUG TRAFFICKING AND ILLEGAL DRUG USE.

SEC. 70122. INVESTIGATING AND PROSECUTING IMMIGRATION RELATED MATTERS.

SEC. 70123. EXPEDITED REMOVAL FOR CRIMINAL ALIENS.

SEC. 70124. REMOVAL OF CERTAIN CRIMINAL ALIENS WITHOUT FURTHER HEARING.

Subtitle B--Regulatory Matters

SEC. 70200. REVIEW OF AGENCY RULEMAKING.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated:
(1) To the Director of the Office of Management and
Budget for fiscal year 2025, out of any money in the
Treasury not otherwise appropriated, $10,000,000, to
remain available through September 30, 2034, to carry
out this section and the amendments made by this
section.
(2) To the Comptroller General of the United States
for fiscal year 2025, out of any money in the Treasury
not otherwise appropriated, $10,000,000, to remain
available through September 30, 2034, to carry out this
section and the amendments made by this section.
(b) Use of Funds.--
(1) Office of management and budget.--The Director of
the Office of Management and Budget shall use amounts
made available under subsection (a)(1) to pay expenses
associated with implementing the requirements of
subsections (c) and (d).
(2) Comptroller general.--The Comptroller General of
the United States shall use amounts made available
under subsection (a)(2) to pay expenses associated with
implementing the requirements of subsection (e).
(c) Congressional Review of Agency Rulemaking.--
(1) Chapter 8 of title 5, United States Code, is
amended by inserting at the end the following:

``Sec. 809. Additional reporting requirements

``(a) Agency Reports.--In the case of any rule for which a
report is submitted under section 801(a)(1)(A) the agency shall
also include in such report--
``(1) an estimate of the budgetary effects associated
with the enactment and enforcement of the rule;
``(2) an analysis of the direct and reasonably
foreseeable indirect costs associated with the rule;
``(3) an analysis of any jobs added or lost within
each affected industry, as identified by North American
Industrial Classification System code, differentiating
between public and private sector jobs, as a direct or
indirect result of the rule;
``(4) a determination, by the Administrator of the
Office of Information and Regulatory Affairs of the
Office of Management and Budget, of whether the rule is
a major or nonmajor rule, including an explanation of
the finding specifically addressing each criteria for a
major rule contained within subparagraphs (A) through
(C) of section 804(2);
``(5) a list of information on which the rule is
based, including data, scientific and economic studies,
and cost-benefit analyses;
``(6) a list of any other related regulatory actions
that implement the same statutory provision or
regulatory objective as well as the estimated economic
effects of those actions;
``(7) an estimate of the effect on inflation of the
rule; and
``(8) a statement of the constitutional authority
authorizing the agency to make the rule.
``(b) Comptroller General Reports.--If requested in writing
by a Member of Congress--
``(1) the Comptroller General of the United States
shall make a determination whether an agency action
qualifies as a rule for purposes of this chapter, and
shall submit to Congress this determination not later
than 60 days after the date of the request; and
``(2) the Comptroller General shall make a
determination whether a rule is considered a major rule
for purposes of this chapter, and shall submit to
Congress this determination not later than 90 days
after the date of the request.
``(c) Determination.--For purposes of this section, a
determination under this subsection (b) shall be deemed to be a
report under section 801(a)(1)(A).

``Sec. 810. Approval of certain major rules

``(a) Approval Required.--Notwithstanding any other provision
of this chapter, a major rule that increases revenues, as
determined in section 809(a), shall not take effect unless
Congress enacts a joint resolution of approval described in
subsection (c).
``(b) Effect.--If a joint resolution of approval relating to
a major rule that increases revenue is not enacted into law by
the end of 60 session days or legislative days, as applicable,
beginning on the date on which the report referred to in
section 801(a)(1)(A) is received by Congress (excluding days
either House of Congress is adjourned for more than 3 days
during a session of Congress), then the rule described in that
resolution shall be deemed not to be approved and such rule
shall not take effect.
``(c) Resolution of Approval.--Section 802 shall apply to a
joint resolution of approval under this section to the same
extent as it does to a joint resolution of disapproval, except
that the matter after the resolving clause of a joint
resolution of approval shall be as follows: `That Congress
approves the rule submitted by the _____ relating to _____.'
(The blank spaces being appropriately filled in).
``(d) Rulemaking Authority.--The enactment of a joint
resolution of approval under this section shall not be
interpreted to serve as a grant or modification of statutory
authority by Congress for the promulgation of a rule, shall not
extinguish or affect any claim, whether substantive or
procedural, against any alleged defect in a rule or the
rulemaking process, and shall not form part of the record
before the court in any judicial proceeding concerning a rule
except for purposes of determining whether or not the rule is
in effect.
``(e) Judicial Review.--Notwithstanding section 805, a court
may determine whether a Federal agency has completed the
necessary requirements under this chapter for a rule to take
effect.

``Sec. 811. Additional review of rules

``(a) Additional Review.--In addition to the opportunity for
review otherwise provided under this chapter, notwithstanding
any other provision under this chapter, in the case of any rule
for which a report is submitted under section 801(a)(1)(A)
which increases revenue as determined under section 809(a) and
which was submitted during the final year of a President's
term, the procedures described in section 802 shall apply to
such rule in the succeeding session of Congress, and a joint
resolution may contain one or more such rules.
``(b) Resolution of Disapproval.--In the case of such a
resolution containing one or more such rules under this
section, the matter after the resolving clause shall be as
follows: `That Congress disapproves the following rules: the
rule submitted by the __ relating to __; and the rule submitted
by the __ relating to __. Such rules shall have no force or
effect.' (The blank spaces being appropriately filled in and
additional clauses describing additional rules to be included
as necessary).

``Sec. 812. Review of rules currently in effect

``(a) Annual Review.--Beginning on the date that is 6 months
after the date of enactment of this section and annually
thereafter for the 4 years following, each agency shall
designate not less than 20 percent of eligible rules made by
that agency for review, and shall submit a report including
each such eligible rule in the same manner as a report under
section 801(a)(1). Sections 801, 802, 809, 810, and 811 shall
apply to each such rule, subject to subsection (c) of this
section. No eligible rule previously designated may be
designated again.
``(b) Sunset for Eligible Rules Not Extended.--Beginning
after the date that is 5 years after the date of enactment of
this section, if Congress has not enacted a joint resolution of
approval for that eligible rule, that eligible rule shall not
continue in effect.
``(c) Approval of Rules.--
``(1) Unless Congress approves all eligible rules
designated by executive agencies for review within 90
days after designation, they shall have no effect and
the Federal agency which originally promulgated such
rules may not enforce such rules.
``(2) A single joint resolution of approval shall
apply to all eligible rules in a report designated for
a year as follows: `That Congress approves the rules
submitted by the___ for the year ___.' (The blank
spaces being appropriately filled in).
``(d) Definition.--In this section the term `eligible rule'
means a rule that is in effect as of the date of enactment of
this section.''.
(2) The table of chapters for chapter 8 of title 5,
United States Code, is amended by inserting after the
item relating to section 808 the following:

``809. Additional reporting requirements.
``810. Approval of certain major rules.
``811. Additional review of rules.
``812. Review of rules currently in effect.''.

(d) Technical and Conforming Amendments.--Chapter 8 of title
5, United States Code, is amended--
(1) in section 801(a)(3)--
(A) in subparagraph (B)(ii), by striking
``or'' at the end;
(B) in subparagraph (C), by striking the
period at the end and inserting ``; or''; and
(C) by inserting at the end the following:
``(D) in the case of a major rule that
increases revenue, such rule shall not take
effect unless Congress passes a joint
resolution of approval described in section
810.''; and
(2) in section 804, by amending paragraph (3) to read
as follows:
``(3) The term `rule' has the meaning given such term
in section 551, except that such term--
``(A) includes interpretative rules, general
statements of policy, and all other agency
guidance documents; and
``(B) does not include--
``(i) any rule of particular
applicability, including a rule that
approves or prescribes for the future
rates, wages, prices, services, or
allowances therefore, corporate or
financial structures, reorganizations,
mergers, or acquisitions thereof, or
accounting practices or disclosures
bearing on any of the foregoing;
``(ii) any rule relating to agency
management or personnel; or
``(iii) any rule of agency
organization, procedure, or practice
that does not substantially affect the
rights or obligations of nonagency
parties.''.
(e) Government Accountability Office Study of Rules.--
(1) In general.--The Comptroller General of the
United States shall conduct a study to determine, as of
the date of the enactment of this section--
(A) how many rules (as such term is defined
in section 804 of title 5, United States Code)
were in effect;
(B) how many major rules (as such term is
defined in section 804 of title 5, United
States Code) were in effect; and
(C) the total estimated economic cost imposed
by all such rules.
(2) Report.--Not later than 1 year after the date of
the enactment of this section, the Comptroller General
of the United States shall submit a report (and publish
the report on the website of the Comptroller General)
to Congress that contains the findings of the study
conducted under subsection (e).

SEC. 70201. CONGRESSIONAL REVIEW ACT COMPLIANCE.

(a) Appropriation.--In addition to amounts otherwise
available, there is appropriated to the Director of the Office
of Management and Budget for fiscal year 2025, out of any money
in the Treasury not otherwise appropriated, $10,000,000, to
remain available through September 30, 2034, to carry out this
section.
(b) Analysis.--The Administrator of the Office of Information
and Regulatory Affairs of the Office of Management and Budget
shall use amounts appropriated under this section to conduct de
novo analysis of the direct and reasonably foreseeable indirect
costs of compliance associated with rules submitted under
section 801(a)(1)(A) of title 5, United States Code. The
Administrator shall use such analysis as the basis for
determining whether a rule is a major rule and publish each
such analysis to the regulatory review database of the Office
of Information and Regulatory Affairs prior to transmission of
such rule to each House of the Congress and the Comptroller
General of the United States. The Administrator shall also
publish an estimate of the budgetary effects associated with
the promulgation and enforcement of such rules prior to
transmission.

Subtitle C--Other Matters

SEC. 70300. LIMITATION ON DONATIONS MADE PURSUANT TO SETTLEMENT
AGREEMENTS TO WHICH THE UNITED STATES IS A PARTY.

(a) Limitation on Required Donations.--An official or agent
of the Government may not enter into or enforce any settlement
agreement on behalf of the United States directing or providing
for a payment to any person or entity other than the United
States, other than a payment that provides restitution for or
otherwise directly remedies actual harm (including to the
environment) directly and proximately caused by the party
making the payment, or constitutes payment for services
rendered in connection with the case.
(b) Penalty.--Any official or agent of the Government who
violates subsection (a) shall be subject to the same penalties
that would apply in the case of a violation of section 3302 of
title 31, United States Code.
(c) Effective Date.--Subsections (a) and (b) apply only in
the case of a settlement agreement entered on or after the date
of enactment of this Act.
(d) Definition.--The term ``settlement agreement'' means a
settlement agreement resolving a civil action or potential
civil action.
(e) Annual Audit Requirement.--
(1) In general.--Not later than at the end of the
first fiscal year that begins after the date of
enactment of this Act, and annually thereafter, the
Inspector General of each Federal agency shall submit,
and make available on a publicly accessible website, a
report on any settlement agreement entered into in
violation of this section by that agency to--
(A) the Committee on the Judiciary of the
Senate; and
(B) the Committee on the Judiciary of the
House of Representatives.
(2) Prohibition on additional funding.--No additional
funds are authorized to be appropriated to carry out
this subsection.

SEC. 70301. SOLICITATION OF ORDERS DEFINED.

Section 101(d) of Public Law 86--272 (73 Stat. 555) is
amended--
(1) in paragraph (1) by striking ``and'' at the end,
(2) in paragraph (2) by striking the period at the
end and inserting ``; and'', and
(3) by adding at the end the following:
``(3) the term `solicitation of orders' means any
business activity that facilitates the solicitation of
orders even if that activity may also serve some
independently valuable business function apart from
solicitation.''.

SEC. 70302. RESTRICTION OF FUNDS.

No court of the United States may use appropriated funds to
enforce a contempt citation for failure to comply with an
injunction or temporary restraining order if no security was
given when the injunction or order was issued pursuant to
Federal Rule of Civil Procedure 65(c), whether issued prior to,
on, or subsequent to the date of enactment of this section.

TITLE VIII--COMMITTEE ON NATURAL RESOURCES

Subtitle A--Energy and Mineral Resources

PART I--OIL AND GAS

SEC. 80101. ONSHORE OIL AND GAS LEASE SALES.

(a) Requirement to Immediately Resume Onshore Oil and Gas
Lease Sales.--
(1) In general.--The Secretary of the Interior shall
immediately resume quarterly onshore oil and gas lease
sales in compliance with the Mineral Leasing Act.
(2) Requirement.--The Secretary of the Interior shall
ensure--
(A) that any oil and gas lease sale pursuant
to paragraph (1) is conducted immediately on
completion of all requirements under the
Mineral Leasing Act; and
(B) that the processes described in
subparagraph (A) are conducted in a timely
manner to ensure compliance with subsection
(b)(1).
(3) Lease of oil and gas lands.--Section 17(b)(1)(A)
of the Mineral Leasing Act (30 U.S.C. 226(b)(1)(A)) is
amended by inserting ``Eligible lands comprise all
lands subject to leasing under this Act and not
excluded from leasing by a statutory or regulatory
prohibition. Land shall be considered available under
the preceding sentence if the land has been designated
as open for leasing under a land use plan developed or
revised under section 202 of the Federal Land Policy
and Management Act of 1976 and has been nominated for
leasing through the submission of an expression of
interest, is subject to drainage (as described in
subsection (j)) in the absence of leasing, or is
otherwise designated as available pursuant to
regulations issued by the Secretary.'' after ``sales
are necessary.''.
(b) Quarterly Lease Sales.--
(1) In general.--In accordance with the Mineral
Leasing Act, each fiscal year, the Secretary of the
Interior shall conduct a minimum of four oil and gas
lease sales in each of the following States:
(A) Wyoming.
(B) New Mexico.
(C) Colorado.
(D) Utah.
(E) Montana.
(F) North Dakota.
(G) Oklahoma.
(H) Nevada.
(I) Alaska.
(J) Any other State in which there is land
available for oil and gas leasing under the
Mineral Leasing Act or any other mineral
leasing law.
(2) Requirement.--In conducting a lease sale under
paragraph (1) in a State described in that paragraph,
the Secretary of the Interior shall offer not less than
50 percent of all parcels nominated that are available
and eligible pursuant to the requirements of the
Mineral Leasing Act.
(3) Replacement sales.--The Secretary of the Interior
shall conduct a replacement sale during the same fiscal
year if--
(A) a lease sale under paragraph (1) is
canceled, delayed, or deferred, including for a
lack of eligible parcels; or
(B) during a lease sale under paragraph (1)
the percentage of acreage that does not receive
a bid is equal to or greater than 25 percent of
the acreage offered.
(c) Leasing of Oil and Gas.--Section 17 of the Mineral
Leasing Act (30 U.S.C. 226) is amended--
(1) by striking the section designation and all that
follows through the end of subsection (a) and inserting
the following:

``SEC. 17. LEASING OF OIL AND GAS.

``(a) Leasing.--
``(1) In general.--Not later than 18 months after the
date of receipt by the Secretary of an expression of
interest in leasing land that is subject to disposition
under this Act and is known or believed to contain oil
or gas deposits, the Secretary shall, subject to
paragraph (2), offer such land for oil and gas leasing
if the Secretary determines that the land is open to
oil or gas leasing under a land use plan developed or
revised under section 202 of the Federal Land Policy
and Management Act of 1976 (43 U.S.C. 1712) and such
land use plan--
``(A) applies to the planning area in which
the land is located; and
``(B) is in effect on the date on which the
expression of interest was submitted to the
Secretary.
``(2) Land use plans.--
``(A) Lease terms and conditions.--A lease
issued by the Secretary under this section--
``(i) shall include any terms and
conditions of the land use plan that
apply to the area of the lease; and
``(ii) shall not require any
stipulations or mitigation requirements
not included in such land use plan.
``(B) Effect of revisions.--The revision of a
land use plan shall not prevent or delay the
Secretary from offering land for leasing under
this section if the other requirements of this
section have been met, as determined by the
Secretary.'';
(2) in subsection (p)--
(A) in paragraph (1), by inserting ``conduct
a complete review of the application with all
applicable agency staff required for the
Secretary to determine the application is
complete and'' after ``drill, the Secretary
shall''; and
(B) by adding at the end the following:
``(4) Term.--A permit to drill approved under this
subsection shall be valid for a single, nonrenewable 4-
year period beginning on the date that the permit to
drill is approved.
``(5) Effect of pending civil action on processing
applications for permits to drill.--Pursuant to the
requirements of paragraph (2), notwithstanding the
existence of any pending civil actions affecting the
application or a related lease issued under this Act,
the Secretary shall process an application for a permit
to drill or other authorizations or approvals under a
lease issued under this Act.''; and
(3) by striking subsection (q) and inserting the
following:
``(q) Other Requirements.--In utilizing the authorities
provided by section 390 of the Energy Policy Act of 2005 with
respect to an activity conducted pursuant to this Act, the
Secretary of the Interior shall not consider whether there are
any extraordinary circumstances.''.

SEC. 80102. NONCOMPETITIVE LEASING.

(a) Noncompetitive Leasing.--Section 17 of the Mineral
Leasing Act (30 U.S.C. 226) is further amended--
(1) in subsection (b)--
(A) in paragraph (1)(A)--
(i) in the first sentence, by
striking ``paragraph (2)'' and
inserting ``paragraph (2) or (3)''; and
(ii) by adding at the end ``Lands for
which no bids are received or for which
the highest bid is less than the
national minimum acceptable bid shall
be offered promptly within 30 days for
leasing under subsection (c) of this
section and shall remain available for
leasing for a period of 2 years after
the competitive lease sale.''; and
(B) by adding at the end the following:
``(3)(A) If the United States held a vested future interest
in a mineral estate that, immediately prior to becoming a
vested present interest, was subject to a lease under which oil
or gas was being produced, or had a well capable of producing,
in paying quantities at an annual average production volume per
well per day of either not more than 15 barrels per day of oil
or condensate, or not more than 60,000 cubic feet of gas, the
holder of the lease may elect to continue the lease as a
noncompetitive lease under subsection (c)(1).
``(B) An election under this paragraph is effective--
``(i) in the case of an interest which vested after
January 1, 1990, and on or before October 24, 1992, if
the election is made before the date that is 1 year
after October 24, 1992;
``(ii) in the case of an interest which vests within
1 year after October 24, 1992, if the election is made
before the date that is 2 years after October 24, 1992;
and
``(iii) in any case other than those described in
clause (i) or (ii), if the election is made prior to
the interest becoming a vested present interest.'';
(2) by striking subsection (c) and inserting the
following:
``(c) Lands Subject to Leasing Under Subsection (b); First
Qualified Applicant.--
``(1) If the lands to be leased are not leased under
subsection (b)(1) of this section or are not subject to
competitive leasing under subsection (b)(2) of this
section, the person first making application for the
lease who is qualified to hold a lease under this
chapter shall be entitled to a lease of such lands
without competitive bidding, upon payment of a
nonrefundable application fee of at least $75. A lease
under this subsection shall be conditioned upon the
payment of a royalty at a rate of 12.5 percent in
amount or value of the production removed or sold from
the lease. Leases shall be issued within 60 days of the
date on which the Secretary identifies the first
responsible qualified applicant.
``(2)(A) Lands (i) which were posted for sale under
subsection (b)(1) of this section but for which no bids
were received or for which the highest bid was less
than the national minimum acceptable bid and (ii) for
which, at the end of the period referred to in
subsection (b)(1) of this section no lease has been
issued and no lease application is pending under
paragraph (1) of this subsection, shall again be
available for leasing only in accordance with
subsection (b)(1) of this section.
``(B) The land in any lease which is issued under
paragraph (1) of this subsection or under subsection
(b)(1) of this section which lease terminates, expires,
is cancelled or is relinquished shall again be
available for leasing only in accordance with
subsection (b)(1) of this section.''; and
(3) by striking subsection (e) and inserting the
following:
``(e) Primary Term.--Competitive and noncompetitive leases
issued under this section shall be for a primary term of 10
years: Provided, however, That competitive leases issued in
special tar sand areas shall also be for a primary term of 10
years. Each such lease shall continue so long after its primary
term as oil or gas is produced in paying quantities. Any lease
issued under this section for land on which, or for which under
an approved cooperative or unit plan of development or
operation, actual drilling operations were commenced prior to
the end of its primary term and are being diligently prosecuted
at that time shall be extended for two years and so long
thereafter as oil or gas is produced in paying quantities.''.
(b) Failure to Comply With Provisions of Lease.--Section 31
of the Mineral Leasing Act (30 U.S.C. 188) is amended--
(1) in subsection (d)(1), by striking ``section
17(b)'' and inserting ``subsection (b) or (c) of
section 17 of this Act'';
(2) in subsection (e)--
(A) in paragraph (2)--
(i) by inserting ``either'' after
``rentals and''; and
(ii) by inserting ``or the inclusion
in a reinstated lease issued pursuant
to the provisions of section 17(c) of
this Act of a requirement that future
rentals shall be at a rate not less
than $5 per acre per year, all'' before
``as determined by the Secretary''; and
(B) by amending paragraph (3) to read as
follows:
``(3)(A) payment of back royalties and the inclusion
in a reinstated lease issued pursuant to the provisions
of section 17(b) of this Act of a requirement for
future royalties at a rate of not less than 16\2/3\
percent computed on a sliding scale based upon the
average production per well per day, at a rate which
shall be not less than 4 percentage points greater than
the competitive royalty schedule then in force and used
for royalty determination for competitive leases issued
pursuant to such section as determined by the
Secretary: Provided, That royalty on such reinstated
lease shall be paid on all production removed or sold
from such lease subsequent to the termination of the
original lease;
``(B) payment of back royalties and inclusion in a
reinstated lease issued pursuant to the provisions of
section 17(c) of this Act of a requirement for future
royalties at a rate not less than 16\2/3 \percent:
Provided, That royalty on such reinstated lease shall
be paid on all production removed or sold from such
lease subsequent to the cancellation or termination of
the original lease; and'';
(3) in subsection (f)--
(A) in paragraph (1), by striking ``in the
same manner as the original lease issued
pursuant to section 17'' and inserting ``as a
competitive or a noncompetitive oil and gas
lease in the same manner as the original lease
issued pursuant to subsection (b) or (c) of
section 17 of this Act'';
(B) by adding at the end the following:
``(4) Except as otherwise provided in this section, the
issuance of a lease in lieu of an abandoned patented oil placer
mining claim shall be treated as a noncompetitive oil and gas
lease issued pursuant to section 17(c) of this Act.'';
(4) in subsection (g), by striking ``subsection (d)''
and inserting ``subsections (d) and (j)'';
(5) by amending subsection (h) to read as follows:
``(h) Royalty Reductions.--
``(1) In acting on a petition to issue a
noncompetitive oil and gas lease, under subsection (j)
of this section or in response to a request filed after
issuance of such a lease, or both, the Secretary is
authorized to reduce the royalty on such lease if in
his judgment it is equitable to do so or the
circumstances warrant such relief due to uneconomic or
other circumstances which could cause undue hardship or
premature termination of production.
``(2) In acting on a petition for reinstatement
pursuant to subsection (d) of this section or in
response to a request filed after reinstatement, or
both, the Secretary is authorized to reduce the royalty
in that reinstated lease on the entire leasehold or any
tract or portion thereof segregated for royalty
purposes if, in his judgment, there are uneconomic or
other circumstances which could cause undue hardship or
premature termination of production; or because of any
written action of the United States, its agents or
employees, which preceded, and was a major
consideration in, the lessee's expenditure of funds to
develop the property under the lease after the rent had
become due and had not been paid; or if in the judgment
of the Secretary it is equitable to do so for any
reason.''; and
(6) by adding at the end the following:
``(j) Issuance of Noncompetitive Oil and Gas Lease;
Conditions.--Where an unpatented oil placer mining claim
validly located prior to February 24, 1920, which has been or
is currently producing or is capable of producing oil or gas,
has been or is hereafter deemed conclusively abandoned for
failure to file timely the required instruments or copies of
instruments required by section 1744 of title 43, and it is
shown to the satisfaction of the Secretary that such failure
was inadvertent, justifiable, or not due to lack of reasonable
diligence on the part of the owner, the Secretary may issue,
for the lands covered by the abandoned unpatented oil placer
mining claim, a noncompetitive oil and gas lease, consistent
with the provisions of section 17(e) of this Act, to be
effective from the statutory date the claim was deemed
conclusively abandoned. Issuance of such a lease shall be
conditioned upon--
``(1) a petition for issuance of a noncompetitive oil
and gas lease, together with the required rental and
royalty, including back rental and royalty accruing
from the statutory date of abandonment of the oil
placer mining claim, being filed with the Secretary--
``(A) with respect to any claim deemed
conclusively abandoned on or before January 12,
1983, on or before the one hundred and
twentieth day after January 12, 1983; or
``(B) with respect to any claim deemed
conclusively abandoned after January 12, 1983,
on or before the one hundred and twentieth day
after final notification by the Secretary or a
court of competent jurisdiction of the
determination of the abandonment of the oil
placer mining claim;
``(2) a valid lease not having been issued affecting
any of the lands covered by the abandoned oil placer
mining claim prior to the filing of such petition:
Provided, however, That after the filing of a petition
for issuance of a lease under this subsection, the
Secretary shall not issue any new lease affecting any
of the lands covered by such abandoned oil placer
mining claim for a reasonable period, as determined in
accordance with regulations issued by him;
``(3) a requirement in the lease for payment of
rental, including back rentals accruing from the
statutory date of abandonment of the oil placer mining
claim, of not less than $5 per acre per year;
``(4) a requirement in the lease for payment of
royalty on production removed or sold from the oil
placer mining claim, including all royalty on
production made subsequent to the statutory date the
claim was deemed conclusively abandoned, of not less
than 12\1/2\ percent; and
``(5) compliance with the notice and reimbursement of
costs provisions of paragraph (4) of subsection (e) but
addressed to the petition covering the conversion of an
abandoned unpatented oil placer mining claim to a
noncompetitive oil and gas lease.''.

SEC. 80103. PERMIT FEES.

Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is
further amended by adding at the end the following:
``(r) Fee for Commingling of Production.--
``(1) In general.--The Secretary of the Interior
shall approve applications allowing for the commingling
of production from two or more sources (including the
area of an oil and gas lease, the area included in a
drilling spacing unit, a unit participating area, a
communitized area, or non-Federal property) before
production reaches the point of royalty measurement
regardless of ownership, the royalty rates, and the
number or percentage of acres for each source if the
applicant pays an application fee of $10,000 and agrees
to install measurement devices for each source, utilize
an allocation method that achieves volume measurement
uncertainty levels within plus or minus 2 percent
during the production phase reported on a monthly
basis, or utilize an approved periodic well testing
methodology. Production from multiple oil and gas
leases, drilling spacing units, communitized areas, or
participating areas from a single wellbore shall be
considered a single source. Nothing in this subsection
shall prevent the Secretary of the Interior from
continuing the current practice of exercising
discretion to authorize higher percentage volume
measurement uncertainty levels if appropriate technical
and economic justifications have been provided.
``(2) Revenue allocation.--Fees received under this
subsection shall be deposited into the Treasury as
miscellaneous receipts.
``(s) Fees for Permits-by-rule.--
``(1) In general.--The Secretary shall establish, by
regulation not later than 2 years after the date of
enactment of this subsection, a permit-by-rule process
under which a leaseholder may receive approval to drill
for oil and gas if the leaseholder certifies compliance
with such regulations and pays a fee of $5,000. Such
permit-by-rule process shall allow drilling operations
to commence no later than 45 days after the leaseholder
has filed a registration that certifies compliance with
such regulations and paid the fee required by this
paragraph.
``(2) Revenue allocation.--Fees received under this
subsection shall be deposited into the Treasury as
miscellaneous receipts.''.

SEC. 80104. PERMITTING FEE FOR NON-FEDERAL LAND.

(a) In General.--Notwithstanding the Mineral Leasing Act, the
Federal Oil and Gas Royalty Management Act of 1982, or subpart
3162 of part 3160 of title 43, Code of Federal Regulations (or
successor regulations), but subject to any applicable State
requirements, the Secretary of the Interior shall not require a
permit to drill for an oil and gas lease under the Mineral
Leasing Act for an action occurring within an oil and gas
drilling or spacing unit if the leaseholder pays a fee of
$5,000 and--
(1) the Federal Government--
(A) owns less than 50 percent of the minerals
within the oil and gas drilling or spacing
unit; and
(B) does not own or lease the surface estate
within the area directly impacted by the
action; or
(2) the well is located on non-Federal land overlying
a non-Federal mineral estate, but some portion of the
wellbore traverses but does not produce from the
Federal mineral estate subject to the lease.
(b) Notification.--For each State permit to drill or drilling
plan that would impact or extract oil and gas owned by the
Federal Government--
(1) each lessee of Federal minerals in the unit, or
designee of a lessee, shall--
(A) notify the Secretary of the Interior of
the submission of a State application for a
permit to drill or drilling plan on submission
of the application;
(B) provide a copy of the application
described in subparagraph (A) to the Secretary
of the Interior not later than 5 days after the
date on which the permit or plan is submitted;
and
(C) pay to the Secretary of the Interior the
$5,000 fee referenced in subsection (a) of this
section;
(2) each lessee, designee of a lessee, or applicable
State shall notify the Secretary of the Interior of the
approved State permit to drill or drilling plan not
later than 45 days after the date on which the permit
or plan is approved; and
(3) each lessee or designee of a lessee shall
provide, prior to commencing drilling operations,
agreements authorizing the Secretary of the Interior to
enter non-Federal land, as necessary, for inspection
and enforcement of the terms of the Federal lease.
(c) Effect.--Nothing in this section affects the amount of
royalties due to the Federal Government from the production of
the Federal minerals within the oil and gas drilling or spacing
unit.
(d) Revenue Allocation.--Fees received under this section
shall be deposited into the Treasury as miscellaneous receipts.
(e) Authority on Non-Federal Land.--Section 17(g) of the
Mineral Leasing Act (30 U.S.C. 226(g)) is amended--
(1) by striking the subsection designation and all
that follows through ``Secretary of the Interior, or''
in the first sentence and inserting the following:
``(g) Regulation of Surface Disturbing Activities.--
``(1) In general.--The Secretary of the Interior,
or''; and
(2) by adding at the end the following:
``(2) Authority on non-federal land.--
``(A) In general.--In the case of an oil and
gas lease under this Act on land described in
subparagraph (B) located within an oil and gas
drilling or spacing unit, nothing in this Act
authorizes the Secretary of the Interior to--
``(i) require a bond to protect non-
Federal land;
``(ii) enter non-Federal land without
the consent of the applicable
landowner;
``(iii) impose mitigation
requirements; or
``(iv) require approval for surface
reclamation.
``(B) Land.--Land referred to in subparagraph
(A) is land where--
``(i) the Federal Government--
``(I) owns less than 50
percent of the minerals within
the oil and gas drilling or
spacing unit; and
``(II) does not own or lease
the surface estate within the
area directly impacted by the
action;
``(ii) the well is located on non-
Federal land overlying a non-Federal
mineral estate, but some portion of the
wellbore enters and produces from the
Federal mineral estate subject to the
lease; or
``(iii) the well is located on non-
Federal land overlying a non-Federal
mineral estate, but some portion of the
wellbore traverses but does not produce
from the Federal mineral estate subject
to the lease.
``(C) No federal action.--An oil and gas
exploration or production activity carried out
under a lease described in subparagraph (A)--
``(i) shall require no Federal
action; and
``(ii) may commence 30 days after the
leaseholder submits the State permit to
the Secretary.''.

SEC. 80105. REINSTATE REASONABLE ROYALTY RATES.

(a) Offshore Oil and Gas Royalty Rate.--Section 8(a)(1) of
the Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)(1)) is
amended--
(1) in subparagraph (A), by striking ``not less than
16\2/3\ percent, but not more than 18\3/4\ percent,
during the 10-year period beginning on the date of
enactment of the Act titled `An Act to provide for
reconciliation pursuant to title II of S. Con. Res.
14', and not less than 16\2/3\ percent thereafter,''
and inserting ``not less than 12.5 percent, but not
more than 18\3/4\ percent,'';
(2) in subparagraph (C), by striking ``not less than
16\2/3\ percent, but not more than 18\3/4\ percent,
during the 10-year period beginning on the date of
enactment of the Act titled `An Act to provide for
reconciliation pursuant to title II of S. Con. Res.
14', and not less than 16\2/3\ percent thereafter,''
and inserting ``not less than 12.5 percent, but not
more than 18\3/4\ percent,'';
(3) in subparagraph (F), by striking ``not less than
16\2/3\ percent, but not more than 18\3/4\ percent,
during the 10-year period beginning on the date of
enactment of the Act titled `An Act to provide for
reconciliation pursuant to title II of S. Con. Res.
14', and not less than 16\2/3\ percent thereafter,''
and inserting ``not less than 12.5 percent, but not
more than 18\3/4\ percent,''; and
(4) in subparagraph (H), by striking ``not less than
16\2/3\ percent, but not more than 18\3/4\ percent,
during the 10-year period beginning on the date of
enactment of the Act titled `An Act to provide for
reconciliation pursuant to title II of S. Con. Res.
14', and not less than 16\2/3\ percent thereafter,''
and inserting ``not less than 12.5 percent, but not
more than 18\3/4\ percent,''.
(b) Onshore Oil and Gas Royalty Rates.--Section 17 of the
Mineral Leasing Act (30 U.S.C. 226) is amended--
(1) in subsection (b)--
(A) in paragraph (1)(A), by striking ``the
Act titled `An Act to provide for
reconciliation pursuant to title II of S. Con.
Res. 14', 16\2/3\'' and inserting ``subsection
(s), 12.5''; and
(B) in paragraph (2)(A)(ii), by striking
``16\2/3\ percent'' and inserting ``16\2/3\
percent or, in the case of a lease issued on or
after the date of enactment of subsection (s),
12.5 percent'';
(2) in subsection (l), by striking ``16\2/3\
percent'' each place it appears and inserting ``16\2/3\
percent or, in the case of a lease issued on or after
the date of enactment of subsection (s), 12.5
percent''; and
(3) in subsection (n)(1)(C), by striking ``16\2/3\
percent'' and inserting ``16\2/3\ percent or, in the
case of a lease issued on or after the date of
enactment of subsection (s), 12.5 percent''.

PART II--GEOTHERMAL

SEC. 80111. GEOTHERMAL LEASING.

Section 4(b) of the Geothermal Steam Act of 1970 (30 U.S.C.
1003(b)) is amended--
(1) in paragraph (2), by striking ``2 years'' and
inserting ``year''; and
(2) by adding at the end the following:
``(5) Replacement sales.--If a lease sale under
paragraph (2) for a year is canceled or delayed, the
Secretary of the Interior shall conduct a replacement
sale during the same year.
``(6) Requirement.--In conducting a lease sale under
paragraph (2) in a State described in that paragraph,
the Secretary of the Interior shall offer all nominated
parcels eligible for geothermal development and
utilization under a land use plan developed or revised
under section 202 of the Federal Land Policy and
Management Act of 1976 that is in effect for the
State.''.

SEC. 80112. GEOTHERMAL ROYALTIES.

Section 5(a)(1) of the Geothermal Steam Act of 1970 (30
U.S.C. 1004(a)(1)) is amended--
(1) in subparagraph (A)--
(A) by inserting ``with respect to each
electric generating facility producing
electricity,'' before ``not less than''; and
(B) by inserting by ``by such facility''
after ``produced''; and
(2) in subparagraph (B)--
(A) by inserting ``with respect to each
electric generating facility producing
electricity,'' before ``not less than''; and
(B) by inserting by ``by such facility''
after ``produced''.

PART III--ALASKA

SEC. 80121. COASTAL PLAIN OIL AND GAS LEASING.

(a) Definitions.--In this section:
(1) Coastal plain.--The term ``Coastal Plain'' has
the meaning given the term in section 20001(a) of
Public Law 115-97 (16 U.S.C. 3143 note).
(2) Oil and gas program.--The term ``oil and gas
program'' means the oil and gas program established
under section 20001(b)(2) of Public Law 115-97 (16
U.S.C. 3143 note).
(3) Secretary.--The term ``Secretary'' means the
Secretary of the Interior.
(b) Administration.--Not later than 30 days after the date of
enactment of this Act, the Secretary shall--
(1) withdraw--
(A) the supplemental environmental impact
statement described in the notice of
availability of the Bureau of Land Management
entitled ``Notice of Availability of the Final
Coastal Plain Oil and Gas Leasing Program
Supplemental Environmental Impact Statement,
Alaska'' (89 Fed. Reg. 88805 (November 8,
2024)); and
(B) the record of decision described in the
notice of availability of the Bureau of Land
Management entitled ``Notice of Availability of
the Record of Decision for the Final
Supplemental Environmental Impact Statement for
the Coastal Plain Oil and Gas Leasing Program,
Alaska'' (89 Fed. Reg. 101042 (December 13,
2024)); and
(2) reinstate--
(A) the environmental impact statement
described in the notice of availability of the
Bureau of Land Management entitled ``Notice of
Availability of the Final Environmental Impact
Statement for the Coastal Plain Oil and Gas
Leasing Program, Alaska'' (84 Fed. Reg. 50472
(September 25, 2019)); and
(B) the record of decision described in the
notice of availability of the Bureau of Land
Management entitled ``Notice of Availability of
the Record of Decision for the Final
Environmental Impact Statement for the Coastal
Plain Oil and Gas Leasing Program, Alaska'' (85
Fed. Reg. 51754 (August 21, 2020)).
(c) Reissuance of Cancelled Leases.--
(1) Acceptance of bids.--Not later than 30 days after
the date of enactment of this Act, the Secretary shall,
without modification or delay--
(A) accept the highest valid bid for each
Coastal Plain lease tract for which a valid bid
was received on January 6, 2021, pursuant to
the requirement to hold the first lease sale
under section 20001(c)(1)(A) of Public Law 115-
97 (16 U.S.C. 3143 note); and
(B) provide the appropriate lease form to
each successful bidder under subparagraph (A)
to execute and return to the Secretary.
(2) Lease issuance.--On receipt of an executed lease
form under paragraph (1)(B) and payment in accordance
with that lease of the rental for the first year, the
balance of the bonus bid (unless deferred), and any
required bond or security from the successful bidder,
the Secretary shall promptly issue to the successful
bidder a fully executed lease, in accordance with--
(A) the applicable regulations, as in effect
on January 6, 2021; and
(B) the terms and conditions of the record of
decision described in subsection (b)(2)(B).
(3) Terms and conditions.--Leases reissued pursuant
to this subsection shall include the terms and
conditions from the record of decision described in the
notice of availability of the Bureau of Land Management
entitled ``Notice of Availability of the Record of
Decision for the Final Environmental Impact Statement
for the Coastal Plain Oil and Gas Leasing Program,
Alaska'' (85 Fed. Reg. 51754 (August 21, 2020)).
(4) Exception.--This subsection shall not apply to
any bid for which a lease was issued and subsequently
relinquished by the successful bidder prior to the date
of enactment of this Act.
(d) Lease Sales Required.--
(1) In general.--Subject to paragraph (2), in
addition to the lease sales required under section
20001(c)(1)(A) of Public Law 115-97 (16 U.S.C. 3143
note), the Secretary shall conduct not fewer than 4
lease sales area-wide under the oil and gas program by
not later than 10 years after the date of the enactment
of this Act.
(2) Sale acreages; schedule.--The Secretary shall
offer--
(A) an initial lease sale under paragraph (1)
not later than 1 year after the date of the
enactment of this Act;
(B) a second lease sale under paragraph (1)
not later than 3 years after the date of the
enactment of this Act;
(C) a third lease sale under paragraph (1)
not later than 5 years after the date of the
enactment of this Act;
(D) a fourth lease sale under paragraph (1)
not later than 7 years after the date of the
enactment of this Act; and
(E)(i) not fewer than 400,000 acres area-wide
in each lease sale, including those areas that
have the highest potential for the discovery of
hydrocarbons; or
(ii) the total number of unleased acres
subject to the provisions of this section if
that total number of available acres is less
than 400,000 acres.
(3) Rights-of-way.--The Secretary shall issue any
rights-of-way, easements, authorizations, permits,
verifications, extensions, biological opinions,
incidental take statements, and any other approvals
across the Coastal Plain to facilitate the exploration,
development, production, or transportation of oil or
gas under a lease issued under a lease sale conducted
under this subsection or reissued pursuant to
subsection (c).
(4) Leasing certainty.--The rights-of-way, easements,
authorizations, permits, verifications, extensions,
biological opinions, incidental take statements, and
any other approvals or orders described in paragraph
(3) and the record of decision described in subsection
(b)(2)(B) shall be considered to satisfy the
requirements of--
(A) the Alaska National Interest Lands
Conservation Act;
(B) the National Environmental Policy Act of
1969;
(C) Public Law 115-97;
(D) the Endangered Species Act of 1973;
(E) subchapter II of chapter 5 of title 5,
United States Code, and chapter 7 of title 5,
United States Code; and
(F) the Marine Mammal Protection Act of 1972.
(e) Lease Issuance.--Leases shall be reissued or issued under
subsections (c) and (d)--
(1) not later than 60 days after payment by the
successful bidder of the remainder of the bonus bid, if
any, and the annual rental for the first lease year;
(2) in accordance with the applicable regulations, as
in effect on January 6, 2021; and
(3) in accordance with the terms and conditions from
the record of decision described in the notice of
availability of the Bureau of Land Management entitled
``Notice of Availability of the Record of Decision for
the Final Environmental Impact Statement for the
Coastal Plain Oil and Gas Leasing Program, Alaska'' (85
Fed. Reg. 51754 (August 21, 2020)).
(f) Geophysical Surveys.--Not later than 30 days after the
date on which the Secretary receives a complete application
pursuant to section 3152.1 of title 43, Code of Federal
Regulations (or any successor regulations), to conduct oil and
gas geophysical exploration operations in the Coastal Plain,
the Secretary shall approve such application.
(g) Receipts.--Notwithstanding section 35 of the Mineral
Leasing Act (30 U.S.C. 191) and section 20001(b)(5) of Public
Law 115-97 (16 U.S.C. 668dd note), of the amount of adjusted
bonus, rental, and royalty receipts derived from the oil and
gas program and operations on the Coastal Plain pursuant to
this section--
(1)(A) for fiscal years 2025 through 2034, 50 percent
shall be paid to the State of Alaska; and
(B) for fiscal year 2035 and thereafter, 90 percent
shall be paid to the State of Alaska; and
(2) the balance shall be deposited into the Treasury
as miscellaneous receipts.
(h) Judicial Preclusion.--
(1) In general.--Except as provided in paragraph (2),
no court shall have jurisdiction to review any action
taken by the Secretary, the Administrator of the
Environmental Protection Agency, a State or municipal
government administrative agency, or any other Federal
agency (acting pursuant to Federal law) to--
(A) reissue a lease pursuant to subsection
(c) or issue a lease under a lease sale
conducted under subsection (d); or
(B) grant or issue a right-of-way, easement,
authorization, permit, verification, biological
opinion, incidental take statement, or other
approval for a lease reissued pursuant to
subsection (c) or issued under a lease sale
conducted under subsection (d), whether
reissued or issued prior to, on, or after the
date of the enactment of this Act, and
including any lawsuit or any other action
pending in a court as of the date of enactment
of this Act.
(2) Petition by leaseholder.--
(A) In general.--A leaseholder or the State
of Alaska may obtain a review of an alleged
failure by the Secretary to act in accordance
with this section or with any law pertaining to
granting or issuing a lease, right-of-way,
easement, authorization, permit, verification,
biological opinion, incidental take statement,
or other approval related to a lease under this
section by filing a written petition with a
court of competent jurisdiction seeking an
order.
(B) Deadlines.--If a court of competent
jurisdiction finds pursuant to subparagraph (A)
that an agency has failed to act in accordance
with this section or with any law pertaining to
granting or issuing a lease, right-of-way,
easement, authorization, permit, verification,
biological opinion, incidental take statement,
or other approval related to a lease under this
section, the court shall set a schedule and
deadline for the agency to act as soon as
practicable, which shall not exceed 90 days
from the date on which the order of the court
is issued, unless the court determines a longer
time period is necessary to comply with
applicable law.

SEC. 80122. NATIONAL PETROLEUM RESERVE-ALASKA.

(a) Restoration of NPR-A Oil and Gas Program.--Effective
beginning on the date of enactment of this Act, the Secretary
shall--
(1) expeditiously restore and resume the Program for
domestic energy production to generate Federal revenue,
subject to the requirements of section 107 of the Naval
Petroleum Reserves Production Act of 1976 (42 U.S.C.
6506a); and
(2) cease to implement, administer, or enforce the
regulations contained in part 2360 of title 43, Code of
Federal Regulations (as in effect on the date of the
enactment of this Act).
(3) Definitions.--In this subsection:
(A) Program.--The term ``Program'' means the
competitive oil and gas leasing, exploration,
development, and production program established
under section 107 of the Naval Petroleum
Reserves Production Act of 1976 (42 U.S.C.
6506a).
(B) Secretary.--The term ``Secretary'' means
the Secretary of the Interior.
(b) Purpose.--The Naval Petroleum Reserves Production Act of
1976 is amended by inserting before section 101 (42 U.S.C.
6501) the following:

``SEC. 1. PURPOSE.

``The purpose of this Act is to require and facilitate a
leasing program in the National Petroleum Reserve in Alaska for
the expeditious exploration, development, and production of
petroleum to meet the energy needs of the Nation and the world.
In order to accomplish this purpose, the Secretary shall, in
consultation with the State of Alaska and the North Slope
Borough, Alaska, expedite administration of the Program for
domestic energy production and Federal revenue as prescribed in
section 107(d) of the Naval Petroleum Reserves Production Act
of 1976 (42 U.S.C. 6506a(d)).''.
(c) Required Lease Sales.--Section 107(d) of the Naval
Petroleum Reserves Production Act of 1976 (42 U.S.C. 6506a(d))
is amended--
(1) by striking ``First Lease Sale.--The first
lease'' and inserting ``Required Lease Sales.--
``(1) First lease sale.--The first lease''; and
(2) by adding at the end the following:
``(2) Subsequent lease sales.--
``(A) In general.--Subject to subparagraph
(B), beginning in the first full calendar year
after the date of enactment of this paragraph,
the Secretary shall conduct an oil and gas
lease sale in the reserve not less frequently
than once every two years.
``(B) Acreages.--The Secretary shall offer
not fewer than 4,000,000 acres in each lease
sale conducted under subparagraph (A).
``(C) Terms and stipulations for npr-a lease
sales.--In conducting lease sales under this
paragraph, the Secretary shall offer the same
lease form as lease form AK-3130-1 (March 2018)
and the same lease terms, economic conditions,
and stipulations as described in the NPR-A
record of decision published by the Bureau of
Land Management entitled `National Petroleum
Reserve in Alaska Integrated Activity Plan
Record of Decision' (December 2020).''.
(d) Receipts.--Section 107(l) of the Naval Petroleum Reserves
Production Act of 1976 (42 U.S.C. 6506a(l)) is amended--
(1) by striking ``All receipts from'' and inserting
the following:
``(1) In general.--Except as provided in paragraph
(2), all receipts from''; and
(2) by adding at the end the following:
``(2) Percent share for fiscal year 2035 and
thereafter.--Beginning in fiscal year 2035, of the
receipts described in paragraph (1)--
``(A) 90 percent shall be paid to the State
of Alaska; and
``(B) 10 percent shall be paid into the
Treasury of the United States.''.
(e) Facilitation.--Section 107(n)(2) of the Naval Petroleum
Reserves Production Act of 1976 (42 U.S.C. 6506a(n)(2)) is
amended to read as follows:
``(2) Subsequent lease sales.--The detailed
environmental study and assessments that have been
conducted and identified in the document titled `Notice
of Availability of the National Petroleum Reserve in
Alaska Integrated Activity Plan Final Environmental
Impact Statement' (85 Fed. Reg. 38388 (June 26, 2020))
are deemed to fulfill the requirements of the National
Environmental Policy Act of 1969 with regard to the oil
and gas lease sales required by subsection (d)(2).''.
(f) Geophysical Surveys; Judicial Preclusion.--Section 107 of
the Naval Petroleum Reserves Production Act of 1976 (42 U.S.C.
6506a) is amended by adding at the end the following:
``(q) Geophysical Surveys.--Not later than 30 days after the
date on which the Secretary of the Interior receives a complete
application pursuant to section 3152.1 of title 43, Code of
Federal Regulations (or any successor regulations), to conduct
oil and gas geophysical exploration operations in the National
Petroleum Reserve in Alaska, the Secretary of the Interior
shall approve such application.
``(r) Judicial Preclusion.--
``(1) In general.--Except as provided in paragraph
(2), no court shall have jurisdiction to review any
action taken by the Secretary of the Interior, a State
or municipal government administrative agency, or any
other Federal agency (acting pursuant to Federal law)
to grant or issue a right-of-way, easement,
authorization, permit, verification, biological
opinion, incidental take statement, or other approval
for a lease issued under this Act, whether issued prior
to, on, or after the date of the enactment of this
subsection, and including any lawsuit or any other
action pending in a court as of the date of enactment
of this subsection.
``(2) Petition by leaseholder.--
``(A) In general.--A leaseholder or the State
of Alaska may obtain a review of an alleged
failure by the Secretary of the Interior to act
in accordance with this Act by filing a written
petition with a court of competent jurisdiction
seeking an order.
``(B) Deadlines.--If a court of competent
jurisdiction finds pursuant to subparagraph (A)
that an agency has failed to act in accordance
with this Act, the court shall set a schedule
and deadline for the agency to act as soon as
practicable, which shall not exceed 90 days
from the date on which the order of the court
is issued, unless the court determines a longer
time period is necessary to comply with
applicable law.''.

PART IV--MINING

SEC. 80131. SUPERIOR NATIONAL FOREST LANDS IN MINNESOTA.

(a) Rescission.--The Public Land Order of the Bureau of Land
Management titled ``Public Land Order No. 7917 for Withdrawal
of Federal Lands; Cook, Lake, and Saint Louis Counties, MN''
(88 Fed. Reg. 6308; published January 31, 2023) is hereby
rescinded and shall have no force or effect.
(b) Reinstatement, Issuance, and Modification of Certain
Hardrock Mineral Leases.--
(1) Reinstatement and term modification.--
(A) Reinstatement.--Notwithstanding
Reorganization Plan No. 3 of 1946 (5 U.S.C.
App.), section 2478 of the Revised Statutes (43
U.S.C. 1457c), the Act of June 30, 1950 (64
Stat. 311; 16 U.S.C. 508b), and the Act of
March 4, 1917 (39 Stat. 1150; 16 U.S.C. 520),
and not later than 5 calendar days after the
date of the enactment of this section, the
Secretary shall reinstate each covered lease.
(B) Lease term.--Upon reinstatement of each
covered lease under subparagraph (A)--
(i) each covered lease shall have an
initial term of 20 years from the date
of such reinstatement and a right to
successive renewals in accordance with
paragraph (4);
(ii) the Secretary shall toll the
initial term of a covered lease during
any period in which permitting
activities of the covered lease are
delayed by legal or administrative
proceedings not initiated by the holder
of the covered lease; and
(iii) the Secretary shall extend the
initial term of a covered lease by a
period equal to any tolling period
under clause (ii).
(C) Applicable terms.--Except as modified by
this section, all terms and conditions of each
covered lease shall be in accordance with the
original terms of the covered lease.
(2) Revenue provisions.--
(A) Reinstatement fee.--Upon reinstatement of
each covered lease under paragraph (1)(A), the
holder of a covered lease shall pay to the
Secretary a one-time fee of $100 per acre of
the covered lease.
(B) Supplemental rental.--In addition to the
rental payment specified in the reinstated
covered lease, the holder of a covered lease
shall pay to the Secretary an annual
supplemental rental of $10 per acre of the
covered lease during years 6 through 10 of the
initial term of the covered lease.
(C) Revenue allocation.--All revenues
collected under this paragraph shall be
deposited in the Treasury as miscellaneous
receipts.
(3) Grant of preference right hardrock mineral
lease.--
(A) Congressional grant.--Notwithstanding
Reorganization Plan No. 3 of 1946 (5 U.S.C.
App.), section 2478 of the Revised Statutes (43
U.S.C. 1457c), the Act of June 30, 1950 (64
Stat. 311; 16 U.S.C. 508b), and the Act of
March 4, 1917 (39 Stat. 1150; 16 U.S.C. 520),
and in recognition of the valid existing rights
created through the finding of a valuable
mineral deposit as determined by the issuance
of a Notice of Preliminary Valuable Deposit
Determination from the Bureau of Land
Management, Congress hereby grants to any
holder of a Notice of Preliminary Valuable
Deposit Determination issued between January
20, 2017, and January 20, 2021, a preference
right hardrock mineral lease subject to the
terms described in this paragraph.
(B) Lease terms.--Each preference right
hardrock mineral lease granted under
subparagraph (A) shall--
(i) have an initial term of 20 years
from the date of such grant and a right
to successive renewals in accordance
with paragraph (4);
(ii) except as provided in clause
(iv), be subject to the same terms and
conditions as adjacent covered leases,
as modified by this section;
(iii) be deemed part of the unified
mining operation with adjacent covered
leases for purposes of mine planning
and operations; and
(iv) not be required to meet the
diligence requirements of adjacent
covered leases until the date on which
the first term of the preference right
hardrock mineral lease after the lease
is renewed under paragraph (4) begins.
(C) Revenue provisions.--
(i) In general.--Upon the grant of
each preference right hardrock mineral
lease under subparagraph (A), the
holder of each lease shall pay to the
Secretary--
(I) a one-time issuance fee
of $250 per acre of the
preference right hardrock
mineral lease;
(II) an annual rental payment
of $1 per acre of the
preference right hardrock
mineral lease per year; and
(III) a production royalty in
accordance with the terms and
conditions described in
subparagraph (B)(ii).
(ii) Deposit of amounts.--Amounts
collected under this subparagraph shall
be deposited in the Treasury as
miscellaneous receipts.
(4) Renewal provisions.--
(A) Renewal qualification.--If, during the
last 2 years of each initial or renewal term of
a lease reinstated, granted, or renewed under
this subsection, the holder of the lease
requests renewal, the Secretary shall renew the
lease in accordance with this paragraph.
(B) Renewal process.--
(i) In general.--Not later than 90
days before the date on which the term
of a lease for which the holder of the
lease requests renewal under
subparagraph (A) ends, the holder of
the lease shall pay to the Secretary a
renewal fee of $100 per acre of the
lease.
(ii) Renewal required.--Upon receipt
of a renewal request under subparagraph
(A) and the renewal fee required under
clause (i) of this subparagraph, the
Secretary shall renew the lease that is
the subject of the renewal request for
an additional 10-year term.
(C) Renewal conditions.--
(i) In general.--
(I) Mine plan of operations
not required during initial
term.--Approval of a mine plan
of operations is not required
during the initial term of a
lease reinstated or granted
under this subsection.
(II) Minimum production
requirements.--Minimum
production requirements as
described in adjacent covered
leases shall begin with respect
to a lease reinstated or
granted under this subsection
on the date that is 5 years
after the approval of a mine
plan of operations for such
lease.
(ii) Annual rental payments.--The
annual rental payment for a lease
renewed under this subsection shall be
$2 per acre more than the annual rental
payment of such lease during the
preceding term of such lease.
(5) Judicial review.--
(A) In general.--The reinstatement,
modification, or grant of a lease, or a
combination thereof, under this section is not
subject to judicial review.
(B) Exception.--Notwithstanding subparagraph
(A), the holder of a lease reinstated,
modified, or granted under this subsection may
seek review of an alleged failure by the
Secretary to act in accordance with this
section.
(6) Definitions.--In this section:
(A) Covered lease.--The term ``covered
lease'' means a hardrock mineral lease--
(i) located within the Superior
National Forest in the State of
Minnesota;
(ii) issued or renewed in between
January 20, 2017, and January 19, 2021;
and
(iii) cancelled or otherwise
rescinded between January 20, 2021, and
January 20, 2025.
(B) Secretary.--The term ``Secretary'' means
the Secretary of the Interior.

SEC. 80132. AMBLER ROAD IN ALASKA.

(a) ANILCA.--Section 201(4)(b) of the Alaska National
Interest Lands Conservation Act (16 U.S.C. 410hh(4)(b)) is
amended by adding at the end ``In accordance with the
provisions of this subsection, each Federal agency shall
approve each authorization within its jurisdiction with respect
to the surface transportation corridor and each such Federal
agency shall promptly issue, in accordance with applicable law,
such rights-of-way, permits, licenses, leases, certificates, or
other authorizations as are necessary with respect to the
establishment of the surface transportation corridor, including
the Secretary, who shall permit such access across all Federal
land and public lands, including across the Western (Kobuk
River) unit of the Gates of the Arctic National Preserve
administered by the National Park Service and the Central Yukon
Planning Area administered by the Bureau of Land Management.
Each such authorization shall be deemed to satisfy all
requirements of all applicable Federal law and shall not be
subject to judicial review.''''.
(b) Reinstatement of Joint Record of Decision.--Not later
than 90 days after the date of the enactment of this subtitle,
the Secretary shall--
(1) rescind the record of decision published by the
Bureau of Land Management titled ``Ambler Road
Supplemental Environmental Impact Statement'' (June
2024);
(2) reinstate, as amended if the Secretary determines
necessary, and publish in the Federal Register the
Joint Record of Decision, which selected Alternative A
as the preferred alternative; and
(3) issue to the Applicant all Federal rights-of-way
on Federal land and public lands, and any associated
permits, approvals, or other authorizations, as
necessary to implement the Joint Record of Decision
published under paragraph (2).
(c) Rental Payments.--The rental fee paid by the Applicant to
the Bureau of Land Management for a right-of-way issued
pursuant to subsection (b)(3) shall be $500,000 for each of
fiscal years 2025 through 2034.
(d) Receipts.--Receipts derived from adjusted rental receipts
under subsection (c) shall be deposited into the Treasury as
miscellaneous receipts.
(e) Judicial Review.--
(1) In general.--An action taken by the Secretary
pursuant to this section is not subject to judicial
review.
(2) Exception.--Notwithstanding paragraph (1), the
Applicant may seek review of an alleged failure by the
Secretary to act in accordance with this section.
(f) Definitions.--In this section:
(1) Alternative a.--The term ``Alternative A'' means
Alternative A as described in ``Section 2
(Alternatives)'' of the document titled ``Ambler Road
Environmental Impact Statement, Final, Volume 1:
Chapters 1-3, Appendices A-F) (March 2020)''.
(2) Applicant.--The term ``Applicant'' has the
meaning given the term in the document titled ``Ambler
Road Environmental Impact Statement, Final, Volume 1:
Chapters 1-3, Appendices A-F) (March 2020)''.
(3) Federal land.--The term ``Federal land'' has the
meaning given such term in section 102 of the Alaska
National Interest Lands Conservation Act (16 U.S.C.
3102).
(4) Joint record of decision.--The term ``Joint
Record of Decision'' means the Joint Record of Decision
as described in the document titled ``Ambler Road
Environmental Impact Statement Joint Record of Decision
(July 2020)''.
(5) Public lands.--The term ``public lands'' has the
meaning given such term in section 102 of the Alaska
National Interest Lands Conservation Act (16 U.S.C.
3102).
(6) Secretary.--The term ``Secretary'' means the
Secretary of the Interior.

PART V--COAL

SEC. 80141. COAL LEASING.

(a) Mandatory Leasing and Other Required Approvals.--Not
later than 90 days after the date of enactment of this Act in
the case of a pending application, or not later than 90 days
after the date of submission in the case of an application
submitted after the date of the enactment of this Act, the
Secretary of the Interior shall--
(1) with respect to each qualified application--
(A) if not previously published for public
comment, publish any required environmental
review;
(B) finalize the fair market value of the
applicable coal tract;
(C) hold a lease sale with respect to the
applicable coal tract;
(D) take all other intermediate actions
necessary to grant the qualified application;
and
(E) after completing the actions required by
subparagraphs (A) through (D), grant the
qualified application and issue the applicable
lease to the person that submitted the
qualified application if that person submitted
the highest bid in the lease sale held under
subparagraph (C); and
(2) with respect to previously issued coal leases,
grant any additional approvals of the Department of the
Interior required for mining activities to commence.
(b) Leases for Known Recoverable Coal Resources.--
Notwithstanding section 2(a)(3)(A) of the Mineral Leasing Act
(30 U.S.C. 201(a)(3)(A)) and section 202 of the Federal Land
Policy and Management Act of 1976 (43 U.S.C. 1712), not later
than 90 days after the date of enactment of this Act, the
Secretary of the Interior shall make available for lease known
recoverable coal resources of not less than 4,000,000
additional acres on Federal land west of the 100th meridian
located in the 48 contiguous States and Alaska, but which shall
not include any Federal land within--
(1) a National Monument;
(2) a National Recreation Area;
(3) a component of the National Wilderness
Preservation System;
(4) a component of the National Wild and Scenic
Rivers System;
(5) a component of the National Trails System;
(6) a National Conservation Area;
(7) a unit of the National Wildlife Refuge System;
(8) a unit of the National Fish Hatchery System;
(9) a unit of the National Park System;
(10) a National Preserve;
(11) a National Seashore or National Lakeshore;
(12) a National Historic Site;
(13) a National Memorial;
(14) a National Battlefield, National Battlefield
Park, National Battlefield Site, or National Military
Park; or
(15) a National Historical Park.
(c) Definitions.--In this section:
(1) Coal lease.--The term ``coal lease'' means a
lease entered into by the United States as lessor,
through the Bureau of Land Management, and an applicant
on Bureau of Land Management Form 3400-012, or a
successor form that contains terms of a coal lease.
(2) Qualified application.--The term ``qualified
application'' means an application for a coal lease
pending as of the date of enactment of this Act or
submitted within 90 days thereafter under the lease by
application program administered by the Bureau of Land
Management pursuant to the Mineral Leasing Act.

SEC. 80142. FUTURE COAL LEASING.

Secretarial Order 3338, issued by the Secretary of the
Interior on January 15, 2016, or any other actions limiting the
Federal coal leasing program, shall have no force or effect.

SEC. 80143. COAL ROYALTY.

(a) Rate.--Section 7(a) of the Mineral Leasing Act (30 U.S.C.
207(a)) is amended by striking ``12\1/2\ per centum'' and
inserting ``12\1/2\ percent, except such amount shall be not
more than 7 percent during the period that begins on the date
of enactment of subsection (s) of section 17 and ends September
30, 2034,''.
(b) Retroactivity.--The amendment made by subsection (a)
shall apply to a coal lease--
(1) issued under section 2 of the Mineral Leasing Act
(30 U.S.C. 201) before, on, or after the date of the
enactment of this subtitle; and
(2) that has not been terminated.
(c) Advance Royalties.--With respect to a lease issued under
section 2 of the Mineral Leasing Act (30 U.S.C. 201) for which
the lessee has paid advance royalties under section 7(b) of
that Act (30 U.S.C. 207(b)), the Secretary of the Interior
shall provide to the lessee a credit for the difference between
the amount paid by the lessee in advance royalties for the
lease before the date of the enactment of this subtitle and the
amount the lessee would have been required to pay if the
amendment made by subsection (a) had been made before the
lessee paid advance royalties for the lease.

SEC. 80144. AUTHORIZATION TO MINE FEDERAL MINERALS.

(a) In General.--All Federal coal reserves leased under
Federal Coal Lease MTM 97988 located within the covered Federal
land are authorized to be mined in accordance with the Bull
Mountains Mining Plan Modification.
(b) Definitions.--In this section:
(1) Bull mountains mining plan modification.--The
term ``Bull Mountains Mining Plan Modification'' means
the Mine No. 1, Amendment 3 mining plan modification
for Federal coal lease MTM 97988 described in the
memorandum of the Department of the Interior titled
``Recommendation regarding the previously approved
mining plan modification for Federal Lease MTM-97988 at
Signal Peak Energy, LLC's Bull Mountains Mine No.1,
located in Musselshell and Yellowstone Counties,
Montana'' (November 18, 2020).
(2) Covered federal land.--The term ``covered Federal
land'' means the following land comprising
approximately 800 acres:
(A) The NE \1/4\ of sec. 8, T. 6 N., R. 27
E., Montana Principal Meridian.
(B) The SW \1/4\ of sec. 10, T. 6 N., R. 27
E., Montana Principal Meridian.
(C) The W \1/2\, SE \1/4\ of sec. 22, T. 6
N., R. 27 E., Montana Principal Meridian.

PART VI--NEPA

SEC. 80151. PROJECT SPONSOR OPT-IN FEES FOR ENVIRONMENTAL REVIEWS.

The National Environmental Policy Act of 1969 is amended by
inserting after section 111 (42 U.S.C. 4336e) the following:

``SEC. 112. PROJECT SPONSOR OPT-IN FEES FOR ENVIRONMENTAL REVIEWS.

``(a) Process.--
``(1) Project sponsor.--A project sponsor who intends
to pay a fee under this section for the preparation, or
supervision of the preparation, of an environmental
assessment or environmental impact statement with
respect to the project of the project sponsor shall
submit to the Council--
``(A) a description of the project; and
``(B) a declaration of whether the project
sponsor intends to prepare the environmental
assessment or environmental impact statement
under section 107(f) of this title.
``(2) Council on environmental quality.--Not later
than 15 days after the receipt of the information
described in paragraph (1), the Council shall provide
to the project sponsor that submitted such information
notice of--
``(A) the relevant lead agency; and
``(B) the amount of the fee, as determined
under subsection (b).
``(3) Payment of fee.--A project sponsor may pay a
fee under this section after receipt of the notice
described in paragraph (2).
``(4) Deadline for environmental reviews for which a
fee is paid.--Notwithstanding section 107(g)(1)--
``(A) an environmental assessment for which a
fee was paid under this section shall be
completed by not later than 6 months after the
sooner of, as applicable, the dates described
in clauses (i), (ii), and (iii) of section
107(g)(1)(B); and
``(B) an environmental impact statement for
which a fee was paid under this section shall
be completed by not later than 1 year after the
sooner of, as applicable, the dates described
in clauses (i), (ii), and (iii) of section
107(g)(1)(A).
``(b) Fee Amount.--The amount of a fee under this section
shall be--
``(1) in the case of an environmental assessment or
environmental impact statement to be prepared by the
lead agency, 125 percent of the anticipated costs to
prepare the environmental assessment or environmental
impact statement; and
``(2) in the case of an environmental assessment or
environmental impact statement to be prepared in whole
or in part by a project sponsor under section 107(f),
125 percent of the anticipated costs to supervise
preparation of, and (as applicable) prepare, the
environmental assessment or environmental impact
statement.
``(c) Administrative and Judicial Review.--
``(1) EA; eis.--There shall be no administrative or
judicial review of an environmental assessment or
environmental impact statement for which a fee is paid
under this section.
``(2) FONSI; rod.--An action for administrative or
judicial review of a finding of no significant impact
or record of decision that is associated with an
environmental assessment or environmental impact
statement described in paragraph (1) may not challenge
the finding of no significant impact or record of
decision based on an alleged issue with the
environmental assessment or environmental impact
statement.
``(d) Revenue Allocation.--Fees received under this section
shall be deposited into the Treasury as miscellaneous
receipts.''.

SEC. 80152. RESCISSION RELATING TO ENVIRONMENTAL AND CLIMATE DATA
COLLECTION.

The unobligated balance of any amounts made available under
section 60401 of Public Law 117-169 is rescinded.

PART VII--MISCELLANEOUS

SEC. 80161. PROTEST FEES.

Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is
further amended by adding at the end the following:
``(t) Protest Filing Fee.--
``(1) In general.--Before processing any protest
under this Act, the Secretary shall collect a filing
fee in the amount described in paragraph (2) from the
protestor to recover the cost for processing documents
filed for the protest.
``(2) Amount.--The amount described in this paragraph
is calculated as follows:
``(A) For each protest filed in a submission
not exceeding 10 pages in length, the base
filing fee shall be $150.
``(B) For each protest filed in a submission
exceeding 10 pages in length, in addition to
the base filing fee, an assessment of $5 per
page in excess of 10 pages shall apply.
``(C) For each protest filed in a submission
that includes more than one oil and gas lease
parcel, right-of-way, or application for permit
to drill, an additional assessment of $10 per
additional lease parcel, right-of-way, or
application for permit to drill shall apply.
``(3) Adjustment.--
``(A) In general.--Beginning on January 1,
2026, and annually thereafter, the Secretary
shall adjust the filing fees established in
this subsection to whole dollar amounts to
reflect changes in the Producer Price Index, as
published by the Bureau of Labor Statistics,
for the previous 12 months.
``(B) Publication of adjusted filing fees.--
At least 30 days before an adjustment to a
filing fee under this paragraph takes effect,
the Secretary shall publish notification of the
adjustment in the Federal Register.
``(4) Revenue allocation.--All revenues collected
under this paragraph shall be deposited in the Treasury
as miscellaneous receipts.''.

PART VIII--OFFSHORE OIL AND GAS LEASING

SEC. 80171. MANDATORY OFFSHORE OIL AND GAS LEASE SALES.

(a) In General.--
(1) Gulf of america.--
(A) In general.--Notwithstanding section 18
of the Outer Continental Shelf Lands Act (43
U.S.C. 1344), the Secretary shall hold not
fewer than 30 lease sales in the Gulf of
America during the 15-year period beginning on
the date of the enactment of this section.
(B) Location requirement.--For each lease
sale held under this paragraph, the Secretary
may offer for lease only an area identified as
the Proposed Final Program Area in Figure S-1
of the 2017-2022 Outer Continental Shelf Oil
and Gas Leasing Proposed Final Program
referenced in the notice of availability
published by the Bureau of Ocean Energy
Management titled ``Notice of Availability of
the 2017-2022 Outer Continental Shelf Oil and
Gas Leasing Proposed Final Program'' (81 Fed.
Reg. 84612; published November 23, 2016).
(C) Acreage requirement.--For each lease sale
held under this paragraph, the Secretary shall
offer for lease--
(i) not fewer than 80,000,000 acres;
or
(ii) if there are fewer than
80,000,000 acres that are unleased, all
such unleased acres.
(D) Timing requirement.--Of the not fewer
than 30 lease sales required under this
paragraph, the Secretary shall hold not fewer
than 1 lease sale on or before each of the
following dates:
(i) August 15, 2025.
(ii) March 15, 2026.
(iii) August 15, 2026.
(iv) March 15, 2027.
(v) August 15, 2027.
(vi) March 15, 2028.
(vii) August 15, 2028.
(viii) March 15, 2029.
(ix) August 15, 2029.
(x) March 15, 2030.
(xi) August 15, 2030.
(xii) March 15, 2031.
(xiii) August 15, 2031.
(xiv) March 15, 2032.
(xv) August 15, 2032.
(xvi) March 15, 2033.
(xvii) August 15, 2033.
(xviii) March 15, 2034.
(xix) August 15, 2034.
(xx) March 15, 2035.
(xxi) August 15, 2035.
(xxii) March 15, 2036.
(xxiii) August 15, 2036.
(xxiv) March 15, 2037.
(xxv) August 15, 2037.
(xxvi) March 15, 2038.
(xxvii) August 15, 2038.
(xxviii) March 15, 2039.
(xxix) August 15, 2039.
(xxx) March 15, 2040.
(E) Lease terms and conditions.--
(i) In general.--For each lease sale
held under this paragraph, the
Secretary shall offer the same lease
form, lease terms, economic conditions,
and stipulations 4 through 10 as
contained in the Bureau of Ocean Energy
Management final notice of sale titled
``Gulf of Mexico Outer Continental
Shelf Region-Wide Oil and Gas Lease
Sale 254'' (85 Fed. Reg. 8010;
published February 12, 2020).
(ii) Update.--The Secretary is
authorized to update stipulations 1
through 3 of the final notice of sale
titled ``Gulf of Mexico Outer
Continental Shelf Region-Wide Oil and
Gas Lease Sale 254'' (85 Fed. Reg.
8010; published February 12, 2020) to
reflect current conditions for lease
sales held under this paragraph.
(2) Cook inlet planning area.--
(A) In general.--Notwithstanding section 18
of the Outer Continental Shelf Lands Act (43
U.S.C. 1344), the Secretary shall hold not
fewer than 6 lease sales in the Cook Inlet
Planning Area during the 10-year period
beginning on the date of the enactment of this
section.
(B) Location requirement.--For each lease
sale held under this paragraph, the Secretary
may offer for lease only an area identified in
Figure S-2 of the 2017-2022 Outer Continental
Shelf Oil and Gas Leasing Proposed Final
Program referenced in the notice of
availability published by the Bureau of Ocean
Energy Management titled ``Notice of
Availability of the 2017-2022 Outer Continental
Shelf Oil and Gas Leasing Proposed Final
Program'' (81 Fed. Reg. 84612; published
November 23, 2016).
(C) Acreage requirement.--For each lease sale
held under this paragraph, the Secretary shall
offer for lease--
(i) not fewer than 1,000,000 acres;
or
(ii) if there are fewer than
1,000,000 acres that are unleased, all
such unleased acres.
(D) Timing requirement.--Of the not fewer
than 6 lease sales required under this
paragraph, the Secretary shall hold not fewer
than 1 lease sale on or before each of the
following dates:
(i) March 15, 2026.
(ii) March 15, 2027.
(iii) August 15, 2028.
(iv) March 15, 2030.
(v) August 15, 2031.
(vi) March 15, 2032.
(E) Lease terms and conditions.--For each
lease sale held under this paragraph, the
Secretary shall offer the same lease form,
lease terms, economic conditions, and
stipulations as contained in the final notice
of sale titled ``Outer Continental Shelf Cook
Inlet, Alaska, Oil and Gas Lease Sale 244'' (82
Fed. Reg. 23163; published May 22, 2017).
(F) Revenue sharing.--Notwithstanding section
8(g) and 9 of the Outer Continental Shelf Lands
Act (43 U.S.C. 1337(g) and 1338), and beginning
in fiscal year 2035, of the bonuses, rents,
royalties, and other revenues derived from
leases issued pursuant to this paragraph--
(i) 90 percent shall be paid to the
State of Alaska; and
(ii) 10 percent shall be deposited in
the Treasury as miscellaneous receipts.
(b) Lease Sales Held Under Proposed Final Program.--The lease
sales held under this section may be in addition to the lease
sales held under the Proposed Final Program for the 2024-2029
National Outer Continental Shelf Oil and Gas Leasing Program
referenced in the notice of availability published by the
Bureau of Ocean Energy Management titled ``Notice of
Availability of the 2024-2029 National Outer Continental Shelf
Oil and Gas Leasing Proposed Final Program and Final
Programmatic Environmental Impact Statement'' (88 Fed. Reg.
67798; published October 2, 2023).
(c) Other Requirements.--During the period beginning on the
date of the enactment of this section and ending on the date
that is 2 years after the date on which the last lease sale
required to be held under this section is held, with respect to
each lease sale held, lease issued, and any activity that
requires a Federal authorization and is associated with a lease
issued pursuant to this title, the Outer Continental Shelf
Lands Act, or section 50264 of Public Law 117-169 in the Gulf
of America--
(1) adherence with the Biological Opinion shall
satisfy the Secretary's obligations under the
Endangered Species Act of 1973 and the Marine Mammal
Protection Act of 1972;
(2) the final programmatic environmental impact
statement referenced in the notice of availability
titled ``Final Programmatic Environmental Impact
Statement for the 2017-2022 Outer Continental Shelf
(OCS) Oil and Gas Leasing Program'' (81 Fed. Reg.
83870; published November 22, 2016), the Record of
Decision related to such final programmatic
environmental impact statement, and the final
environmental impact statement referenced in the notice
of availability titled ``Final Environmental Impact
Statement for Outer Continental Shelf, Gulf of Mexico,
2017-2022 Oil and Gas Lease Sales 249, 250, 251, 252,
253, 254, 256, 257, 259, and 261'' (82 Fed. Reg. 13363;
published March 10, 2017) shall satisfy the Secretary's
obligations under the National Environmental Policy Act
of 1969 and division A of subtitle III of title 54,
United States Code; and
(3) the consistency determinations prepared by the
Bureau of Ocean Energy Management under section 307 of
the Coastal Zone Management Act of 1972 (16 U.S.C.
1456) for Lease Sale 261 for the States of Texas,
Louisiana, Mississippi, Alabama, and Florida shall
satisfy the Secretary's obligations under that section
(16 U.S.C. 1456).
(d) Waiver of Certain Requirements Under Outer Continental
Shelf Lands Act.--The Secretary may waive any requirement under
the Outer Continental Shelf Lands Act that the Secretary
determines would delay issuance of a lease under a lease sale
held under this section.
(e) Issuance of Leases.--If the Secretary receives an
acceptable bid for an area offered in a lease sale held under
this section, the Secretary shall--
(1) in accordance with section 8 of the Outer
Continental Shelf Lands Act (43 U.S.C. 1337), accept
the highest acceptable bid for such area; and
(2) not later than 90 days after the date on which
the applicable lease sale ends, issue a lease of the
area to the highest responsible qualified bidder.
(f) Nomination of Areas for Inclusion in Lease Sale by
Governor.--
(1) In general.--The Secretary shall establish a
process through which the Governor of a State may
nominate for leasing under a lease sale held under this
section an area of the outer Continental Shelf that
is--
(A) adjacent to the waters of the State; and
(B) unleased and available for leasing.
(2) Inclusion of nominated area.--If under paragraph
(1) the Governor of a State nominates an area described
in that paragraph for leasing under a lease sale held
under this section, the Secretary shall include the
area in the next scheduled lease sale under subsection
(a)(1)(D).
(g) Geological and Geophysical Surveys.--Not later than 30
days after the date on which the Secretary receives a complete
application pursuant to section 551.5 of title 30, Code of
Federal Regulations (as in effect on September 22, 2015), to
conduct a geological or geophysical survey pursuant to oil and
gas activities on the outer Continental Shelf, the Secretary
shall approve such application.
(h) Lease Sale 259 and Lease Sale 261 Leases.--
(1) Leasing revenue certainty.--A lease awarded under
Lease Sale 259 or Lease Sale 261, which has been fully
executed by the Secretary, shall not be set aside,
vacated, enjoined, suspended, or cancelled except in
accordance with section 5 of the Outer Continental
Shelf Lands Act (43 U.S.C. 1334).
(2) No additional terms or conditions.--The Secretary
shall not impose any additional terms or conditions on
a lease awarded under Lease Sale 259 or Lease Sale 261,
which has been fully executed by the Secretary, that
were not included in the Bureau of Ocean Energy
Management final notice of sale titled ``Gulf of Mexico
Outer Continental Shelf Oil and Gas Lease Sale 259''
(88 Fed. Reg. 12404; published Feb. 27, 2023) or the
final notice of sale titled ``Gulf of Mexico Outer
Continental Shelf Oil and Gas Lease Sale 261'' (88 Fed.
Reg. 80750; published on Nov. 20, 2023).
(i) Judicial Review.--Section 23(c)(2) of the Outer
Continental Shelf Lands Act (43 U.S.C. 1349(c)(2)) is amended
to read as follows:
``(2) Any action of the Secretary to approve, require
modification of, or disapprove any exploration plan,
development and production plan, bidding procedure, lease sale,
lease issuance, or permit or authorization related to oil and
gas exploration, development, or production under this Act, or
any inaction by the Secretary resulting in the failure to hold
a lease sale under any Federal law requiring oil and gas lease
sales on the outer Continental Shelf, shall be subject to
judicial review only in a United States court of appeals for a
circuit in which an affected State is located.''.
(j) Definitions.--In this section:
(1) Acceptable bid.--The term ``acceptable bid''
means a bid that meets the requirements of the document
published by the Bureau of Ocean Energy Management
titled ``Summary of Procedures for Determining Bid
Adequacy at Offshore Oil and Gas Lease Sales Effective
March 2016, with Central Gulf of Mexico Sale 241 and
Eastern Gulf of Mexico Sale 226''.
(2) Biological opinion.--The term ``Biological
Opinion''--
(A) means the biological opinion issued by
the National Marine Fisheries Service titled
``Biological Opinion on the Federally Regulated
Oil and Gas Program Activities in the Gulf of
Mexico'' and the incidental take statement
associated with such biological opinion
(published March 12, 2020, and updated April
26, 2021); and
(B) does not include sections 3.3.1 through
3.3.3 of such biological opinion.
(3) Lease.--The term ``lease'' means an oil and gas
lease.
(4) Lease sale 259.--The term ``Lease Sale 259''
means the lease sale held by the Bureau of Ocean Energy
Management on March 29, 2023.
(5) Lease sale 261.--The term ``Lease Sale 261''
means the lease sale held by the Bureau of Ocean Energy
Management on December 20, 2023.
(6) Outer continental shelf.--The term ``outer
Continental Shelf'' has the meaning given such term in
section 2 of the Outer Continental Shelf Lands Act (43
U.S.C. 1331).
(7) Secretary.--The term ``Secretary'' means the
Secretary of the Interior.

SEC. 80172. OFFSHORE COMMINGLING.

The Secretary of the Interior shall approve operator
requests to commingle production from multiple reservoirs
within a single wellbore completed on the Outer Continental
Shelf of the Gulf of America unless conclusive evidence
establishes that such commingling--
(1) could not be conducted in a safe manner; or
(2) would result in the ultimate recovery from such
formations being reduced.

SEC. 80173. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED OUTER
CONTINENTAL SHELF REVENUES.

Section 105(f)(1) of the Gulf of Mexico Energy Security Act
of 2006 (43 U.S.C. 1331 note) is amended--
(1) in subparagraph (B), by striking ``and'' at the
end;
(2) in subparagraph (C), by striking ``2055.'' and
inserting ``2024;''; and
(3) by adding at the end the following:
``(D) $650,000,000 for each of fiscal years
2025 through 2034; and
``(E) $500,000,000 for each of fiscal years
2035 through 2055.''.

PART IX--RENEWABLE ENERGY

SEC. 80181. RENEWABLE ENERGY FEES ON FEDERAL LANDS.

(a) Acreage Rent for Wind and Solar Rights-of-way.--
(1) In general.--Under the second sentence of section
504(g) of the Federal Land Policy and Management Act of
1976 (43 U.S.C. 1764(g)), the Secretary shall, subject
to paragraph (3) and not later than January 1 of each
calendar year, collect from the holder of a right-of-
way for a renewable energy project an acreage rent in
an amount based on the equation described in paragraph
(2).
(2) Calculation of acreage rent rate.--
(A) Equation.--The amount of an acreage rent
collected under paragraph (1) shall be
determined using the following equation:
Acreage rent = A B ((1 +
C)\D\)).
(B) Definitions.--For purposes of
subparagraph (A):
(i) The letter ``A'' means the Per-
Acre Rate.
(ii) The letter ``B'' means the
Encumbrance Factor.
(iii) The letter ``C'' means the
Annual Adjustment Factor.
(iv) The letter ``D'' means the year
in the term of the right-of-way.
(3) Payment until production.--The holder of a right-
of-way for a renewable energy project shall pay an
acreage rent collected under paragraph (1) until the
date on which energy generation begins.
(b) Capacity Fees.--
(1) In general.--The Secretary shall, subject to
paragraph (2), annually collect a capacity fee from the
holder of a right-of-way for a renewable energy project
based on the amount described in paragraph (2).
(2) Calculation of capacity fee.--The amount of a
capacity fee collected under paragraph (1) shall be
equal to the greater of--
(A) an amount equal to the acreage rent
described in subsection (a); and
(B) 4.58 percent of the gross proceeds from
the sale of electricity produced by the
renewable energy project.
(3) Multiple-use reduction factor.--
(A) Application.--The holder of a right-of-
way for a wind energy generation project may
request that the Secretary apply a 10-percent
Multiple-Use Reduction Factor to the amount of
a capacity fee determined under paragraph (2)
by submitting to the Secretary an application
for approval.
(B) Approval.--The Secretary may approve an
application submitted under subparagraph (A) if
not less than 25 percent of the land within the
area of the right-of-way is authorized for use,
occupancy, or development with respect to an
activity other than the generation of wind
energy for the entirety of the year in which
the capacity fee is collected.
(C) Late determination.--If the Secretary
approves an application under subparagraph (B)
for a wind energy generation project after the
date on which the holder of the right-of-way
for the project begins paying a capacity fee,
the Secretary shall apply the Multiple-Use
Reduction Factor to the capacity fee in the
following years. Under this subparagraph, the
Secretary may not refund the holder of a right-
of-way for the difference in the amount of a
capacity fee paid in a previous year.
(c) Late Payment Fee; Termination.--
(1) In general.--The Secretary may charge the holder
of a right-of-way for a renewable energy project a late
payment fee if the Secretary does not receive payment
for the acreage rent under subsection (a) or the
capacity fee under subsection (b) by the date that is
15 days after the date on which the payment was due.
(2) Termination of right-of-way.--The Secretary may
terminate a right-of-way for a renewable energy project
if the Secretary does not receive payment for the
acreage rent under subsection (a) or the capacity fee
under subsection (b) by the date that is 90 days after
the date on which the payment was due.
(d) Revenue Accuracy, Transparency, and Accountability.--The
Secretary shall document, verify, and make publicly available
the respective amount of wind and solar energy revenues
collected under this section on the Department of the
Interior's Natural Resources Revenue Data website.
(e) Ensuring Fee Certainty.--Section 3103 of the Energy Act
of 2020 (43 U.S.C. 3003) is repealed.
(f) Definitions.--In this section:
(1) Annual adjustment factor.--The term ``Annual
Adjustment Factor'' means 3 percent.
(2) Encumbrance factor.--The term ``Encumbrance
Factor'' means--
(A) 100 percent for solar energy generation
facilities; and
(B) 10 percent for wind energy generation
facilities.
(3) Per-acre rate.--The term ``Per-Acre Rate'' means
the average of per-acre pastureland rental rates
published in the Cash Rents Survey by the National
Agricultural Statistics Service for the State in which
the right-of-way is located over the 5 calendar-year
period preceding the issuance or renewal of the right-
of-way.
(4) Project.--The term ``project'' means a system
described in section 2801.9(a)(4) of title 43, Code of
Federal Regulations (as such section is in effect on
the date of the enactment of this Act).
(5) Public lands.--The term ``public lands'' means--
(A) public lands as such term is defined in
section 103 of the Federal Land Policy and
Management Act of 1976 (43 U.S.C. 1702); and
(B) the lands of the National Forest System
as described in section 11(a) of the Forest and
Rangeland Renewable Resources Planning Act of
1974 (16 U.S.C. 1609(a)).
(6) Renewable energy project.--The term ``renewable
energy project'' means a project located on public
lands that uses wind or solar energy to generate
energy.
(7) Right-of-way.--The term ``right-of-way'' has the
meaning given such term in section 103 of the Federal
Land Policy and Management Act of 1976 (43 U.S.C.
1702).
(8) Secretary.--The term ``Secretary'' means--
(A) the Secretary of the Interior with
respect to land controlled or administered by
the Secretary of the Interior; or
(B) the Secretary of Agriculture with respect
to the lands of the National Forest System
controlled or administered by the Secretary of
Agriculture.

SEC. 80182. RENEWABLE ENERGY REVENUE SHARING.

(a) Disposition of Revenue.--
(1) Disposition of revenues.--Beginning on January 1,
2026, the amounts collected from a renewable energy
project as bonus bids, rentals, fees, or other payments
under a right-of-way, permit, lease, or other
authorization shall be--
(A) deposited in the general fund of the
Treasury; and
(B) without further appropriation or fiscal
year limitation, allocated as follows:
(i) 25 percent shall be paid from
amounts in the general fund of the
Treasury to the State within the
boundaries of which the revenue is
derived.
(ii) 25 percent shall be paid from
amounts in the general fund of the
Treasury to each county within the
boundaries of which the revenue is
derived, to be allocated among each
such county based on the percentage of
land from which the revenue is derived.
(2) Payments to states and counties.--
(A) In general.--The amounts paid to States
and counties under paragraph (1) shall be used
consistent with section 35 of the Mineral
Leasing Act (30 U.S.C. 191).
(B) Payments in lieu of taxes.--A payment to
a county under paragraph (1) shall be in
addition to a payment in lieu of taxes received
by the county under chapter 69 of title 31,
United States Code.
(C) Timing.--The amounts required to be paid
under paragraph (1)(B) for an applicable fiscal
year shall be made available not later than the
fiscal year that immediately follows the fiscal
year for which the amounts were collected.
(b) Definitions.--In this section:
(1) Covered land.--The term ``covered land'' means
land that is--
(A) public lands administered by the
Secretary; and
(B) not excluded from the development of
solar or wind energy under--
(i) a land use plan; or
(ii) other Federal law.
(2) Public lands.--The term ``public lands'' means--
(A) public lands as such term is defined in
section 103 of the Federal Land Policy and
Management Act of 1976 (43 U.S.C. 1702); and
(B) lands of the National Forest System as
described in section 11(a) of the Forest and
Rangeland Renewable Resources Planning Act of
1974 (16 U.S.C. 1609(a)).
(3) Renewable energy project.--The term ``renewable
energy project'' means a system described in section
2801.9(a)(4) of title 43, Code of Federal Regulations
(as such section is in effect on the date of the
enactment of this Act), located on covered land that
uses wind or solar energy to generate energy.
(4) Secretary.--The term ``Secretary'' means--
(A) the Secretary of the Interior with
respect to land controlled or administered by
the Secretary of the Interior; or
(B) the Secretary of Agriculture with respect
to the lands of the National Forest System
controlled or administered by the Secretary of
Agriculture.

Subtitle B--Water, Wildlife, and Fisheries

SEC. 80201. RESCISSION OF FUNDS FOR INVESTING IN COASTAL COMMUNITIES
AND CLIMATE RESILIENCE.

There is hereby rescinded the unobligated balance of funds
made available by section 40001 of Public Law 117-169.

SEC. 80202. RESCISSION OF FUNDS FOR FACILITIES OF NATIONAL OCEANIC AND
ATMOSPHERIC ADMINISTRATION AND NATIONAL MARINE
SANCTUARIES.

There is hereby rescinded the unobligated balance of funds
made available by section 40002 of Public Law 117-169.

SEC. 80203. SURFACE WATER STORAGE ENHANCEMENT.

In addition to amounts otherwise available, there is
appropriated to the Secretary of the Interior, acting through
the Commissioner of Reclamation, for fiscal year 2025, out of
any money in the Treasury not otherwise appropriated,
$2,000,000,000, to remain available through September 30, 2034,
for construction and associated activities that increase the
capacity of existing Bureau of Reclamation surface water
storage facilities, in a manner as determined by the Secretary:
Provided, That, for the purposes of section 203 of the
Reclamation Reform Act of 1982 (43 U.S.C. 390cc) or section
3404(a) of the Reclamation Projects Authorization and
Adjustment Act of 1992 (Public Law 102-575), a contract or
agreement entered into pursuant to this section shall not be
treated as a new or amended contract. None of the funds
provided under this section shall be reimbursable or subject to
matching or cost-share requirements.

SEC. 80204. WATER CONVEYANCE ENHANCEMENT.

Subtitle C--Federal Lands

SEC. 80301. PROHIBITION ON THE IMPLEMENTATION OF THE ROCK SPRINGS FIELD
OFFICE, WYOMING, RESOURCE MANAGEMENT PLAN.

The Secretary of the Interior shall not implement,
administer, or enforce the Record of Decision and Approved
Resource Management Plan referred to in the notice of
availability titled ``Notice of Availability of the Record of
Decision and Approved Resource Management Plan for the Rock
Springs Field Office, Wyoming'' published by the Bureau of Land
Management on January 7, 2025 (80 Fed. Reg. 1186).

SEC. 80302. PROHIBITION ON THE IMPLEMENTATION OF THE BUFFALO FIELD
OFFICE, WYOMING, RESOURCE MANAGEMENT PLAN.

The Secretary of the Interior shall not implement,
administer, or enforce the Record of Decision and Approved
Resource Management Plan Amendment referred to in the notice of
availability titled ``Notice of Availability of the Record of
Decision and Approved Resource Management Plan Amendment for
the Buffalo Field Office, Wyoming'' published by the Bureau of
Land Management on November 27, 2024 (89 Fed. Reg. 93650).

SEC. 80303. PROHIBITION ON THE IMPLEMENTATION OF THE MILES CITY FIELD
OFFICE, MONTANA, RESOURCE MANAGEMENT PLAN.

The Secretary of the Interior shall not implement,
administer, or enforce the Record of Decision and Approved
Resource Management Plan Amendment referred to in the notice of
availability titled ``Notice of Availability of the Record of
Decision and Approved Resource Management Plan Amendment for
the Miles City Field Office, Montana'' published by the Bureau
of Land Management on November 27, 2024 (89 Fed. Reg. 93650).

SEC. 80304. PROHIBITION ON THE IMPLEMENTATION OF THE NORTH DAKOTA
RESOURCE MANAGEMENT PLAN.

The Secretary of the Interior shall not implement,
administer, or enforce the Record of Decision and Approved
Resource Management Plan referred to in the notice of
availability titled ``Record of Decision and Approved Resource
Management Plan for the North Dakota Resource Management Plan/
Environmental Impact Statement, North Dakota'' published by the
Bureau of Land Management on January 15, 2025 (90 Fed. Reg.
3915).

SEC. 80305. PROHIBITION ON THE IMPLEMENTATION OF THE COLORADO RIVER
VALLEY FIELD OFFICE AND GRAND JUNCTION FIELD OFFICE
RESOURCE MANAGEMENT PLANS.

The Secretary of the Interior shall not implement,
administer, or enforce the Records of Decision and Approved
Resource Management Plans referred to in the notice of
availability titled ``Availability of the Records of Decision
and Approved Resource Management Plans for the Grand Junction
Field Office and the Colorado River Valley Field Office,
Colorado'' published by the Bureau of Land Management on
October 22, 2024 (89 Fed. Reg. 84385).

SEC. 80306. RESCISSION OF FOREST SERVICE FUNDS.

There is hereby rescinded the unobligated balances of amounts
made available by section 23001(a)(4) of Public Law 117-169.

SEC. 80307. RESCISSION OF NATIONAL PARK SERVICE AND BUREAU OF LAND
MANAGEMENT FUNDS.

There is hereby rescinded the unobligated balances of amounts
made available by section 50221 of Public Law 117-169.

SEC. 80308. RESCISSION OF BUREAU OF LAND MANAGEMENT AND NATIONAL PARK
SERVICE FUNDS.

There is hereby rescinded the unobligated balances of amounts
made available by section 50222 of Public Law 117-169.

SEC. 80309. RESCISSION OF NATIONAL PARK SERVICE FUNDS.

There is hereby rescinded the unobligated balances of amounts
made available by section 50223 of Public Law 117-169.

SEC. 80310. CELEBRATING AMERICA'S 250TH ANNIVERSARY.

In addition to amounts otherwise available, there is
appropriated to the Secretary of the Interior for fiscal year
2025, out of any money in the Treasury not otherwise
appropriated, to remain available through fiscal year 2028--
(1) $150,000,000 for events, celebrations, and
activities related to the observance and commemoration
of the 250th anniversary of the founding of the United
States; and
(2) $40,000,000 to carry out Executive Order 13934 of
July 3, 2020 (85 Fed. Reg. 41165), Executive Order
13978 of January 18, 2021 (86 Fed. Reg. 6809), and
Executive Order 14189 of January 29, 2025 (90 Fed. Reg.
8849) to establish and maintain a statuary park to be
known as the National Garden of American Heroes.

SEC. 80311. LONG-TERM CONTRACTS FOR THE FOREST SERVICE.

(a) In General.--For each of fiscal years 2025 through 2034,
the Chief of the Forest Service (in this section referred to as
the ``Chief'') shall enter into not less than one long-term
contract or agreement with private persons or other public or
private entities under section 14(a) of the National Forest
Management Act (16 U.S.C. 472a(a)) with respect to covered
National Forest System lands in each region of the Forest
Service that contains covered National Forest System lands.
(b) Terms.--
(1) In general.--Except as provided in paragraphs (2)
and (3), the Chief shall enter into contracts or
agreements under subsection (a) in accordance with
section 3903 of title 41, United States Code, and
section 14 of the National Forest Management Act (16
U.S.C. 472a).
(2) Contract length.--The period of a contract or
agreement under subsection (a) shall be for at least 20
years, with options for extensions and renewals as
determined by the Chief.
(3) Cancellation ceilings.--A contract or agreement
entered into under subsection (a) shall include
provisions for a cancellation ceiling consistent with
section 604(d) of the Healthy Forests Restoration Act
of 2003 (16 U.S.C. 6591c(d)).
(c) Receipts.--Any monies derived from an agreement or
contract under this section by the Chief shall be deposited in
the general fund of the Treasury.
(d) Covered National Forest System Lands Defined.--In this
section, the term ``covered National Forest System lands''
means the proclaimed National Forest System lands reserved or
withdrawn from the public domain of the United States.

SEC. 80312. LONG-TERM CONTRACTS FOR THE BUREAU OF LAND MANAGEMENT.

(a) In General.--For each of fiscal years 2025 through 2034,
the Director of the Bureau of Land Management (in this section
referred to as the ``Director'') shall enter into not less than
one long-term contract or agreement with private persons or
other public or private entities under section 1 of the
Materials Act of 1947 (30 U.S.C. 601) with respect to
vegetative materials on covered public lands.
(b) Terms.--
(1) In general.--Except as provided in paragraphs (2)
and (3), the Director shall enter into contracts or
agreements under subsection (a) in accordance with
section 3903 of title 41, United States Code, and
section 2(a) of the Materials Act of 1947 (30 U.S.C.
602(a)).
(2) Contract length.--The period of a contract or
agreement under subsection (a) shall be for at least 20
years, with options for extensions and renewals as
determined by the Director.
(3) Cancellation ceilings.--A contract or agreement
entered into under subsection (a) shall include
provisions for a cancellation ceiling consistent with
section 604(d) of the Healthy Forests Restoration Act
of 2003 (16 U.S.C. 6591c(d)).
(c) Receipts.--Any monies derived from an agreement or
contract under this section by the Director shall be deposited
in the general fund of the Treasury.
(d) Covered Public Lands Defined.--The term ``covered public
lands'' has the meaning given the term ``public lands'' in
section 103 of the Federal Land Policy and Management Act of
1976 (43 U.S.C. 1702), except that the term includes Coos Bay
Wagon Road Grant lands and Oregon and California Railroad Grant
lands.

SEC. 80313. TIMBER PRODUCTION FOR THE FOREST SERVICE.

(a) In General.--Not later than 1 year after the date of
enactment of this title, the Secretary of Agriculture, acting
through the Chief of the Forest Service or their designee,
shall direct timber harvest on covered National Forest System
lands in amounts that--
(1) in total, equal or exceed the volume that is 25
percent higher than the total volume harvested on such
lands during fiscal year 2024; and
(2) are in accordance with the applicable forest
plan, including the allowable sale quantity or probable
sale quantity, as applicable, of timber applicable to
such lands on the date of enactment of this title.
(b) Definitions.--In this section:
(1) Covered national forest system lands.--
(A) In general.--Except as provided in
subparagraph (B), the term ``covered National
Forest System lands'' means the proclaimed
National Forest System lands reserved or
withdrawn from the public domain of the United
States.
(B) Exclusions.--The term ``covered National
Forest System lands'' does not include lands--
(i) that are included in the National
Wilderness Preservation System;
(ii) that are located within a
national or State-specific inventoried
roadless area established by the
Secretary of Agriculture through
regulation, unless--
(I) the forest management
activity to be carried out
under such authority is
consistent with the forest plan
applicable to the area; or
(II) the activity is allowed
under the applicable roadless
rule governing such lands,
including--
(aa) the Idaho
roadless rule under
subpart C of part 294
of title 36, Code of
Federal Regulations;
(bb) the Colorado
roadless rule under
subpart D of part 294
of title 36, Code of
Federal Regulations; or
(cc) any other
roadless rule developed
after the date of the
enactment of this
section by the
Secretary with respect
to a specific State; or
(iii) on which timber harvesting for
any purpose is prohibited by Federal
statute.
(2) Forest plan.--The term ``forest plan'' means a
land and resource management plan prepared by the
Forest Service for a unit of the National Forest System
pursuant to section 6 of the Forest and Rangeland
Renewable Resources Planning Act of 1974 (16 U.S.C.
1604).

SEC. 80314. TIMBER PRODUCTION FOR THE BUREAU OF LAND MANAGEMENT.

(a) In General.--Not later than 1 year after the date of
enactment of this title, the Secretary of the Interior, acting
through the Director of the Bureau of Land Management or their
designee, shall direct timber harvest on covered public lands
in amounts that--
(1) in total, equal or exceed the volume that is 25
percent higher than the total volume harvested on such
lands during fiscal year 2024; and
(2) are in accordance with the applicable forest
plan.
(b) Definitions.--In this section:
(1) Covered public lands.--
(A) In general.--Except as provided in
subparagraph (B), the term ``covered public
lands'' has the meaning given the term ``public
lands'' in section 103 of the Federal Land
Policy and Management Act of 1976 (43 U.S.C.
1702), except that the term includes Coos Bay
Wagon Road Grant lands and Oregon and
California Railroad Grant lands.
(B) Exclusions.--The term ``covered public
lands'' does not include lands--
(i) that are included in the National
Wilderness Preservation System; or
(ii) on which timber harvesting for
any purpose is prohibited by Federal
statute.
(2) Forest plan.--The term ``forest plan'' means a
land use plan prepared by the Bureau of Land Management
for public lands pursuant to section 202 of the Federal
Land Policy and Management Act of 1976 (43 U.S.C.
1712).

SEC. 80315. BUREAU OF LAND MANAGEMENT LAND IN NEVADA.

(a) Lyon County.--
(1) In general.--Not later than 2 years after the
date of enactment of this title, the Secretary of the
Interior (referred to in this section as the
``Secretary''), in accordance with this section and the
Federal Land Policy and Management Act of 1976 (43
U.S.C. 1701), shall identify and offer for sale to the
City of Fernley, Nevada, all right, title, and interest
of the United States in and to the Federal land--
(A) located in Lyon County, Nevada; and
(B) identified as ``Fernley Land Conveyance
Boundary'' on the map entitled ``Fernley
Economic Development Act'' and dated October 6,
2020.
(2) Costs.--As a condition of the conveyance of the
Federal land under paragraph (1), the City of Fernley,
Nevada, shall pay--
(A) an amount equal to the appraised value
determined in accordance with subsection
(e)(2); and
(B) all costs related to the conveyance of
the Federal land to the City, including all
surveys, appraisals, and other associated
administrative costs.
(b) Clark County.--
(1) In general.--Not later than 2 years after the
date of enactment of this title, the Secretary, in
accordance with this section and the Federal Land
Policy and Management Act of 1976 (43 U.S.C. 1701),
shall identify and offer for sale all right, title, and
interest of the United States in and to Federal land
located in Clark County, Nevada that has been
identified--
(A) as suitable for disposal in the Las Vegas
Resource Management Plan in existence on the
date of enactment of this title; or
(B) as ``Modified Existing Disposal'' on the
map entitled ``Southern Nevada Economic
Development and Conservation Act Disposal Map''
and dated February 6, 2025.
(2) Compliance with local planning and zoning laws.--
Before carrying out a sale of Federal land under
paragraph (1), Clark County shall submit to the
Secretary a certification that any entity selected to
purchase land through a competitive bidding process
under subsection (e)(1)(A)has agreed to comply with--
(A) zoning ordinances of the county; and
(B) any master plan for the area approved by
the county or region.
(3) Affordable housing.--
(A) In general.--Upon the request Clark
County, the Secretary shall make the Federal
land identified as ``Modified Existing
Disposal'' on the map entitled ``Southern
Nevada Economic Development and Conservation
Act Disposal Map'' and dated February 6, 2025
available at less than fair market value for
affordable housing, in accordance with section
7(b) of the Southern Nevada Public Land
Management Act of 1998 (Public Law 105-263; 112
Stat. 2349).
(B) Exemption from notice of realty action
requirement.--If any entity seeks to use
covered land for affordable housing purposes
under subparagraph (A), the entity--
(i) shall not be required to comply
notice of realty action requirements
with respect to the covered land; but
(ii) before using the covered land
for affordable housing purposes, shall
provide for a period of not less than
14 days adequate public notice of the
use of the covered land.
(4) Savings clause.--Nothing in this section shall be
construed to affect Federal lands previously identified
for disposal under the Southern Nevada Public Land
Management Act of 1998 (Public Law 105-263; 112 Stat.
2343) nor the disposition of proceeds for such lands
prior to the date of enactment of this title.
(c) Washoe County.--
(1) In general.--Not later than 2 years after the
date of enactment of this title, the Secretary, in
accordance with this section and the Federal Land
Policy and Management Act of 1976 (43 U.S.C. 1701),
shall identify and offer for sale all right, title, and
interest of the United States in and to Federal land
located in Washoe County, Nevada, that has been
identified--
(A) as suitable for disposal in the Carson
City Consolidated Resource Management Plan in
existence on the date of enactment of this
title; or
(B) as ``BLM Land for Disposal'' on the map
entitled ``Washoe County Land Disposals'' and
dated February 7, 2025.
(2) Evaluation of additional land for potential
disposal.--
(A) In general.--The Secretary shall, not
later than 1 year after the date of enactment
of this title, evaluate the parcels of Federal
land depicted as ``Additional BLM Land
Potentially Available for Disposal'' on the map
entitled ``Washoe County Land Disposals'' and
dated February 7, 2025, to assess the
suitability of the evaluated Federal land for
disposal in accordance with section 203(a) of
the Federal Land Policy and Management Act of
1976 (43 U.S.C. 1713(a)).
(B) Sale.--The parcels of Federal land
identified by the Secretary as suitable for
disposal under subparagraph (A) may be offered
for sale in accordance with this section.
(3) Joint selection required; determination regarding
suitability for affordable housing.--
(A) In general.--The Secretary and Washoe
County shall jointly select which parcels of
the Federal land described in paragraph (2)(A)
and identified as suitable for disposal in
subparagraph (B) to offer for sale under this
subsection.
(B) Determination.--During the selection
process under subparagraph (A), the Secretary
and Washoe County shall evaluate whether any
parcels of the Federal land described in that
subparagraph are suitable for affordable
housing.
(C) Conveyance.--If a parcel of Federal land
is determined to be suitable for affordable
housing under subparagraph (B), on request of a
State or local governmental entity, the
applicable parcel of Federal land shall be made
available at less than fair market value to the
governmental entity in accordance with section
7(b) of the Southern Nevada Public Land
Management Act of 1998 (Public Law 105-263; 112
Stat. 2349).
(D) Survey.--The exact acreage and legal
description of a parcel of Federal land to be
conveyed under subparagraph (C) shall be
determined by a survey satisfactory to the
Secretary.
(4) Compliance with local planning and zoning laws.--
Before carrying out a sale of Federal land under
paragraph (2), Washoe County shall submit to the
Secretary a certification that any entity selected to
purchase land through a competitive bidding process
under subsection (e)(1)(A) has agreed to comply with--
(A) Washoe County zoning ordinances; and
(B) any master plan for the area approved by
Washoe County or region.
(5) Postponement; exclusion from sale.--At the
request of Washoe County, the Secretary shall postpone
or exclude from sale all or a portion of the Federal
land described in paragraph (2).
(6) Affordable housing.--
(A) Determination regarding suitability for
affordable housing.--Not later than 90 days
after the date of enactment of this title, the
Secretary shall conduct a review of the Federal
land described in subparagraph (C) to determine
the suitability of the Federal land for
affordable housing.
(B) Authorization.--Upon the request of a
State or local governmental entity, the
Secretary shall make the Federal land described
in subparagraph (C) available at less than fair
market value for affordable housing, in
accordance with section 7(b) of the Southern
Nevada Public Land Management Act of 1998
(Public Law 105-263; 112 Stat. 2349).
(C) Description of federal land.--The Federal
land referred to in subparagraphs (A) and (B)
is the land identified as ``BLM Land for
Disposal Only for Affordable Housing'' on the
map entitled ``Washoe County Land Disposals''
and dated February 7, 2025.
(D) Exemption from notice of realty action
requirement.--If any entity seeks to use
covered land for affordable housing purposes
under subparagraph (B), the entity--
(i) shall not be required to comply
notice of realty action requirements
with respect to the covered land; but
(ii) before using the covered land
for affordable housing purposes, shall
provide for a period of not less than
14 days adequate public notice of the
use of the covered land.
(d) Pershing County Checkerboard Resolution and Disposal.--
(1) Sale or exchange of eligible land.--
(A) Authorization of conveyance.--Not later
than 2 years after the date of the enactment of
this title, the Secretary, in accordance with
this section and subject to valid existing
rights, shall conduct sales or exchanges of all
right, title, and interest of the United States
in and to the eligible land.
(B) Joint selection required.--After
providing public notice, the Secretary and the
County shall jointly select parcels of eligible
land to be offered for sale or exchange under
subparagraph (A).
(C) Land exchanges.--
(i) In general.--An exchange of
eligible land under subparagraph (A)
shall be consistent with section 206(a)
of the Federal Land Policy and
Management Act of 1976 (43 U.S.C.
1716).
(ii) Equal value exchange.--
(I) In general.--The value of
the eligible land and private
land to be exchanged under
subparagraph (A)--
(aa) shall be equal;
or
(bb) shall be made
equal in accordance
with subclause (II).
(II) Equalization.--
(aa) Surplus of
eligible land.--With
respect to the eligible
land and private land
to be exchanged under
subparagraph (A), if
the value of the
eligible land exceeds
the value of the
private land, the value
of the eligible land
and the private land
shall be equalized by--
(AA) the
owner of the
private land
making a cash
equalization
payment to the
Secretary;
(BB) adding
private land to
the exchange;
or
(CC) removing
eligible land
from the
exchange.
(bb) Surplus of
private land.--With
respect to the eligible
land and private land
to be exchanged under
subparagraph (A), if
the value of the
private land exceeds
the value of the
eligible land, the
value of the private
land and the eligible
land shall be equalized
by--
(AA) the
Secretary
making a cash
equalization
payment to the
owner of the
private land,
in accordance
with section
206(b) of the
Federal Land
Policy and
Management Act
of 1976 (43
U.S.C.
1716(b));
(BB) adding
eligible land
to the
exchange; or
(CC) removing
private land
from the
exchange.
(iii) Adjacent land.--To the extent
practicable, the Secretary shall seek
to enter into agreements with one or
more owners of private land adjacent to
the eligible land for the exchange of
the private land for the eligible land,
if the Secretary determines that the
exchange would consolidate Federal land
ownership and facilitate improved
Federal land management.
(D) Deadline for sale or exchange;
exclusions.--
(i) Deadline.--Not later than 2 years
after the date on which the eligible
land is jointly selected under
subparagraph (B), the Secretary shall
offer for sale or exchange the parcels
of eligible land jointly selected under
that subparagraph.
(ii) Postponement or exclusion.--The
Secretary or the County may postpone or
exclude from sale or exchange all or a
portion of the eligible land jointly
selected under subparagraph (B) for
emergency ecological or safety reasons.
(2) Sale of encumbered land.--
(A) Authorization of conveyance.--Not later
than 2 years after the date of the enactment of
this title and subject to valid existing rights
held by third parties, the Secretary shall
offer to convey to qualified entities, for fair
market value, the remaining right, title, and
interest of the United States, in and to the
encumbered land.
(B) Offer to convey.--Not later than 180 days
after the date on which the Secretary receives
a fair market offer from a qualified entity for
the conveyance of encumbered land, the
Secretary shall accept the fair market value
offer.
(C) Conveyance.--Not later than 180 days
after the date of acceptance by the Secretary
of an offer from a qualified entity under
subparagraph (B) and completion of a sale for
all or part of the applicable portion of
encumbered land to the highest qualified
entity, the Secretary, by delivery of an
appropriate deed, patent, or other valid
instrument of conveyance, shall convey to the
qualified entity all remaining right, title,
and interest of the United States in and to the
applicable portion of the encumbered land.
(D) Merger.--Subject to valid existing rights
held by third parties, on delivery of the
instrument of conveyance to the qualified
entity under subparagraph (C), the prior
interests in the locatable minerals and the
right to use the surface for mineral purposes
held by the qualified entity under a mining
claim, millsite, tunnel site, or any other
Federal land use authorization applicable to
the encumbered land included in the instrument
of conveyance, shall merge with all right,
title, and interest conveyed to the qualified
entity by the United States under this section
to ensure that the qualified entity receives
fee simple title to the purchased encumbered
land.
(3) Definitions.--In this subsection:
(A) County.--The term ``County'' means
Pershing County, Nevada.
(B) Eligible land.--The term ``eligible
land'' means any land administered by the
Secretary, acting through the Director of the
Bureau of Land Management--
(i) that is within the area
identified on the Map as ``Checkerboard
Lands Resolution Area'' that is
designated for disposal by the
Secretary through--
(I) the Winnemucca
Consolidated Resource
Management Plan; or
(II) any subsequent amendment
or revision to the management
plan that is undertaken with
full public involvement;
(ii) that is the land identified on
the Map as ``Additional Lands Eligible
for Disposal''; and
(iii) that is not encumbered land.
(C) Encumbered land.--The term ``encumbered
land'' means any land administered by the
Secretary, acting through the Director of the
Bureau of Land Management, within the area
identified on the Map as ``Checkerboard
Resolution Area'' that is encumbered by mining
claims, millsites, or tunnel sites.
(D) Map.--The term ``Map'' means the map
titled ``Pershing County Checkerboard Lands
Resolution'' and dated July 8, 2024.
(E) Qualified entity.--The term ``qualified
entity'' means, with respect to a portion of
encumbered land--
(i) the owner of a mining claim,
millsite, or tunnel site located on a
portion of the encumbered land on the
date of the enactment of this title;
and
(ii) a successor in interest of an
owner described in clause (i).
(e) Appraisals and Methods of Sale.--
(1) Method of sale.--The sale or exchange of eligible
lands under this section shall be--
(A) through a competitive bidding process;
(B) for not less than fair market value, in
accordance with paragraphs (2) and (3); and
(C) subject to valid existing rights.
(2) Appraisals.--Any sales or exchanges carried out
under this section shall be for not less than fair
market value, based on an appraisal that is conducted
in accordance with--
(A) the Uniform Appraisal Standards for
Federal Land Acquisitions; and
(B) the Uniform Standards of Professional
Appraisal Practice.
(3) Mass appraisals.--Not later than 2 years after
the date of the enactment of this title, and every 5
years thereafter, the Secretary shall--
(A) conduct a mass appraisal of eligible land
to be sold or exchanged under this section;
(B) prepare an evaluation analysis for each
land transaction under this section; and
(C) make available to the public the results
of the mass appraisals conducted under
subparagraph (A).
(f) Costs.--The qualified entity or entity selected through a
competitive bidding process to purchase or exchange land, as
appropriate, shall pay all costs associated with sales or
exchanges carried out under this section.
(g) Disposition of Proceeds.--Amounts received from the sale
of land under this section shall be deposited in the general
fund of the Treasury.
(h) Map and Legal Description.--
(1) In general.--Not later than 2 years after the
date of enactment of this title, the Secretary shall
finalize the maps and legal descriptions of the land to
be sold or exchanged under this section.
(2) Controlling document.--In the case of a
discrepancy between the maps and legal descriptions
finalized under paragraph (1), the map shall control.
(3) Corrections.--The Secretary may correct minor
errors in the maps or the legal descriptions finalized
under paragraph (1).
(4) Map on file.--The maps and legal descriptions
finalized under paragraph (1) shall be kept on file and
available for public inspection in each appropriate
office of the Bureau of Land Management.
(i) Rule of Construction.--Nothing in this section shall be
construed as authorizing the conveyance of any lands
administered by the National Park Service.

SEC. 80316. FOREST SERVICE LAND IN NEVADA.

(a) In General.--Not later than 2 years after the date of
enactment of this title, the Secretary of Agriculture (referred
to in this section as the ``Secretary''), in accordance with
this section, shall identify and offer for sale, subject to
subsection (b), all right, title, and interest of the United
States in and to covered Federal land located in Washoe County,
Nevada.
(b) Joint Selection Required; Determination Regarding
Suitability for Affordable Housing.--
(1) In general.--The Secretary and Washoe County
shall jointly select which parcels of covered Federal
land to offer for sale under subsection (a).
(2) Determination.--During the selection process
under paragraph (1), the Secretary and Washoe County
shall evaluate whether any parcels of the Federal land
described in that paragraph are suitable for affordable
housing.
(3) Conveyance.--If a parcel of Federal land is
determined to be suitable for affordable housing under
paragraph (2), on request of a State or local
governmental entity, the applicable parcel of Federal
land shall be made available at less than fair market
value to the governmental entity in accordance with
section 7(b) of the Southern Nevada Public Land
Management Act of 1998 (Public Law 105-263; 112 Stat.
2349).
(4) Survey.--The exact acreage and legal description
of a parcel of Federal land to be conveyed under
paragraph (3) shall be determined by a survey
satisfactory to the Secretary.
(5) Compliance with local planning and zoning laws.--
Before carrying out a sale of covered Federal land
under subsection (a), Washoe County shall submit to the
Secretary a certification that any entity selected to
purchase covered Federal land through a competitive
bidding process under subsection (d)(1)(A) has agreed
to comply with--
(A) Washoe County zoning ordinances; and
(B) any master plan for the area approved by
Washoe County or region.
(6) Postponement; exclusion from sale.--At the
request of Washoe County, the Secretary shall postpone
or exclude from sale all or a portion of the Federal
land described in subsection (a).
(c) Affordable Housing.--
(1) Determination regarding suitability for
affordable housing.--Not later than 90 days after the
date of enactment of this title, the Secretary shall
conduct a review of the additional Federal land to
determine the suitability of the additional Federal
land for affordable housing.
(2) Authorization.--Upon the request of a State or
local governmental entity and subject to valid existing
rights, the Secretary shall make the additional Federal
land available at less than fair market value for
affordable housing, in accordance with section 7(b) of
the Southern Nevada Public Land Management Act of 1998
(Public Law 105-263; 112 Stat. 2349).
(d) Appraisals and Method of Sale.--
(1) Method of sale.--The sale or exchange of any
lands under this section shall be--
(A) through a competitive bidding process;
(B) except as provided in subsections (b)(3)
and (c), for not less than fair market value,
in accordance with paragraphs (2) and (3); and
(C) subject to valid existing rights.
(2) Appraisals.--Any sales or exchanges carried out
under this section shall be for not less than fair
market value, based on an appraisal that is conducted
in accordance with--
(A) the Uniform Appraisal Standards for
Federal Land Acquisitions; and
(B) the Uniform Standards of Professional
Appraisal Practice.
(3) Mass appraisals.--Not later than 2 years after
the date of the enactment of this title, and every 5
years thereafter, the Secretary shall--
(A) conduct a mass appraisal of eligible land
to be sold or exchanged under this section;
(B) prepare an evaluation analysis for each
land transaction under this section; and
(C) make available to the public the results
of the mass appraisals conducted under
subparagraph (A).
(e) Costs of Conveyance.--Any entity selected to purchase
covered Federal land or additional Federal land under this
section shall pay all costs associated with the sale.
(f) Disposition of Proceeds.--The proceeds from the sale of
additional Federal land and covered Federal land required under
this section shall be deposited in the general fund of the
Treasury.
(g) Map and Legal Description.--
(1) In general.--Not later than 2 years after the
date of enactment of this title, the Secretary shall
finalize the maps and legal descriptions of the
additional Federal land and covered Federal land to be
sold under this section.
(2) Controlling document.--In the case of a
discrepancy between the maps and legal descriptions
finalized under paragraph (1), the map shall control.
(3) Corrections.--The Secretary and Washoe County, by
mutual agreement, may correct minor errors in the maps
or the legal descriptions finalized under paragraph
(1).
(4) Map on file.--The maps and legal descriptions
finalized under paragraph (1) shall be kept on file and
available for public inspection in each appropriate
office of the Bureau of Land Management.
(h) Rule of Construction.--Nothing in this section shall be
construed as authorizing the conveyance of any lands
administered by the National Park Service.
(i) Definitions.--In this section:
(1) Additional federal land.--The term ``additional
Federal land'' means the Federal land identified as
``USFS Land for Disposal Only for Affordable Housing''
on the map entitled ``Washoe County Land Disposals''
and dated February 7, 2025.
(2) Covered federal land.--The term ``covered Federal
land'' means ``USFS Land for Disposal'' on the map
entitled ``Washoe County Land Disposal'' and dated
February 7, 2025.

SEC. 80317. FEDERAL LAND IN UTAH.

(a) Conveyance of Bureau of Land Management Land to Covered
Entity.--Not later than 180 days after the date of enactment of
this title, the Secretary shall convey to the covered entity
all right, title, and interest of the United States in and to
the covered land.
(b) Requirements.--The conveyance of covered land under this
section shall be--
(1) subject to valid existing rights; and
(2) for not less than fair market value, based on an
appraisal that is conducted in accordance with--
(A) the Uniform Appraisal Standards for
Federal Land Acquisitions; and
(B) the Uniform Standards of Professional
Appraisal Practice.
(c) Costs of Conveyance.--The covered entity shall pay all
costs associated with the conveyances required under subsection
(a).
(d) Proceeds From Conveyance.--The proceeds from the
conveyances required under subsection (a) shall be deposited in
the general fund of the Treasury.
(e) Map and Legal Description.--
(1) In general.--Not later than 120 days after the
date of enactment of this title, the Secretary shall
finalize the maps and legal descriptions of the covered
land to be conveyed under this section.
(2) Controlling document.--In the case of a
discrepancy between the maps and legal descriptions
finalized under paragraph (1), the map shall control.
(3) Corrections.--The Secretary and the covered
entity, by mutual agreement, may correct minor errors
in the maps or the legal descriptions finalized under
paragraph (1).
(4) Map on file.--The maps and legal descriptions
finalized under paragraph (1) shall be kept on file and
available for public inspection in each appropriate
office of the Forest Service.
(f) Rule of Construction.--Nothing in this section shall be
construed as authorizing the conveyance of any lands
administered by the National Park Service.
(g) Definitions.--In this section:
(1) Covered entity.--The term ``covered entity''
means the following:
(A) Beaver County, Utah, with respect to
covered land depicted on the map entitled
``Beaver County Land Conveyance'' and dated
March 8, 2025.
(B) The City of St. George, Utah, with
respect to covered land depicted on the map
entitled ``City of St. George, Utah, Land
Conveyance'' and dated March 28, 2025.
(C) Washington County, Utah, with respect to
covered land depicted on--
(i) the map entitled ``Washington
County Land Conveyance - East Half''
and dated April 11, 2025; and
(ii) the map entitled ``Washington
County Land Conveyance - West Half''
and dated April 9, 2025.
(D) Washington County Water Conservancy
District, with respect to covered land depicted
on the map entitled ``Washington County Water
Conservancy District Land Conveyance'' and
dated March 27, 2025.
(2) Covered land.--The term ``covered land'' means
the following:
(A) On the map entitled ``Beaver County Land
Conveyance'' and dated March 8, 2025, the
following parcels:
(i) The approximately 10.32 acres
depicted as ``Parcel 1''.
(ii) The approximately 10.81 acres
depicted as ``Parcel 2''.
(iii) The approximately 40.83 acres
depicted as ``Parcel 3''.
(B) On the map entitled ``City of St. George,
Utah, Land Conveyance'' and dated March 28,
2025, the following parcels:
(i) The approximately 203.37 acres
depicted as ``Airport''.
(ii) The approximately 16.48 acres
depicted as ``Brigham Road''.
(iii) The approximately 9.57 acres
depicted as ``Curly Hollow''.
(iv) The approximately 11.52 acres
depicted as ``Devario Site''.
(v) The approximately 105.55 acres
depicted as ``Graveyard Dam''.
(vi) The approximately 4.88 acres
depicted as ``Gunlock Arsenic Plant''.
(vii) The approximately 1.17 acres
depicted as ``Gunlock Filter Station''.
(viii) The approximately 0.92 acres
depicted as ``Gunlock#1''.
(ix) The approximately 0.92 acres
depicted as ``Gunlock#2''.
(x) The approximately 0.92 acres
depicted as ``Gunlock#3''.
(xi) The approximately 0.92 acres
depicted as ``Gunlock#4''.
(xii) The approximately 0.92 acres
depicted as ``Gunlock#5''.
(xiii) The approximately 0.92 acres
depicted as ``Gunlock#6''.
(xiv) The approximately 0.92 acres
depicted as ``Gunlock#7''.
(xv) The approximately 1.1 acres
depicted as ``Gunlock#8''.
(xvi) The approximately 0.92 acres
depicted as ``Gunlock#9''.
(xvii) The approximately 0.92 acres
depicted as ``Gunlock#10''.
(xviii) The approximately 4.34 acres
depicted as ``Man O War Connecter''.
(xix) The approximately 36.56 acres
depicted as ``Sun River''.
(xx) The approximately 31.22 acres
depicted as ``Treatment Plant''.
(xxi) The approximately 3.75 acres
depicted as ``Virgin River Site''.
(xxii) The approximately 82.27 acres
depicted as ``Western Corridor (100'
ROW)''.
(C) On the map entitled ``Washington County
Land Conveyance - East Half'' and dated April
11, 2025, the following parcels:
(i) The approximately 330.58 acres
depicted as ``Parcel 1''.
(ii) The approximately 287.02 acres
depicted as ``Parcel 2''.
(iii) The approximately 279.72 acres
depicted as ``Parcel 3''.
(iv) The approximately 10.67 acres
depicted as ``Parcel 4''.
(v) The approximately 213.56 acres
depicted as ``Parcel 6''.
(vi) The approximately 180.51 acres
depicted as ``Parcel 11''.
(vii) The approximately 186.14 acres
depicted as ``Parcel 12''.
(viii) The approximately 153.74 acres
depicted as ``Parcel 13''.
(ix) The approximately 711.56 acres
depicted as ``Parcel 15''.
(x) The approximately 52.28 acres
depicted as ``Parcel 16''.
(xi) The approximately 197.52 acres
depicted as ``Parcel 17''.
(xii) The approximately 311.5 acres
depicted as ``Parcel 19''.
(xiii) The approximately 628.76 acres
depicted as ``Parcel 20''.
(xiv) The approximately 364.31 acres
depicted as ``Parcel 21''.
(xv) The approximately 921.52 acres
depicted as ``Parcel 22''.
(xvi) The approximately 129.77 acres
depicted as ``Parcel 23''.
(D) On the map entitled ``Washington County
Land Conveyance-West Half'' and dated April 9,
2025, the following parcels:
(i) The approximately 338.6 acres
depicted as ``Parcel 5''.
(ii) The approximately 487.13 acres
depicted as ``Parcel 7''.
(iii) The approximately 121.08 acres
depicted as ``Parcel 8''.
(iv) The approximately 64.58 acres
depicted as ``Parcel 9''.
(v) The approximately 62.49 acres
depicted as ``Parcel 10''.
(vi) The approximately 404.63 acres
depicted as ``Parcel 14''.
(vii) The approximately 55.01 acres
depicted as ``Parcel 18''.
(E) On the map entitled ``Washington County
Water Conservancy District Land Conveyance''
and dated March 27, 2025, the following
parcels:
(i) The approximately 35.955036 acres
depicted as ``Parcel 01''.
(ii) The approximately 22.836384
acres depicted as ``Parcel 02''.
(iii) The approximately 29.321031
acres depicted as ``Parcel 04''.
(iv) The approximately 5.307719 acres
depicted as ``Parcel 05''.
(v) The approximately 5.256227 acres
depicted as ``Parcel 06''.
(vi) The approximately 18.162944
acres depicted as ``Parcel 07''.
(vii) The approximately 10.199554
acres depicted as ``Parcel 08''.
(viii) The approximately 32.490829
acres depicted as ``Parcel 09''.
(ix) The approximately 2.609287 acres
depicted as ``Parcel 10''.
(x) The approximately 4.358646 acres
depicted as ``Parcel 11''.
(xi) The approximately 534.961903
acres depicted as ``Parcel 12''.
(xii) The approximately 0.213103
acres depicted as ``Parcel 13''.
(xiii) The approximately 2.977254
acres depicted as ``Parcel 14''.
(xiv) The approximately 13.315086
acres depicted as ``Parcel 15''.
(xv) The approximately 418.173711
acres depicted as ``Parcel 16''.
(xvi) The approximately 3.00085 acres
depicted as ``Parcel 17''.
(xvii) The approximately 8.453333
acres depicted as ``Parcel 18''.
(xviii) The approximately 10.754291
acres depicted as ``Parcel 19''.
(xix) The approximately 3.067501
acres depicted as ``Parcel 20''.
(xx) The approximately 4.995197 acres
depicted as ``Parcel 21''.
(xxi) The approximately 11.596129
acres depicted as ``Parcel 22''.
(xxii) The approximately 3,197.320604
acres depicted as ``Parcel 23''.
(3) Secretary.--The term ``Secretary'' means the
Secretary of the Interior, acting through the Director
of the Bureau of Land Management.

TITLE IX--COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

SEC. 90001. INCREASE IN FERS EMPLOYEE CONTRIBUTION REQUIREMENTS.

Section 8422(a)(3) of title 5, United States Code, is
amended--
(1) in subparagraph (A), by amending the table to
read as follows:

``Employee 7 January 1, 1987, to December 31,
1998.
7.25 January 1, 1999, to December 31,
1999.
7.4 January 1, 2000, to December 31,
2000.
7 January 1, 2001, to December 31,
2025.
8.8 January 1, 2026, to December 31,
2026.
10.6 After December 31, 2026.
Congressional employee 7.5 January 1, 1987, to December 31,
1998.
7.75 January 1, 1999, to December 31,
1999.
7.9 January 1, 2000, to December 31,
2000.
7.5 January 1, 2001, to December 31,
2025.
9.3 January 1, 2026, to December 31,
2026.
11.1 After December 31, 2026.
Member 7.5 January 1, 1987, to December 31,
1998.
7.75 January 1, 1999, to December 31,
1999.
7.9 January 1, 2000, to December 31,
2000.
8 January 1, 2001, to December 31,
2002.
7.5 January 1, 2003, to December 31,
2025.
9.3 January 1, 2026, to December 31,
2026.
11.1 After December 31, 2026.
Law enforcement officer, Firefighter, member of the 7.5 January 1, 1987, to December 31,
Capitol Police, member of the Supreme Court Police, or 1998.
air traffic controller
7.75 January 1, 1999, to December 31,
1999.
7.9 January 1, 2000, to December 31,
2000.
7.5 After December 31, 2000.
Nuclear materials courier 7 January 1, 1987, to October 16,
1998.
7.5 October 17, 1998, to December 31,
1998.
7.75 January 1, 1999, to December 31,
1999.
7.9 January 1, 2000, to December 31,
2000.
7.5 After December 31, 2000.
Customs and border protection officer 7.5 After June 29, 2008.''; and

(2) in subparagraph (B), by amending the table to
read as follows:

``Employee 9.3 January 1, 2013, to December 31, 2025.
9.95 January 1, 2026, to December 31, 2026.
10.6 After December 31, 2026.
Congressional employee 9.3 January 1, 2013, to December 31, 2025.
9.95 January 1, 2026, to December 31, 2026.
10.6 After December 31, 2026.
Member 9.3 January 1, 2013, to December 31, 2025.
9.95 January 1, 2026, to December 31, 2026.
10.6 After December 31, 2026.
Law enforcement officer, Firefighter, member 9.8 After December 31, 2012.
of the Capitol Police, member of the Supreme
Court Police, or air traffic controller
Nuclear materials courier 9.8 After December 31, 2012.
Customs and border protection officer 9.8 After December 31, 2012.''.

SEC. 90002. ELIMINATION OF FERS ANNUITY SUPPLEMENT.

(a) In General.--Section 8421(a) of title 5, United States
Code, is amended--
(1) in paragraph (1), by inserting ``separated from
service under section 8425'' after ``individual''; and
(2) in paragraph (2), by inserting ``separated from
service under section 8425'' after ``an individual''.
(b) Applicability.--The amendments made by this section shall
not apply with respect to any individual entitled to an annuity
supplement under section 8421 of title 5, United States Code,
prior to the date of the enactment of this Act.

SEC. 90003. HIGH-5 AVERAGE PAY FOR CALCULATING CSRS AND FERS PENSION.

(a) CSRS.--Section 8331(4) of title 5, United States Code, is
amended to read as follows:
``(4) `average pay' means--
``(A) except as provided under subparagraph
(B), the largest annual rate resulting from
averaging an employee's or Member's rates of
basic pay in effect over any 3 consecutive
years of creditable service or, in the case of
an annuity under subsection (d) or (e)(1) of
section 8341 of this title based on service of
less than 3 years, over the total service, with
each rate weighted by the time it was in
effect; and
``(B) with respect to an employee or Member
who retires on or after January 1, 2027, other
than an individual entitled to an annuity under
subsection (c) or (e) of section 8336, the
largest annual rate resulting from averaging an
employee's or Member's rates of basic pay in
effect over any 5 consecutive years of
creditable service or, in the case of an
annuity under subsection (d) or (e)(1) of
section 8341 of this title based on service of
less than 5 years, over the total service, with
each rate weighted by the time it was in
effect;''.
(b) FERS.--Section 8401(3) of title 5, United States Code, is
amended to read as follows:
``(3) the term `average pay' means--
``(A) except as provided under subparagraph
(B), the largest annual rate resulting from
averaging an employee's or Member's rates of
basic pay in effect over any 3 consecutive
years of service or, in the case of an annuity
under this chapter based on service of less
than 3 years, over the total service, with each
rate weighted by the period it was in effect;
and
``(B) with respect to an employee or Member
who retires on or after January 1, 2027, other
than an individual entitled to an annuity under
subsection (d) or (e) of section 8412, the
largest annual rate resulting from averaging
the employee's or Member's rates of basic pay
in effect over any 5 consecutive years of
service or, in the case of an annuity under
this chapter based on service of less than 5
years, over the total service, with each rate
weighted by the period it was in effect;''.
(c) Conforming Amendment.--Section 302(a) of the Federal
Employee's Retirement System Act of 1986 (5 U.S.C. 8331 note)
is amended by striking paragraph (6) and inserting the
following:
``(6)(A) For purposes of any computation under
paragraph (4) or (5), the average pay to be used shall
be--
``(i) except as provided under clause (ii),
the largest annual rate resulting from
averaging the individual's rates of basic pay
in effect over any 3 consecutive years of
creditable service or, in the case of an
annuity based on service of less than 3 years,
over the total period of service so creditable,
with each rate weighted by the period it was in
effect; and
``(ii) with respect to an individual who
retires on or after January 1, 2027, other than
an individual entitled to an annuity under
subsection (d) or (e) of section 8412 of title
5, United States Code, the largest annual rate
resulting from averaging the individual's rates
of basic pay in effect over any 5 consecutive
years of creditable service or, in the case of
an annuity based on service of less than 5
years, over the total period of service so
creditable, with each rate weighted by the
period it was in effect.
``(B) For purposes of subparagraph (A), service shall
be considered creditable if it would be considered
creditable for purposes of determining average pay
under chapter 83 or 84 of title 5, United States
Code.''.

SEC. 90004. ELECTION FOR AT-WILL EMPLOYMENT AND LOWER FERS
CONTRIBUTIONS FOR NEW FEDERAL CIVIL SERVICE HIRES.

(a) Election.--
(1) In general.--Subchapter I of chapter 33 of title
5, United States Code, is amended by adding at the end
the following:

``Sec. 3330g. Election for at-will employment and lower FERS
contributions

``(a) Election.--
``(1) In general.--Not later than the last day of the
probationary period (if any) for an individual
initially appointed to a covered position after the
date of the enactment of this section, such individual
may make an irrevocable election to be employed on an
at-will basis, subject to the requirements of this
section.
``(2) Failure to make election.--An individual who
does not make the election under paragraph (1) shall be
subject to the requirements of section 8422(a)(3)(D).
``(b) At-will Employment.--Notwithstanding any other
provision of law, including chapters 43 and 75 of this title,
any individual who makes an affirmative election under
subsection (a)(1) shall--
``(1) be considered an at-will employee; and
``(2) may be subject to an adverse action up to and
including removal, without notice or right to appeal,
by the head of the agency at which the individual is
employed for good cause, bad cause, or no cause at all.
``(c) Application of Other Laws.--Notwithstanding any other
requirement of this section, this section shall not be
construed to reduce, extinguish, or otherwise effect any right
or remedy available to any individual who elects to be an at-
will employee under subsection (a)(1) under any of the
following provisions of law:
``(1) The protections relating to prohibited
personnel practices (as that term is defined in section
2302).
``(2) The Congressional Accountability Act of 1995,
in the case of employees of the legislative branch who
are subject to this section.
``(d) Covered Position.--In this section, the term `covered
position'--
``(1) means--
``(A) any position in the competitive
service;
``(B) a career appointee position in the
Senior Executive Service;
``(C) a position in the excepted service; and
``(2) does not include any position--
``(A) excepted from the competitive service
because of its confidential, policy-
determining, policy-making, or policy-
advocating character; or
``(B) excluded from the coverage of section
2302 (by operation of subsection (a)(2)(B) of
such section) or chapter 75.''.
(2) Clerical amendment.--The table of sections for
such subchapter is amended by adding after the item
relating to section 3330f the following:

``3330g. Election for at-will employment and lower FERS
contributions.''.
(b) Increase in FERS Contributions.--Section 8422(a) of title
5, United States Code, is amended by adding at the end the
following:
``(D) The applicable percentage under this
paragraph for civilian service by any
individual who elects not to be employed on an
at-will basis under section 3330g shall be
equal to the percentage required under
subparagraph (C), increased by 5 percentage
points.''.
(c) Application.--This section and the amendments made by
this section shall apply to individuals initially appointed to
positions in the civil service subject to such section and
amendments appointed on or after the date of the enactment of
this Act.

SEC. 90005. FILING FEE FOR MERIT SYSTEMS PROTECTION BOARD CLAIMS AND
APPEALS.

(a) In General.--Section 7701 of title 5, United States Code,
is amended--
(1) in redesignating subsection (k) as subsection
(l); and
(2) by inserting after subsection (j) the following:
``(k)(1) The Board shall establish and collect a filing fee
to be paid by any employee, former employee, or applicant for
employment filing a claim or appeal with the Board under this
title, or under any other law, rule, or regulation, consistent
with the requirements of this subsection.
``(2) The filing fee under paragraph (1) shall--
``(A) be in an amount equal to the filing fee for a
civil action, suit, or proceeding under section 1914(a)
of title 28;
``(B) be paid on the date the individual submits a
claim or appeal to the Board; and
``(C) if the individual is the prevailing party under
such claim or appeal, be returned to such individual.
``(3) The filing fee under this subsection shall not be
required for any--
``(A) action brought by the Special Counsel under
section 1214, 1215, or 1216; or
``(B) any claim or appeal of a prohibited personnel
practice described in section 2302(b)(8) or
2302(b)(9)(A)(i), (B), (C), or (D) or in section 1221.
``(4) On the date that a claim or appeal with respect to
which the individual is not the prevailing party has not been
appealed and is no longer appealable because the time for
taking an appeal has expired, or which has been appealed under
section 7703 and the appeals process for which is completed,
the fee collected under paragraph (1) shall, except as provided
in paragraph (2)(C), be deposited into the miscellaneous
receipts of the Treasury.''.
(b) Application.--The fee required under the amendment made
by subsection (a) shall apply to any claim or appeal filed with
the Merit Systems Protection Board after the date that is 3
months after the date of the enactment of this section.

SEC. 90006. FEHB PROTECTION.

(a) FEHB Improvements.--
(1) Definitions.--In this subsection:
(A) Director.--The term ``Director'' means
the Director of the Office of Personnel
Management.
(B) Employing office.--The term ``employing
office'' has the meaning given the term in
section 890.101(a) of title 5, Code of Federal
Regulations, or any successor regulation.
(C) Health benefits plan; member of family.--
The terms ``health benefits plan'' and ``member
of family'' have the meanings given those terms
in section 8901 of title 5, United States Code.
(D) Inspector general.--The term ``Inspector
General'' means the Inspector General of the
Office of Personnel Management.
(E) Open season.--The term ``open season''
means an open season described in section
890.301(f) of title 5, Code of Federal
Regulations, or any successor regulation.
(F) Program.--The term ``Program'' means the
health insurance programs carried out under
chapter 89 of title 5, United States Code,
including the program carried out under section
8903c of that title.
(G) Qualifying life event.--The term
``qualifying life event'' has the meaning given
the term in section 892.101 of title 5, Code of
Federal Regulations, or any successor
regulation.
(2) Verification requirements.--
(A) In general.--Not later than 1 year after
the date of the enactment of this Act, the
Director shall issue regulations and implement
a process to verify--
(i) the veracity of any qualifying
life event through which an enrollee in
the Program seeks to add a member of
family with respect to the enrollee to
a health benefits plan under the
Program; and
(ii) that, when an enrollee in the
Program seeks to add a member of family
with respect to the enrollee to the
health benefits plan of the enrollee
under the Program, including during any
open season, the individual so added is
a qualifying member of family with
respect to the enrollee.
(B) Record retention.--The process
implemented under subparagraph (A) shall
require the records used for a verification
described in such subparagraph under such
process with respect to an individual enrolled
in a health benefits plan under the Program to
be provided to the Office of Personnel
Management and retained by the Office of
Personnel Management until the expiration of a
six-year period beginning after the date of
such verification in which such individual is
not enrolled in a health benefits plan under
the Program.
(3) Fraud risk assessment.--In any fraud risk
assessment conducted with respect to the Program on or
after the date of the enactment of this Act, the
Director shall include an assessment of individuals who
are enrolled in, or covered under, a health benefits
plan under the Program even though those individuals
are not eligible to be so enrolled or covered.
(4) Family member eligibility verification audit.--
(A) In general.--During the 5-year period
beginning 1 year after the date of the
enactment of this Act, the Director, in
coordination with the head of each employing
office, shall conduct a comprehensive audit
regarding members of family who are covered
under an enrollment in a health benefits plan
under the Program.
(B) Contents.--In conducting an audit
required by subparagraph (A), the Director, in
coordination with the head of each employing
office, shall review marriage certificates,
birth certificates, and other appropriate
documents that are necessary to determine
eligibility to enroll in a health benefits plan
under the Program.
(C) Record retention.--All records pertaining
to the eligibility of an individual to be
enrolled in, or covered under, a health
benefits plan under the Program obtained by the
Director or the head of the relevant employing
office in the audit required by subparagraph
(A) shall be retained by the Office of
Personnel Management until the expiration of a
six-year period beginning after the date of
such audit in which such individual is not
enrolled in, or covered under, a health
benefits plan under the Program.
(D) Referral to inspector general.--The
Director shall refer any instances of
individuals enrolled in, or covered under, a
health benefits plan under the Program who are
not eligible to be so enrolled or covered that
are identified in the audit required by
subparagraph (A) to the Inspector General.
(5) Disenrollment or removal.--
(A) In general.--Not later than 6 months
after the date of the enactment of this Act,
the Director shall develop a process by which
any individual enrolled in, or covered under, a
health benefits plan under the Program who is
not eligible to be so enrolled or covered shall
be disenrolled or removed from enrollment in a
health benefits plan under the Program.
(B) Notify inspector general.--The Director
shall notify the Inspector General of each
individual disenrolled or removed from
enrollment in a health benefits plan under the
Program under the process developed under
subparagraph (A).
(b) Earned Benefits and Healthcare Administrative Services
Associated Oversight and Audit Funding.--
(1) In general.--Section 8909(a)(2) of title 5,
United States Code, is amended by striking
``Congress.'' and inserting ``Congress, except that the
amounts authorized under subsection (b)(2) for the
Office shall not be subject to the limitations that may
be specified annually by Congress.''.
(2) Oversight.--Section 8909(b) of title 5, United
States Code, is amended--
(A) by redesignating paragraph (2) as
paragraph (5); and
(B) by inserting after paragraph (1) the
following:
``(2) In addition to the funds provided under
paragraph (1), amounts of all contributions shall be
available for the Office to develop, maintain, and
conduct ongoing eligibility verification and oversight
over the enrollment and eligibility systems with
respect to benefits under this chapter, including the
Postal Service Health Benefits Program under section
8903c. Amounts for the Office under this paragraph
shall not be available in excess of the following
amounts in the following fiscal years:
``(A) In fiscal year 2026, $36,792,000.
``(B) In fiscal year 2027, $44,733,161.
``(C) In fiscal year 2028, $50,930,778.
``(D) In fiscal year 2029, $54,198,238.
``(E) In fiscal year 2030, $54,855,425.
``(F) In fiscal year 2031, $56,062,244.
``(G) In fiscal year 2032, $57,295,613.
``(H) In fiscal year 2033, $58,556,117.
``(I) In fiscal year 2034, $59,844,351.
``(J) In fiscal year 2035 and each fiscal
year thereafter, the amount equal to the dollar
limit for the immediately preceding fiscal
year, increased by 2.2. percent.
``(3) In fiscal year 2026, $80,000,000, to be derived
from all contributions and to remain available until
expended, shall be available for the Office to conduct
the audit required under section 90006(a)(4) of the Act
titled `An Act to provide for reconciliation pursuant
to title II of H. Con. Res. 14'. Of such amount, the
Office may transfer funds as the Director of the Office
determines necessary to an employing office (as that
term is defined in section 890.101(a) of title 5, Code
of Federal Regulations, or any successor regulation) in
order to conduct the required audit.
``(4) Amounts of all contributions shall be available
for the Office of Personnel Management Office of the
Inspector General to conduct oversight associated with
activities under this chapter (including the Postal
Service Health Benefits Program under section 8903c),
including activities associated with enrollment and
eligibility in these programs and any associated audit
activities as required under section 90006 of the Act
titled `An Act to provide for reconciliation pursuant
to title II of H. Con. Res. 14'. Amounts for the Office
of the Inspector General under this paragraph shall not
be available in excess of the following amounts in the
following fiscal years:
``(A) In fiscal year 2026, $5,090,278.
``(B) In fiscal year 2027 and each fiscal
year thereafter, the amount equal to the dollar
limit for the immediately preceding fiscal
year, increased by 2.2 percent.''.

TITLE X--COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

SEC. 100001. COAST GUARD ASSETS NECESSARY TO SECURE THE MARITIME BORDER
AND INTERDICT MIGRANTS AND DRUGS.

(a) In General.--For the purpose of the acquisition,
sustainment, improvement, and operation of United States Coast
Guard assets, in addition to amounts otherwise made available,
there is appropriated to the Commandant of the Coast Guard for
fiscal year 2025, out of any money in the Treasury not
otherwise appropriated, to remain available until September 30,
2029--
(1) $571,500,000 for fixed wing aircraft and spare
parts, training simulators, support equipment, and
program management for such aircraft;
(2) $1,283,000,000 for rotary wing aircraft and spare
parts, training simulators, support equipment, and
program management for such aircraft;
(3) $140,000,000 for long-range unmanned aircraft
systems and base stations, support equipment, and
program management for such systems;
(4) $4,300,000,000 for Offshore Patrol Cutters and
spare parts and program management for such Cutters;
(5) $1,000,000,000 for Fast Response Cutters and
spare parts and program management for such Cutters;
(6) $4,300,000,000 for Polar Security Cutters and
spare parts and program management for such Cutters;
(7) $4,978,000,000 for Arctic Security Cutters and
domestic icebreakers and spare parts and program
management for such Cutters and icebreakers;
(8) $3,154,500,000 for design, planning, engineering,
construction of, and program management for shoreside
infrastructure, of which--
(A) $400,000,000 is provided for hangers and
maintenance and crew facilities for the fixed
wing aircraft for which funds are appropriated
under paragraph (1) and rotary wing aircraft
for which funds are appropriated under
paragraph (2);
(B) $2,329,500,000 is provided for homeports
for the Cutters for which funds are
appropriated under paragraphs (4), (5), (6),
and (7), National Security Cutters, and other
Fast Response Cutters; and
(C) $425,000,000 is provided for design,
planning, engineering, construction of, and
program management for enlisted boot camp
barracks, multi-use training centers, and other
related facilities;
(9) $1,300,000,000 for aviation, cutter, shoreside
facility depot maintenance, and C5I service
maintenance, of which $500,000,000 is provided to
acquire, procure, or construct a floating dry dock
under subsection (b) and conduct channel dredging
necessary to allow Cutters for which funds are
appropriated under paragraph (4) and National Security
Cutters to be maintained and repaired in such dry dock;
and
(10) $180,000,000 for equipment and services for
maritime domain awareness, of which $75,000,000 is
provided to contract the services of, acquire, or
procure autonomous maritime systems.
(b) Requirements.--
(1) In general.--Except as provided in paragraph (2),
the Commandant may not acquire, procure, or construct a
floating dry dock for the Coast Guard Yard with amounts
appropriated under subsection (a).
(2) Permissible acquisition, procurement, or
construction methods.--Notwithstanding paragraph (1) of
this subsection and section 1105(a) of title 14, United
States Code, the Commandant may, through September 30,
2030--
(A) provide for an entity other than the
Coast Guard to contract for the acquisition,
procurement, or construction of a floating dry
dock by contract, purchase, or other agreement;
(B) construct a floating dry dock at the
Coast Guard Yard; or
(C) acquire or procure a commercially
available floating dry dock.
(3) Floating dry dock defined.--In this section, the
term ``floating dry dock'' means equipment that is--
(A) documented under chapter 121 of title 46,
United States Code; and
(B) capable of meeting the lifting and
maintenance requirements of an Offshore Patrol
Cutter or a National Security Cutter.
(c) Limitation.--Not more than 15 percent of the amounts
provided in paragraph (9) of subsection (a) shall be available
for design, planning, and engineering of the facilities
described in such paragraph.
(d) Application.--In carrying out acquisitions or
procurements for which funds are appropriated under subsection
(a), sections 1131, 1132, and 1133 of title 14, United States
Code, shall not apply.
(e) Entity Other Than the Coast Guard.--Notwithstanding
section 1105(a) of title 14, United States Code, in carrying
out acquisition, procurement, or construction of Arctic
Security Cutters or domestic icebreakers for which funds are
appropriated under subsection (a)(7), the Commandant may
provide for an entity other than the Coast Guard to contract
for such acquisition, procurement, or construction.
(f) Compliance With Applicable Reporting Requirements.--None
of the amounts provided in--
(1) this section may be obligated or expended during
any fiscal year in which the Commandant is not
compliant with sections 5102 and 5103 (excluding
section 5103(e)) of title 14, United States Code; and
(2) paragraphs (1) and (2) of subsection (a) may be
obligated or expended until the Commandant provides the
report required under section 11217 of the James M.
Inhofe National Defense Authorization Act for Fiscal
Year 2023 (Public Law 117-263) to the Committee on
Transportation and Infrastructure of the House of
Representatives and the Committee on Commerce, Science,
and Transportation of the Senate.
(g) Notification Requirement.--The Commandant shall notify
the Committee on Transportation and Infrastructure of the House
of Representatives and the Committee on Commerce, Science, and
Transportation of the Senate not less than 1 week prior to
taking any procurement actions impacting estimated costs or
timelines for acquisitions or procurements funded with amounts
appropriated under this section.
(h) Expenditure Plan.--Not later than 90 days after the date
of enactment of this Act, the Commandant shall submit to the
Committee on Transportation and Infrastructure of the House of
Representatives and the Committee on Commerce, Science, and
Transportation of the Senate a detailed expenditure plan,
including projected project timelines for each acquisition and
procurement funded under this section and a list of project
locations to be funded under paragraphs (8) and (9) of
subsection (a).
(i) Exception.--If the President authorizes an exception
under section 1151(b) of title 14, United States Code, for any
Coast Guard vessel, or the hull or superstructure of such
vessel for which funds are appropriated under paragraphs (4)
through (7) of subsection (a), no such funds shall be obligated
until the President submits to the Committee on Transportation
and Infrastructure of the House of Representatives and the
Committee on Commerce, Science, and Transportation of the
Senate a written explanation of the circumstances requiring
such an exception in the national security interest,
including--
(1) a confirmation that there are insufficient
qualified United States shipyards to meet the national
security interest without such exception; and
(2) actions taken by the President to enable
qualified United States shipyards to meet national
security requirements prior to the issuance of such an
exception.

SEC. 100002. CHANGES TO MANDATORY BENEFITS PROGRAMS TO ALLOW SELECTED
RESERVE ORDERS FOR PREPLANNED MISSIONS TO SECURE
MARITIME BORDERS AND INTERDICT PERSONS AND DRUGS.

(a) In General.--Subchapter I of chapter 37 of title 14,
United States Code, is amended by adding at the end the
following:

``Sec. 3715. Selected reserve: order to active duty for preplanned
missions in support of the active component

``(a) Authority.--When the Commandant determines that it is
necessary to augment the active forces for a preplanned mission
in support of Coast Guard requirements, the Commandant may,
subject to subsection (b), order any member of the Selected
Reserve, without the consent of the member, to active duty for
not more than 365 consecutive days.
``(b) Limitations.--Members of the Selected Reserve may be
ordered to active duty under this section only if--
``(1) the manpower and associated costs of such
active duty are specifically included and identified in
the materials submitted to Congress by the Secretary of
the department in which the Coast Guard is operating,
in support of the budget for the fiscal year or years
in which such members are anticipated to be ordered to
active duty; and
``(2) the budget information on such costs includes a
description of the mission for which such members are
anticipated to be ordered to active duty and the
anticipated length of time of the order of such members
to active duty on an involuntary basis.
``(c) Exclusion From Strength Limitations.--Members of the
Selected Reserve ordered to active duty under this section
shall not be counted in computing authorized strength in
members on active duty or the total number of members in grade
under this title or any other law.
``(d) Termination of Duty.--Whenever any member of the
Selected Reserve is ordered to active duty under subsection
(a), such service may be terminated--
``(1) by order of the Commandant; or
``(2) by law.
``(e) Considerations for Involuntary Order to Active Duty.--
In determining which members of the Selected Reserve will be
ordered to duty without their consent under subsection (a),
appropriate consideration shall be given to--
``(1) the length and nature of previous service, to
assure such sharing of exposure to hazards as national
security and military requirements will reasonably
allow;
``(2) the frequency of assignments during service
career;
``(3) family responsibilities; and
``(4) employment necessary to maintain the national
health, safety, or interest.
``(f) Policies and Procedures.--The Commandant may prescribe
policies and procedures to carry out this section, including on
determinations with respect to orders to active duty under
subsection (e).''.
(b) Clerical Amendment.--The analysis for chapter 37 of title
14, United States Code, is amended by inserting after the item
relating to section 3714 the following:

``3715. Selected reserve: order to active duty for preplanned missions
in support of the active component''.
(c) Definitions.--Section 3301(1)(B) of title 38, United
States Code is amended by striking ``section 712 of title 14.''
and inserting ``section 3713 or 3715 of title 14.''.
(d) Reemployment Rights of Persons Who Serve in the Uniformed
Services.--Section 4312(c)(4)(A) of title 38, United States
Code is amended by striking ``712 of title 14;'' and inserting
``section 3713 or 3715 of title 14;''.
(e) Medical and Dental Care for Members and Certain Former
Members.--Section 1074(d)(2) of title 10, United States Code is
amended by inserting ``, or section 3715 of title 14,'' after
``section 101(a)(13)(B) of this title''.
(f) Health Benefits.--Section 1145(a)(2)(B) of title 10,
United States Code is amended by inserting ``, or section 3715
of title 14,'' after ``section 101(a)(13)(B) of this title''.
(g) Age and Service Requirements.--Section 12731(f)(2)(B)(i)
of title 10, United States Code is amended by inserting ``, or
section 3715 of title 14,'' after ``section 101(a)(13)(B) of
this title''.

SEC. 100003. VESSEL TONNAGE DUTIES.

Section 60301 of title 46, United States Code, is amended--
(1) in subsection (a) by striking ``, for fiscal
years 2006 through 2010, and 2 cents per ton, not to
exceed a total of 10 cents per ton per year, for each
fiscal year thereafter,''; and
(2) in subsection (b) by striking ``, for fiscal
years 2006 through 2010, and 6 cents per ton, not to
exceed a total of 30 cents per ton per year, for each
fiscal year thereafter,''.

SEC. 100004. REGISTRATION FEE ON MOTOR VEHICLES.

(a) In General.--Chapter 1 of title 23, United States Code,
is amended by adding at the end the following:

``Sec. 180. Registration fee on motor vehicles.

``(a) In General.--The Administrator of the Federal Highway
Administration shall impose for each year the following
registration fee amounts on the owner of a vehicle registered
for operation by a State motor vehicle department:
``(1) $250 for a covered electric vehicle.
``(2) $100 for a covered hybrid vehicle.
``(b) Withholding of Funds for Noncompliance.--The
Administrator shall withhold, from amounts required to be
apportioned to any State under section 104(b), an amount equal
to 125 percent to the amount required to be remitted under
subsection (c)(2). The Administrator shall withhold the amount
on the first day of each fiscal year beginning after September
30, 2026, in which the State does not meet the requirements of
subsection (c).
``(c) Collection and Remittance of Fee.--
``(1) Collection of fee.--A State motor vehicle
department shall--
``(A) incorporate the collection of the fees
established under subsection (a) into the
vehicle registration and renewal processes
administered by such department, so long as
such fees are imposed for each year in which
the fees are required; or
``(B) obtain approval from the Administrator
to establish an alternate means of compliance
for the collection of such fees that is
acceptable to the Administrator.
``(2) Remittance of fee.--Not later than 30 days
after the last day of each month, a State motor vehicle
department shall remit to the Administrator the balance
of the total fee amounts collected under this section
in the preceding month less the portion reserved for
administrative expenses under subsection (e).
``(d) Fee Assessment.--The amounts specified in subsection
(a) shall be increased on an annual basis to account for the
rate of inflation each fiscal year in accordance with the
Consumer Price Index for All Urban Consumers of the Bureau of
Labor Statistics.
``(e) Administrative Expenses.--In any fiscal year in which a
State is in compliance with this section, such State may retain
an amount not to exceed 1 percent of the total fees collected
under this section for administrative expenses.
``(f) Applicability of Fees.--The fees imposed under
paragraphs (1) and (2) of subsection (a) shall terminate on
October 1, 2035.
``(g) Definitions.--In this section:
``(1) Covered electric vehicle.--The term `covered
electric vehicle' means a covered motor vehicle with an
electric motor as the sole means of propulsion of such
vehicle.
``(2) Covered motor vehicle.--The term `covered motor
vehicle' has the meaning given the term `motor vehicle'
under section 154(a) but excludes a motor vehicle that
is a covered farm vehicle or commercial motor vehicle
(as such terms are defined in section 390.5 of title
49, Code of Federal Regulations).
``(3) Covered hybrid vehicle.--The term `covered
hybrid vehicle' means a covered motor vehicle propelled
by a combination of an electric motor and an internal
combustion engine or other power source and components
thereof.''.
(b) Implementation of Certain Processes.--
(1) Implementation.--The Administrator of the Federal
Highway Administration shall provide grants to State
motor vehicle departments to implement a process to
carry out section 180 of title 23, United States Code.
(2) Funding.--Out of any money in the Treasury not
otherwise appropriated, $104,000,000 is to remain
available until September 30, 2029, beginning in the
first fiscal year following the date of enactment of
this Act, for grants under paragraph (1).
(3) Eligible amounts.--Each State motor vehicle
department may receive not more than $2,000,000 under
this subsection.
(c) Regulations.--The Administrator shall issue such
regulations and guidance as are necessary to--
(1) carry out section 180 of title 23, United States
Code (as added by this Act); and
(2) establish a process for the timely and accurate
remittance of fees collected under such section through
an electronic method.
(d) Report.--Not later than 2 years after the date of
enactment of this Act, the Administrator shall submit to the
Committee on Transportation and Infrastructure of the House of
Representatives and the Committee on Environment and Public
Works of the Senate a report on the status of the
implementation of section 180 of title 23, United States Code
(as added by this Act).
(e) Clerical Amendment.--The analysis for chapter 1 of title
23, United States Code, is amended by adding at the end the
following:

``180. Registration fee on motor vehicles.''.

SEC. 100005. DEPOSIT OF REGISTRATION FEE ON MOTOR VEHICLES.

Any amounts accrued pursuant to section 180 of title 23,
United States Code (as added by this Act), shall be deposited
into the Highway Trust Fund.

SEC. 100006. MOTOR CARRIER DATA.

(a) Public Confirmation of Authorized Motor Carriers.--There
is appropriated $5,000,000 to the Administrator of the Federal
Motor Carrier Safety Administration to establish a public
website to present data on motor carriers, as such term is
defined in section 13102 of title 49, United States Code, in a
manner that indicates whether each motor carrier meets or does
not meet all Administration operating requirements, including
by displaying 1 of the following statements for each motor
carrier:
(1) ``This motor carrier meets Federal Motor Carrier
Safety Administration operating requirements and is
authorized to operate on the nation's roadways.''.
(2) ``This motor carrier does not meet Federal Motor
Carrier Safety Administration operating requirements
and is not authorized to operate on the nation's
roadways.''.
(b) Usage Fee.--The Administrator shall assess an annual fee
of $100 on each person seeking access to the website
established under subsection (a). In each fiscal year through
fiscal year 2033, monies collected under this subsection shall
be--
(1) credited to the account in the Treasury from
which the Administrator incurs expenses for
establishing, maintaining, and updating the website
required to be established under subsection (a); and
(2) available for establishing, maintaining, and
updating such website without further appropriation.
(c) Determination.--A broker, freight forwarder, or household
goods freight forwarder, as such terms are defined in section
13102 of title 49, United States Code, that uses the website
established under subsection (a) to ensure that a motor carrier
engaged by such broker, freight forwarder, or household goods
freight forwarder meets Federal Motor Carrier Safety
Administration operating requirements shall be considered to
have taken reasonable and prudent determinations in engaging
such motor carrier.

SEC. 100007. IRA RESCISSIONS.

(a) Repeal of Funding for Alternative Fuel and Low-emission
Aviation Technology Program.--The unobligated balances of
amounts made available to carry out section 40007 of Public Law
117-169 (49 U.S.C. 44504 note) (as in effect on the day before
the date of enactment of this Act) are permanently rescinded.
(b) Repeal of Funding for Neighborhood Access and Equity
Grant Program.--The unobligated balances of amounts made
available to carry out section 177 of title 23, United States
Code, (as in effect on the day before the date of enactment of
this Act) are permanently rescinded.
(c) Repeal of Funding for Federal Building Assistance.--The
unobligated balances of amounts made available to carry out
section 60502 of Public Law 117-169 (136 Stat. 2083) (as in
effect on the day before the date of enactment of this Act) are
permanently rescinded.
(d) Repeal of Funding for Use of Low-carbon Materials for
Federal Building Assistance.-- The unobligated balances of
amounts made available to carry out section 60503 of Public Law
117-169 (136 Stat. 2083) (as in effect on the day before the
date of enactment of this Act) are permanently rescinded.
(e) Repeal of Funding for General Services Administration
Emerging Technologies.--The unobligated balances of amounts
made available to carry out section 60504 of Public Law 117-169
(136 Stat. 2083) (as in effect on the day before the date of
enactment of this Act) are permanently rescinded.
(f) Repeal of Environmental Review Implementation Funds.--The
unobligated balances of amounts made available to carry out
section 178 of title 23, United States Code, (as in effect on
the day before the date of enactment of this Act) are
permanently rescinded.
(g) Repeal of Funding for Low-carbon Transportation Materials
Grants.-- The unobligated balances of amounts made available to
carry out section 179 of title 23, United States Code, (as in
effect on the day before the date of enactment of this Act) are
permanently rescinded.

SEC. 100008. AIR TRAFFIC CONTROL STAFFING AND MODERNIZATION.

(a) In General.--For the purpose of the acquisition,
construction, sustainment, improvement, and operation of
facilities and equipment necessary to improve or maintain
aviation safety, and for personnel expenses related to such
facilities and equipment, in addition to amounts otherwise made
available, there is appropriated to the Administrator of the
Federal Aviation Administration for fiscal year 2025, out of
any money in the Treasury not otherwise appropriated, to remain
available until September 30, 2029--
(1) $2,160,000,000 for air traffic control tower and
terminal radar approach control facility replacement,
of which not less than $240,000,000 shall be available
for Contract Tower Program air traffic control tower
replacement and airport sponsor-owned air traffic
control tower replacement;
(2) $3,000,000,000 for radar systems replacement;
(3) $4,750,000,000 for telecommunications
infrastructure and systems replacement;
(4) $500,000,000 for runway safety projects, airport
surface surveillance projects, and to carry out section
347 of the FAA Reauthorization Act of 2024;
(5) $550,000,000 for unstaffed infrastructure
sustainment and replacement;
(6) $300,000,000 to carry out section 619 of the FAA
Reauthorization Act of 2024;
(7) $260,000,000 to carry out section 44745 of title
49, United States Code; and
(8) $1,000,000,000 for air traffic controller
recruitment, retention, training, and advanced training
technologies.
(b) Quarterly Reporting.--Not later than 180 days after the
date of enactment of this Act, and every 90 days thereafter,
the Administrator shall submit to Congress a report that
describes any expenditures under this section.

SEC. 100009. JOHN F. KENNEDY CENTER FOR THE PERFORMING ARTS
APPROPRIATIONS.

In addition to amounts otherwise made available, there is
appropriated for fiscal year 2025, out of any money in the
Treasury not otherwise appropriated--
(1) $241,750,000 for necessary expenses for capital
repair and restoration of the building and site of the
John F. Kennedy Center for the Performing Arts, to
remain available until September 30, 2029;
(2) $7,707,000 for necessary expenses for the
operation, maintenance, and security of the John F.
Kennedy Center for the Performing Arts, to remain
available until September 30, 2027; and
(3) $7,200,000 for administrative expenses of the
John F. Kennedy Center for the Performing Arts to carry
out the purposes of this section, to remain available
until September 30, 2029.