H.R. 5376 - Build Back Better Act - Rules Committee Print 117-18

RULES COMMITTEE PRINT 117-18 TEXT OF H.R. 5376, BUILD BACK BETTER ACT

[Showing the text of H.R. 5376, as reported by the Committee on the Budget, with modifications.]

NOVEMBER 3, 2021

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"SEC. 1354. ALLOCATIONS.

"(a) APPROPRIATION. — In addition to amounts otherwise available, there is appropriated, out of any money in the Treasury not otherwise appropriated, $10,000,000,000 for 2023 and each subsequent year through 2025 to provide allocations for States under subsection (b) and payments under section 1353(b).

"(b) ALLOCATIONS. —

"(1) PAYMENT. —

"(A) IN GENERAL. — From amounts appropriated under subsection (a) for a year, the Secretary shall, with respect to a State not described in section 1353(b) for such year and not later than the date specified under subparagraph (B) for such year, allocate for such State the amount determined for such State and year under paragraph (2).

"(B) SPECIFIED DATE. — For purposes of subparagraph (A), the date specified in this subparagraph is —

"(i) for 2023, the date that is 90 days after the date of the enactment of this part; and

"(ii) for 2024 or 2025, January 1 of the previous year.

"(C) NOTIFICATIONS OF ALLOCATION AMOUNTS. — For 2024 and 2025, the Secretary shall notify each State of the amount determined for such State under paragraph (2) for such year by not later than January 1 of the previous year.

"(2) ALLOCATION AMOUNT DETERMINATIONS. —

"(A) IN GENERAL. — For purposes of paragraph (1), the amount determined under this paragraph for a year for a State described in paragraph (1)(A) for such year is the amount equal to —

"(i) the amount that the Secretary estimates would be expended under this part for such year on attachment range claims of individuals residing in such State if such State used such funds only for the purpose described in paragraph (1) of section 1352(a) at the dollar amounts and percentage specified under subparagraph (B) for such year; minus

"(ii) the amount, if any, by which the Secretary determines —

"(I) the estimated amount of premium tax credits under section 36B of the Internal Revenue Code of 1986 that would be attributable to individuals residing in such State for such year without application of this part; exceeds

"(II) the estimated amount of premium tax credits under section 36B of the Internal Revenue Code of 1986 that would be attributable to individuals residing in such State for such year if section 1353(b) applied for such year and applied with respect to such State for such year.

For purposes of the previous sentence and section 1353(b)(3), the term 'attachment range claims' means, with respect to an individual, the claims for such individual that exceed a dollar amount specified by the Secretary for a year, but do not exceed a ceiling dollar amount specified by the Secretary for such year, under subparagraph (B).

"(B) SPECIFICATIONS. — For purposes of subparagraph (A) and section 1353(b)(3), the Secretary shall determine the dollar amounts and the percentage to be specified under this subparagraph for a year in a manner to ensure that the total amount of expenditures under this part for such year is estimated to equal the total amount appropriated for such year under subsection (a) if such expenditures were used solely for the purpose described in paragraph (1) of section 1352(a) for attachment range claims at the dollar amounts and percentage so specified for such year.

"(3) AVAILABILITY. — Funds allocated to a State under this subsection for a year shall remain available through the end of the subsequent year.".

(b) BASIC HEALTH PROGRAM FUNDING ADJUSTMENTS. — Section 1331 of the Patient Protection and Affordable Care Act (42 U.S.C. 18051) is amended —

(1) in subsection (a), by adding at the end the following new paragraph:

"(3) PROVISION OF INFORMATION ON QUALIFIED HEALTH PLAN PREMIUMS. —

"(A) IN GENERAL. — For plan years beginning on or after January 1, 2023, the program described in paragraph (1) shall provide that a State may not establish a basic health program unless such State furnishes to the Secretary, with respect to each qualified health plan offered in such State during a year that receives any reinsurance payment from funds made available under part 6 for such year, the adjusted premium amount (as defined in subparagraph (B)) for each such plan and year.

"(B) ADJUSTED PREMIUM AMOUNT DEFINED. — For purposes of subparagraph (A), the term 'adjusted premium amount' means, with respect to a qualified health plan and a year, the monthly premium for such plan and year that would have applied had such plan not received any payments described in subparagraph

(A) for such year."; and

(2) in subsection (d)(3)(A)(ii), by adding at the end the following new sentence: "In making such determination, the Secretary shall calculate the value of such premium tax credits that would have been provided to such individuals enrolled through a basic health program established by a State during a year using the adjusted premium amounts (as defined in subsection (a)(3)(B)) for qualified health plans offered in such State during such year.".

(c) IMPLEMENTATION AUTHORITY. — The Secretary of Health and Human Services may implement the provisions of, and the amendments made by, this section by subregulatory guidance or otherwise.

SEC. 30603. FUNDING FOR THE PROVISION OF HEALTH INSURANCE CONSUMER INFORMATION.

Section 2793(e) of the Public Health Service Act (42 U.S.C. 300gg-93(e)) is amended by adding at the end the following new paragraph:

"(3) FUNDING FOR 2022 THROUGH 2025. — In addition to amounts otherwise available, there is appropriated, out of any money in the Treasury not otherwise appropriated, $100,000,000 for 2022, to remain available until expended, of which $25,000,000 shall be used for each of 2022 through 2025 to carry out this section.".

SEC. 30604. REQUIREMENTS WITH RESPECT TO COST-SHARING FOR INSULIN PRODUCTS.

(a) IN GENERAL. — Part D of title XXVII of the Public Health Service Act (42 U.S.C. 300gg-111 et seq.) is amended by adding at the end the following:

"SEC. 2799A-11. REQUIREMENTS WITH RESPECT TO COSTSHARING FOR CERTAIN INSULIN PRODUCTS.

"(a) IN GENERAL. — For plan years beginning on or after January 1, 2023, a group health plan or health insurance issuer offering group or individual health insurance coverage shall provide coverage of selected insulin products, and with respect to such products, shall not —

"(1) apply any deductible; or

"(2) impose any cost-sharing in excess of the lesser of, per 30-day supply —

"(A) $35; or

"(B) the amount equal to 25 percent of the negotiated price of the selected insulin product net of all price concessions received by or on behalf of the plan or coverage, including price concessions received by or on behalf of third-party entities providing services to the plan or coverage, such as pharmacy benefit management services.

"(b) DEFINITIONS. — In this section:

"(1) SELECTED INSULIN PRODUCTS. — The term 'selected insulin products' means at least one of each dosage form (such as vial, pump, or inhaler dosage forms) of each different type (such as rapid-acting, short-acting, intermediate-acting, long-acting, ultra long-acting, and premixed) of insulin (as defined below), when available, as selected by the group health plan or health insurance issuer.

"(2) INSULIN DEFINED. — The term 'insulin' means insulin that is licensed under subsection (a) or (k) of section 351 and continues to be marketed under such section, including any insulin product that has been deemed to be licensed under section 351(a) pursuant to section 7002(e)(4) of the Biologics Price Competition and Innovation Act of 2009 and continues to be marketed pursuant to such licensure.

"(c) OUT-OF-NETWORK PROVIDERS. — Nothing in this section requires a plan or issuer that has a network of providers to provide benefits for selected insulin products described in this section that are delivered by an out-of-network provider, or precludes a plan or issuer that has a network of providers from imposing higher cost-sharing than the levels specified in subsection (a) for selected insulin products described in this section that are delivered by an out-of-network provider.

"(d) RULE OF CONSTRUCTION. — Subsection (a) shall not be construed to require coverage of, or prevent a group health plan or health insurance coverage from imposing cost-sharing other than the levels specified in subsection (a) on, insulin products that are not selected insulin products, to the extent that such coverage is not otherwise required and such cost-sharing is otherwise permitted under Federal and applicable State law.

"(e) APPLICATION OF COST-SHARING TOWARDS DEDUCTIBLES AND OUT-OF-POCKET MAXIMUMS. — Any cost-sharing payments made pursuant to subsection (a)(2) shall be counted toward any deductible or out-of-pocket maximum that applies under the plan or coverage.".

(b) NO EFFECT ON OTHER COST-SHARING. — Section 1302(d)(2) of the Patient Protection and Affordable Care Act (42 U.S.C. 18022(d)(2)) is amended by adding at the end the following new subparagraph:

"(D) SPECIAL RULE RELATING TO INSULIN COVERAGE. — The exemption of coverage of selected insulin products (as defined in section 2799A-11(b) of the Public Health Service Act) from the application of any deductible pursuant to section 2799A-11(a)(1) of such Act, section 726(a)(1) of the Employee Retirement Income Security Act of 1974, or section 9826(a)(1) of the Internal Revenue Code of 1986 shall not be considered when determining the actuarial value of a qualified health plan under this subsection.".

(c) COVERAGE OF CERTAIN INSULIN PRODUCTS UNDER CATASTROPHIC PLANS. — Section 1302(e) of the Patient Protection and Affordable Care Act (42 U.S.C. 18022(e)) is amended by adding at the end the following:

"(4) COVERAGE OF CERTAIN INSULIN PRODUCTS. —

"(A) IN GENERAL. — Notwithstanding paragraph (1)(B)(i), a health plan described in paragraph (1) shall provide coverage of selected insulin products, in accordance with section 2799A-11 of the Public Health Service Act, for a plan year before an enrolled individual has incurred cost-sharing expenses in an amount equal to the annual limitation in effect under subsection (c)(1) for the plan year.

"(B) TERMINOLOGY. — For purposes of subparagraph (A) —

"(i) the term 'selected insulin products' has the meaning given such term in section 2799A-11(b) of the Public Health Service Act; and

"(ii) the requirements of section 2799A-11 of such Act shall be applied by deeming each reference in such section to 'individual health insurance coverage' to be a reference to a plan described in paragraph (1).".

SEC. 30605. COST-SHARING REDUCTIONS FOR INDIVIDUALS RECEIVING UNEMPLOYMENT COMPENSATION.

Section 1402(f) of the Patient Protection and Affordable Care Act (42 U.S.C. 18071(f)) is amended —

(1) in the header, by striking "2021" and inserting "CERTAIN YEARS";

(2) in the matter preceding paragraph (1), by striking "2021" and inserting "any of years 2021 through 2022"; and

(3) in paragraph (2), by striking "133 percent" and inserting "150 percent".

SEC. 30606. OVERSIGHT OF PHARMACY BENEFIT MANAGER SERVICES.

(a) IN GENERAL. — Title XXVII of the Public Health Service Act (42 U.S.C. 300gg et seq.), as amended by section 30604, is further amended —

(1) in part D (42 U.S.C. 300gg-111 et seq.), by adding at the end the following new section:

"SEC. 2799A-12. OVERSIGHT OF PHARMACY BENEFIT MANAGER SERVICES.

"(a) IN GENERAL. — For plan years beginning on or after January 1, 2023, a group health plan or health insurance issuer offering group health insurance coverage or an entity or subsidiary providing pharmacy benefits management services on behalf of such a plan or issuer shall not enter into a contract with a drug manufacturer, distributor, wholesaler, subcontractor, rebate aggregator, or any associated third party that limits the disclosure of information to plan sponsors in such a manner that prevents the plan or issuer, or an entity or subsidiary providing pharmacy benefits management services on behalf of a plan or issuer, from making the reports described in subsection (b).

"(b) REPORTS. —

"(1) IN GENERAL. — For plan years beginning on or after January 1, 2023, not less frequently than once every 6 months, a health insurance issuer offering group health insurance coverage or an entity providing pharmacy benefits management services on behalf of a group health plan or an issuer providing group health insurance coverage shall submit to the plan sponsor (as defined in section 3(16)(B) of the Employee Retirement Income Security Act of 1974) of such group health plan or health insurance coverage a report in accordance with this subsection and make such report available to the plan sponsor in a machine-readable format. Each such report shall include, with respect to the applicable group health plan or health insurance coverage —

"(A) as applicable, information collected from drug manufacturers by such issuer or entity on the total amount of copayment assistance dollars paid, or copayment cards applied, that were funded by the drug manufacturer with respect to the participants and beneficiaries in such plan or coverage;

"(B) a list of each drug covered by such plan, issuer, or entity providing pharmacy benefit management services that was dispensed during the reporting period, including, with respect to each such drug during the reporting period —

"(i) the brand name, chemical entity, and National Drug Code;

"(ii) the number of participants and beneficiaries for whom the drug was filled during the plan year, the total number of prescription fills for the drug (including original prescriptions and refills), and the total number of dosage units of the drug dispensed across the plan year, including whether the dispensing channel was by retail, mail order, or specialty pharmacy;

"(iii) the wholesale acquisition cost, listed as cost per days supply and cost per pill, or in the case of a drug in another form, per dose;

"(iv) the total out-of-pocket spending by participants and beneficiaries on such drug, including participant and beneficiary spending through copayments, coinsurance, and deductibles; and

"(v) for any drug for which gross spending of the group health plan or health insurance coverage exceeded $10,000 during the reporting period —

"(I) a list of all other drugs in the same therapeutic category or class, including brand name drugs and biological products and generic drugs or biosimilar biological products that are in the same therapeutic category or class as such drug; and

"(II) the rationale for preferred formulary placement of such drug in that therapeutic category or class;

"(C) a list of each therapeutic category or class of drugs that were dispensed under the health plan or health insurance coverage during the reporting period, and, with respect to each such therapeutic category or class of drugs, during the reporting period —

"(i) total gross spending by the plan, before manufacturer rebates, fees, or other manufacturer remuneration;

"(ii) the number of participants and beneficiaries who filled a prescription for a drug in that category or class;

"(iii) if applicable to that category or class, a description of the formulary tiers and utilization mechanisms (such as prior authorization or step therapy) employed for drugs in that category or class;

"(iv) the total out-of-pocket spending by participants and beneficiaries, including participant and beneficiary spending through copayments, coinsurance, and deductibles; and

"(v) for each therapeutic category or class under which 3 or more drugs are included on the formulary of such plan or coverage —

"(I) the amount received, or expected to be received, from drug manufacturers in rebates, fees, alternative discounts, or other remuneration —

"(aa) to be paid by drug manufacturers for claims incurred during the reporting period; or

"(bb) that is related to utilization of drugs, in such therapeutic category or class;

"(II) the total net spending, after deducting rebates, price concessions, alternative discounts or other remuneration from drug manufacturers, by the health plan or health insurance coverage on that category or class of drugs; and

"(III) the net price per course of treatment or single fill, such as a 30day supply or 90-day supply, incurred by the health plan or health insurance coverage and its participants and beneficiaries, after manufacturer rebates, fees, and other remuneration for drugs dispensed within such therapeutic category or class during the reporting period;

"(D) total gross spending on prescription drugs by the plan or coverage during the reporting period, before rebates and other manufacturer fees or remuneration;

"(E) total amount received, or expected to be received, by the health plan or health insurance coverage in drug manufacturer rebates, fees, alternative discounts, and all other remuneration received from the manufacturer or any third party, other than the plan sponsor, related to utilization of drug or drug spending under that health plan or health insurance coverage during the reporting period;

"(F) the total net spending on prescription drugs by the health plan or health insurance coverage during the reporting period; and

"(G) amounts paid directly or indirectly in rebates, fees, or any other type of remuneration to brokers, consultants, advisors, or any other individual or firm who referred the group health plan's or health insurance issuer's business to the pharmacy benefit manager.

"(2) PRIVACY REQUIREMENTS. — Health insurance issuers offering group health insurance coverage and entities providing pharmacy benefits management services on behalf of a group health plan shall provide information under paragraph (1) in a manner consistent with the privacy, security, and breach notification regulations promulgated under section 264(c) of the Health Insurance Portability and Accountability Act of 1996, and shall restrict the use and disclosure of such information according to such privacy regulations.

"(3) DISCLOSURE AND REDISCLOSURE. —

"(A) LIMITATION TO BUSINESS ASSOCIATES. — A group health plan receiving a report under paragraph (1) may disclose such information only to business associates of such plan as defined in section 160.103 of title 45, Code of Federal Regulations (or successor regulations).

"(B) CLARIFICATION REGARDING PUBLIC DISCLOSURE OF INFORMATION. — Nothing in this section prevents a health insurance issuer offering group health insurance coverage or an entity providing pharmacy benefits management services on behalf of a group health plan from placing reasonable restrictions on the public disclosure of the information contained in a report described in paragraph (1), except that such issuer or entity may not restrict disclosure of such report to the Department of Health and Human Services, the Department of Labor, or the Department of the Treasury.

"(C) LIMITED FORM OF REPORT. — The Secretary shall define through rulemaking a limited form of the report under paragraph (1) required of plan sponsors who are drug manufacturers, drug wholesalers, or other direct participants in the drug supply chain, in order to prevent anti-competitive behavior.

"(4) REPORT TO GAO. — A health insurance issuer offering group health insurance coverage or an entity providing pharmacy benefits management services on behalf of a group health plan shall submit to the Comptroller General of the United States each of the first 4 reports submitted to a plan sponsor under paragraph (1) with respect to such coverage or plan, and other such reports as requested, in accordance with the privacy requirements under paragraph (2) and the disclosure and redisclosure standards under paragraph (3), and such other information that the Comptroller General determines necessary to carry out the study under section 30606(b) of An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14.

"(c) ENFORCEMENT. —

"(1) IN GENERAL. — The Secretary, in consultation with the Secretary of Labor and the Secretary of the Treasury, shall enforce this section.

"(2) FAILURE TO PROVIDE TIMELY INFORMATION. — A health insurance issuer or an entity providing pharmacy benefit management services that violates subsection (a) or fails to provide information required under subsection (b), or a drug manufacturer that fails to provide information under subsection (b)(1)(A) in a timely manner, shall be subject to a civil monetary penalty in the amount of $10,000 for each day during which such violation continues or such information is not disclosed or reported.

"(3) FALSE INFORMATION. — A health insurance issuer, entity providing pharmacy benefit management services, or drug manufacturer that knowingly provides false information under this section shall be subject to a civil money penalty in an amount not to exceed $100,000 for each item of false information. Such civil money penalty shall be in addition to other penalties as may be prescribed by law.

"(4) PROCEDURE. — The provisions of section 1128A of the Social Security Act, other than subsection (a) and (b) and the first sentence of subsection (c)(1) of such section shall apply to civil monetary penalties under this subsection in the same manner as such provisions apply to a penalty or proceeding under section 1128A of the Social Security Act.

"(5) WAIVERS. — The Secretary may waive penalties under paragraph (2), or extend the period of time for compliance with a requirement of this section, for an entity in violation of this section that has made a good-faith effort to comply with this section.

"(d) RULE OF CONSTRUCTION. — Nothing in this section shall be construed to permit a health insurance issuer, group health plan, or other entity to restrict disclosure to, or otherwise limit the access of, the Department of Health and Human Services to a report described in subsection (b)(1) or information related to compliance with subsection (a) by such issuer, plan, or entity.

"(e) DEFINITION. — In this section, the term 'wholesale acquisition cost' has the meaning given such term in section 1847A(c)(6)(B) of the Social Security Act."; and

(2) in section 2723 (42 U.S.C. 300gg-22) —

(A) in subsection (a) —

(i) in paragraph (1), by inserting "(other than subsections (a) and (b) of section 2799A-12)" after "part D"; and

(ii) in paragraph (2), by inserting "(other than subsections (a) and (b) of section 2799A-12)" after "part D";

(B) in subsection (b) —

(i) in paragraph (1), by inserting "(other than subsections (a) and (b) of section 2799A-12)" after "part D";

(ii) in paragraph (2)(A), by inserting "(other than subsections (a) and (b) of section 2799A-12)" after "part D"; and

(iii) in paragraph (2)(C)(ii), by inserting "(other than subsections (a) and (b) of section 2799A-12)" after "part D".

(b) GAO STUDY. —

(1) IN GENERAL. — Not later than 3 years after the date of enactment of this Act, the Comptroller General of the United States shall report to Congress on —

(A) pharmacy networks of group health plans, health insurance issuers, and entities providing pharmacy benefit management services under such group health plan or group or individual health insurance coverage, including networks that have pharmacies that are under common ownership (in whole or part) with group health plans, health insurance issuers, or entities providing pharmacy benefit management services or pharmacy benefit administrative services under group health plan or group or individual health insurance coverage;

(B) as it relates to pharmacy networks that include pharmacies under common ownership described in subparagraph (A) —

(i) whether such networks are designed to encourage enrollees of a plan or coverage to use such pharmacies over other network pharmacies for specific services or drugs, and if so, the reasons the networks give for encouraging use of such pharmacies; and

(ii) whether such pharmacies are used by enrollees disproportionately more in the aggregate or for specific services or drugs compared to other network pharmacies;

(C) whether group health plans and health insurance issuers offering group or individual health insurance coverage have options to elect different network pricing arrangements in the marketplace with entities that provide pharmacy benefit management services, the prevalence of electing such different network pricing arrangements;

(D) pharmacy network design parameters that encourage enrollees in the plan or coverage to fill prescriptions at mail order, specialty, or retail pharmacies that are wholly or partially-owned by that issuer or entity; and

(E) the degree to which mail order, specialty, or retail pharmacies that dispense prescription drugs to an enrollee in a group health plan or health insurance coverage that are under common ownership (in whole or part) with group health plans, health insurance issuers, or entities providing pharmacy benefit management services or pharmacy benefit administrative services under group health plan or group or individual health insurance coverage receive reimbursement that is greater than the median price charged to the group health plan or health insurance issuer when the same drug is dispensed to enrollees in the plan or coverage by other pharmacies included in the pharmacy network of that plan, issuer, or entity that are not wholly or partially owned by the health insurance issuer or entity providing pharmacy benefit management services.

(2) REQUIREMENT. — The Comptroller General of the United States shall ensure that the report under paragraph (1) does not contain information that would allow a reader to identify a specific plan or entity providing pharmacy benefits management services or otherwise contain commercial or financial information that is privileged or confidential.

(3) DEFINITIONS. — In this subsection, the terms "group health plan", "health insurance coverage", and "health insurance issuer" have the meanings given such terms in section 2791 of the Public Health Service Act (42 U.S.C. 300gg-91).

SEC. 30607. FUNDING TO SUPPORT STATE APPLICATIONS FOR SECTION 1332 WAIVERS AND ADMINISTRATION.

Section 1332 of the Patient Protection and Affordable Care Act (42 U.S.C. 18052) is amended by adding at the end the following:

"(f) ADMINISTRATION AND PLANNING GRANTS. —

"(1) APPROPRIATION. — In addition to any other amounts made available, there is appropriated to the Secretary of Health and Human Services for fiscal year 2022, out of any amounts in the Treasury not otherwise appropriated, $50,000,000, to remain available until expended, for purposes of implementing the grant program under paragraph (2) and awarding grants under such paragraph.

"(2) GRANTS. — From the amount appropriated under paragraph (1), the Secretary of Health and Human Services shall award grants to States for purposes of developing a new waiver application, preparing an application for a waiver extension or amendment, or implementing a State plan under this section. The amount of a grant awarded to a State under this subsection shall remain available until expended.

"(3) LIMITATION. — Each grant awarded to a State under this subsection shall be in an amount not to exceed $5,000,000.".

SEC. 30608. ADJUSTMENTS TO UNCOMPENSATED CARE POOLS AND DISPROPORTIONATE SHARE HOSPITAL PAYMENTS.

(a) ADJUSTMENTS TO UNCOMPENSATED CARE POOLS. — Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by adding at the end the following new subsection:

"(cc) EXCLUDING EXPENDITURES FOR EXPANSION POPULATION FROM ASSISTANCE UNDER WAIVERS RELATING TO UNCOMPENSATED CARE. — With respect to a State with a State plan (or waiver of such plan) that does not provide, with respect to a fiscal year (beginning with fiscal year 2023), to all individuals described in section 1902(a)(10)(A)(i)(VIII) benchmark coverage described in section 1937(b)(1) or benchmark equivalent coverage described in section 1937(b)(2), in the case of any experimental, pilot, or demonstration project undertaken under section 1115, with respect to such State and fiscal year, that provides for Federal financial participation with respect to expenditures for payments to providers for otherwise uncompensated care that is furnished to low-income individuals, uninsured individuals, or underinsured individuals, notwithstanding any waiver authority available under such section, such project shall exclude from Federal financial participation any expenditures for care that is furnished with respect to such fiscal year to individuals described in section 1902(a)(10)(A)(i)(VIII).".

(b) ADJUSTMENTS TO DISPROPORTIONATE SHARE HOSPITAL PAYMENTS. —

(1) IN GENERAL. — Section 1923(f) of the Social Security Act (42 U.S.C.1396r-4(f)) is amended —

(A) in paragraph (3)(A), by striking "paragraphs (6), (7), and (8)" and inserting "paragraphs (6), (7), (8), and (10)";

(B) in paragraph (6)(A)(vi), by inserting "(except paragraph (10))" before ", any other provision of law";

(C) in paragraph (7)(A)(i), by inserting "without regard to paragraph (10)," before "the Secretary"; and

(D) by adding at the end the following new paragraph:

"(10) STATE DSH ALLOTMENTS FOR NON-EXPANSION STATES BEGINNING WITH FISCAL YEAR 2023. —

"(A) IN GENERAL. — For fiscal year 2023 and each subsequent fiscal year —

"(i) in the case of a State with a State plan (or waiver of such plan) that, with respect to such fiscal year, does not provide to all individuals described in section 1902(a)(10)(A)(i)(VIII) benchmark coverage described in section 1937(b)(1) or benchmark equivalent coverage described in section 1937(b)(2), the Secretary shall reduce the DSH allotment to the State for such fiscal year in the amount equal to 12.5 percent of the DSH allotment that would (after the application of paragraph (6), and without the application of paragraphs (7), (8), or this paragraph) be determined under this subsection for the State for such fiscal year;

"(ii) in the case of a State with a State plan (or waiver of such plan) that, with respect to such fiscal year, initially provides to all individuals described in section 1902(a)(10)(A)(i)(VIII) benchmark coverage described in 1937(b)(1) or benchmark equivalent coverage described in section 1937(b)(2), but during such fiscal year stops providing to any such individual such benchmark or benchmark equivalent coverage, the Secretary shall reduce the DSH allotment to the State for such fiscal year in the amount equal to the product of —

"(I) 12.5 percent of the DSH allotment that would (after the application of paragraph (6), and without the application of paragraphs (7), (8), or this paragraph) be determined under this subsection for the State for such fiscal year; and

"(II) expressed as a percentage, the number of days of such fiscal year during which such State plan (or waiver of such plan), with respect to such fiscal year, did not provide to such individuals such benchmark or benchmark equivalent coverage; or

"(iii) in the case of a State with a State plan (or waiver of such plan) that, with respect to such fiscal year, either —

"(I) initially does not provide to all individuals described in section 1902(a)(10)(A)(i)(VIII) benchmark coverage described in 1937(b)(1) or benchmark equivalent coverage described in section 1937(b)(2), but during the fiscal year establishes a State plan (or waiver of such plan) that provides, for the remainder of the fiscal year, all such individuals such benchmark or benchmark equivalent coverage; or

"(II) did not provide to all such individuals such benchmark or benchmark equivalent coverage during the fiscal year preceding such fiscal year described in the matter preceding subclause (I), but on the first day of such fiscal year establishes a State plan (or waiver of such plan) that provides, for the entirety of such fiscal year, all such individuals such benchmark or benchmark equivalent coverage; the DSH allotment for such State for such fiscal year is equal to the DSH allotment under this subsection (without application of this paragraph) for the State for the entirety of such fiscal year.

"(B) CALCULATION OF DSH ALLOTMENTS AFTER EXPANSION PERIOD. — The DSH allotment for a State for fiscal years after which a State provides under a State plan (or waiver of such plan) to all individuals described in section 1902(a)(10)(A)(i)(VIII) benchmark coverage described in section 1937(b)(1) or benchmark equivalent coverage described in section 1937(b)(2) and, for which the State continues to provide under the State plan (or waiver of such plan) such benchmark or benchmark equivalent coverage to such individuals, without the providing of such benchmark or benchmark equivalent coverage being stopped during a fiscal year (as described in the matter preceding subclause (I) of subparagraph (A)(ii)), shall be calculated under paragraph (3) without regard to this paragraph.".

(2) TECHNICAL AMENDMENT. — Section 1923(f)(7)(A)(i)(II) of the Social Security Act (42 U.S.C.1396r-4(f)(7)(A)(i)(II)) is amended by adding at period at the end.

SEC. 30609. FURTHER INCREASE IN FMAP FOR MEDICAL ASSISTANCE FOR NEWLY ELIGIBLE MANDATORY INDIVIDUALS.

Section 1905(y)(1) of the Social Security Act (42 U.S.C. 1396d(y)(1)) is amended —

(1) in subparagraph (D), by striking at the end "and";

(2) in subparagraph (E), by striking "2020 and each year thereafter." and inserting "2020, 2021, and 2022; and"; and

(3) by adding at the end the following new subparagraphs:

"(F) 93 percent for calendar quarters in 2023, 2024, and 2025; and

"(G) 90 percent for calendar quarters in 2026 and each year thereafter.".

Subtitle F — Medicaid

PART 1 — INVESTMENTS IN HOME AND COMMUNITY-BASED SERVICES AND LONG-TERM CARE QUALITY AND WORKFORCE

SEC. 30711. HCBS IMPROVEMENT PLANNING GRANTS.

(a) FUNDING. —

(1) IN GENERAL. — In addition to amounts otherwise available, there is appropriated to the Secretary for fiscal year 2022, out of any money in the Treasury not otherwise appropriated, $130,000,000, to remain available until expended, for carrying out this section.

(2) TECHNICAL ASSISTANCE AND GUIDANCE. — In addition to amounts otherwise available, there is appropriated to the Secretary for fiscal year 2022, out of any money in the Treasury not otherwise appropriated, $5,000,000, to remain available until expended, for purposes of issuing guidance and providing technical assistance to States intending to apply for, or which are awarded, a planning grant under this section, and for other administrative expenses related to awarding planning grants under this section.

(b) AWARD AND USE OF GRANTS. —

(1) DEADLINE FOR AWARD OF GRANTS. — From the amount appropriated under subsection (a)(1), the Secretary, not later than 12 months after the date of enactment of this Act, shall solicit State requests for HCBS improvement planning grants and award such grants to all States that meet such requirements as determined by the Secretary.

(2) USE OF FUNDS. — Subject to paragraph (3), a State awarded a planning grant under this section shall use the grant to carry out planning activities for purposes of developing and submitting to the Secretary an HCBS improvement plan for the State that meets the requirements of subsections (c) and (d). A State may use planning grant funds to support activities related to the implementation of the HCBS improvement plan for the State, collect and report information described in subsection (c), identify areas for improvement to the service delivery systems for home and community-based services, carry out activities related to evaluating payment rates for home and community-based services and identifying improvements to update the rate setting process, and make related infrastructure investments (such as case management or other information technology systems).

(3) LIMITATION ON USE OF FUNDS. — None of the funds awarded to a State under this section may be used by a State as the source of the non-Federal share of expenditures under the State plan (or waiver of such plan).

(c) HCBS IMPROVEMENT PLAN REQUIREMENTS. — In order to meet the requirements of this subsection, an HCBS improvement plan developed using funds awarded to a State under this section shall include, with respect to the State and subject to subsection (d), the following:

(1) EXISTING MEDICAID HCBS LANDSCAPE. —

(A) ELIGIBILITY AND BENEFITS. — A description of the existing standards, pathways, and methodologies for eligibility for home and community-based services pursuant to the State plan (or waiver of such plan), including limits on assets and income, the home and community-based services available under the State Medicaid program and the types of settings in which they may be provided, and utilization management standards for such services.

(B) ACCESS. —

(i) BARRIERS. — A description of the barriers to accessing home and communitybased services in the State identified by Medicaid eligible individuals, the families of such individuals, and direct care workers and home care agencies, or other similar organizations.

(ii) AVAILABILITY; UNMET NEED. — A summary, in accordance with guidance issued by the Secretary and as able to be practicably determined by the State, of the extent to which home and community-based services are available to all individuals in the State who would be eligible for such services under the State Medicaid program (including individuals who are on a waiting list for such services).

(C) UTILIZATION. — An assessment of the utilization of home and community-based services in the State (including the number of individuals receiving such services) during such period specified by the Secretary.

(D) SERVICE DELIVERY STRUCTURES AND SUPPORTS. — A description of the service delivery structures for providing home and community-based services in the State.

(E) WORKFORCE. — A description of the direct care workforce, including estimates of the number of fulland part-time direct care workers, the average and range of direct care worker wages, the benefits provided to direct care workers, and the turnover and vacancy rates of direct care worker positions.

(F) PAYMENT RATES. —

(i) IN GENERAL. — A description of the payment rates for home and communitybased services, including, to the extent applicable, how payments for such services are factored into the development of managed care capitation rates, when the State last updated payment rates for home and community-based services, and an estimate of the portion of the payment rate that goes toward direct care worker compensation.

(ii) ASSESSMENT. — An assessment of the relationship between payment rates for such services and workforce shortages, average beneficiary wait times for such services, and provider-to-beneficiary ratios in the geographic region.

(G) QUALITY. — A description of how the quality of home and community-based services is measured and monitored.

(H) LONG-TERM SERVICES AND SUPPORTS PROVIDED IN INSTITUTIONAL SETTINGS. — A description of the number of individuals enrolled in the State Medicaid program in a year who receive items and services furnished by an institution for greater than 30 days in an institutional setting.

(I) HCBS SHARE OF OVERALL MEDICAID LTSS SPENDING. — For the most recent State fiscal year for which complete data is available, the percentage of expenditures made by the State under the State Medicaid program for long-term services and supports that are for home and community-based services.

(J) DEMOGRAPHIC DATA. — To the extent available and as applicable with respect to the information required under subparagraphs (B), (C), and (H), demographic data for such information, disaggregated by age groups, primary disability, income brackets, gender, race, ethnicity, geography, primary language, and type of service setting.

(2) GOALS FOR HCBS IMPROVEMENTS. — A description of how the State will do the following:

(A) Conduct the activities required under subsection (jj) of section 1905 of the Social Security Act (as added under section 30712).

(B) Reduce barriers to and disparities in access or utilization of home and community-based services in the State.

(C) Monitor and report on access to home and community-based services under the State Medicaid program, disparities in access to such services, and the utilization of such services.

(D) Monitor and report the amount of State Medicaid expenditures for home and community-based services under the State Medicaid program as a proportion of the total amount of State expenditures under the State Medicaid program for long-term services and supports.

(E) Monitor and report on wages, benefits, and vacancy and turnover rates for direct care workers.

(F) Assess and monitor the sufficiency of payment rates under the State Medicaid program, in a manner specified by the Secretary, for the specific types of home and community-based services available under such program for purposes of supporting direct care worker recruitment and retention and ensuring the availability of home and community-based services.

(G) Coordinate implementation of the HCBS improvement plan among the State Medicaid agency and State health and human services agencies serving individuals with disabilities and the elderly.

(d) DEVELOPMENT AND APPROVAL REQUIREMENTS. —

(1) DEVELOPMENT REQUIREMENTS. — In order to meet the requirements of this subsection, a State awarded a planning grant under this section shall develop an HCBS improvement plan for the State through a public notice and comment process that includes consultation with Medicaid eligible individuals who are recipients of home and communitybased services, family caregivers of such recipients, providers, health plans, direct care workers, chosen representatives of direct care workers, and aging, disability, and workforce advocates.

(2) AUTHORITY TO ADJUST CERTAIN PLAN CONTENT REQUIREMENTS. — The Secretary may modify the requirements for any of the information specified in subsection (c)(1) if a State requests a modification and demonstrates to the satisfaction of the Secretary that it is impracticable for the State to collect and submit the information.

(3) SUBMISSION AND APPROVAL. — Not later than 24 months after the date on which a State is awarded a planning grant under this section, the State shall submit an HCBS improvement plan for approval by the Secretary, along with assurances by the State that the State will implement the plan in accordance with the requirements of the HCBS Improvement Program established under subsection (jj) of section 1905 of the Social Security Act (42 U.S.C. 1396d) (as added by section 30712). The Secretary shall approve and make publicly available the HCBS improvement plan for a State after the plan and such assurances are submitted to the Secretary for approval and the Secretary determines the plan meets the requirements of subsection (c). A State may amend its HCBS improvement plan, subject to the approval of the Secretary that the plan as so amended meets the requirements of subsection (c). The Secretary may withhold or recoup funds provided under this section to a State, if the State fails to comply with the requirements of this section.

(e) DEFINITIONS. — In the part:

(1) DIRECT CARE WORKER. — The term "direct care worker" means, with respect to a State, any of the following individuals who are paid to provide directly to Medicaid eligible individuals home and community-based services available under the State Medicaid program:

(A) A registered nurse, licensed practical nurse, nurse practitioner, or clinical nurse specialist, or a licensed nursing assistant who provides such services under the supervision of a registered nurse, licensed practical nurse, nurse practitioner, or clinical nurse specialist.

(B) A direct support professional.

(C) A personal care attendant.

(D) A home health aide.

(E) Any other paid health care professional or worker determined to be appropriate by the State and approved by the Secretary.

(2) HCBS PROGRAM IMPROVEMENT STATE. — The term "HCBS program improvement State" means a State that is awarded a planning grant under subsection (b) and has an HCBS improvement plan approved by the Secretary under subsection (d)(3).

(3) HEALTH PLAN. — The term "health plan" means any of the following entities that provide or arrange for home and community-based services for Medicaid eligible individuals who are enrolled with the entities under a contract with a State:

(A) A medicaid managed care organization, as defined in section 1903(m)(1)(A) of the Social Security Act (42 U.S.C. 1396b(m)(1)(A)).

(B) A prepaid inpatient health plan or prepaid ambulatory health plan, as defined in section 438.2 of title 42, Code of Federal Regulations (or any successor regulation).

(4) HOME AND COMMUNITY-BASED SERVICES. — The term "home and community-based services" means any of the following (whether provided on a fee-for-service, risk, or other basis):

(A) Home health care services authorized under paragraph (7) of section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)).

(B) Private duty nursing services authorized under paragraph (8) of such section, when such services are provided in a Medicaid eligible individual's home.

(C) Personal care services authorized under paragraph (24) of such section.

(D) PACE services authorized under paragraph (26) of such section.

(E) Home and community-based services authorized under subsections (b), (c), (i), (j), and (k) of section 1915 of such Act (42 U.S.C. 1396n), authorized under a waiver under section 1115 of such Act (42 U.S.C. 1315), or provided through coverage authorized under section 1937 of such Act (42 U.S.C. 1396u-7).

(F) Case management services authorized under section 1905(a)(19) of the Social Security Act (42 U.S.C. 1396d(a)(19)) and section 1915(g) of such Act (42 U.S.C. 1396n(g)).

(G) Rehabilitative services, including those related to behavioral health, described in section 1905(a)(13) of such Act (42 U.S.C. 1396d(a)(13)).

(H) Such other services specified by the Secretary.

(5) INSTITUTIONAL SETTING. — The term "institutional setting" means —

(A) a skilled nursing facility (as defined in section 1819(a) of the Social Security Act (42 U.S.C. 1395i-3(a)));

(B) a nursing facility (as defined in section 1919(a) of such Act (42 U.S.C. 1396r(a)));

(C) a long-term care hospital (as described in section 1886(d)(1)(B)(iv) of such Act (42 U.S.C. 1395ww(d)(1)(B)(iv)));

(D) a facility described in section 1905(d) of such Act (42 U.S.C. 1396d(d)));

(E) an institution which is a psychiatric hospital (as defined in section 1861(f) of such Act (42 U.S.C. 1395x(f))) or that provides inpatient psychiatric services in a residential setting specified by the Secretary; and

(F) an institution described in section 1905(i) of such Act (42 U.S.C. 1396d(i)).

(6) MEDICAID ELIGIBLE INDIVIDUAL. — The term "Medicaid eligible individual" means an individual who is eligible for and receiving medical assistance under a State Medicaid plan or a waiver of such plan. Such term includes an individual who is on a waiting list and who would become eligible for medical assistance and enrolled under a State Medicaid plan, or waiver of such plan, upon receipt of home and community-based services.

(7) STATE MEDICAID PROGRAM. — The term "State Medicaid program" means, with respect to a State, the State program under title XIX of the Social Security Act (42 U.S.C. 1396 through 1396w-6) (including any waiver or demonstration under such title or under section 1115 of such Act (42 U.S.C. 1315) relating to such title).

(8) SECRETARY. — The term "Secretary" means the Secretary of Health and Human Services.

(9) STATE. — The term "State" means each of the 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa.

SEC. 30712. HCBS IMPROVEMENT PROGRAM.

(a) INCREASED FMAP FOR HCBS PROGRAM IMPROVEMENT STATES. — Section 1905 of the Social Security Act (42 U.S.C. 1396d) is amended —

(1) in subsection (b), by striking "and (ii)" and inserting "(ii), and (jj)"; and

(2) by adding at the end the following new subsection:

"(jj) ADDITIONAL SUPPORT FOR HCBS PROGRAM IMPROVEMENT STATES. —

"(1) IN GENERAL. —

"(A) ADDITIONAL SUPPORT. — Subject to paragraph (5), in the case of a State that is an HCBS program improvement State, for each fiscal quarter that begins on or after the first date on which the State is an HCBS program improvement State —

"(i) and for which the State meets the requirements described in paragraphs (2) and (4), notwithstanding subsection (b) or (ff), subject to subparagraph (B), with respect to amounts expended during the quarter by such State for medical assistance for home and community-based services, the Federal medical assistance percentage for such State and quarter (as determined for the State under subsection (b) and, if applicable, increased under subsection (y), (z), (aa), or (ii), section 6008(a) of the Families First Coronavirus Response Act), or section 1915(k)(2) shall be increased by 6 percentage points; and

"(ii) with respect to the State meeting the requirements described in paragraphs (2) and (4) and with respect to amounts expended during the quarter and before October 1, 2031, for administrative costs for expanding and enhancing home and community-based services, including for enhancing Medicaid data and technology infrastructure, modifying rate setting processes, adopting or improving training programs for direct care workers and family caregivers, home and community-based services ombudsman office activities (as reimbursable under section 1903(a)(7)), developing processes to identify direct care workers and assign such workers unique identifiers (as so reimbursable), and adopting, carrying out, or enhancing programs that register direct care workers or connect beneficiaries to direct care workers, the per centum specified in sections 1903(a)(7) and 1903(a)(3) shall be increased to 80 percent.

In no case may the application of clause (i) result in the Federal medical assistance percentage determined for a State being more than 95 percent with respect to such expenditures. In no case shall the application of clause (ii) result in a reduction to the per centum otherwise specified without application of such clause. Any increase pursuant to clause (ii) shall be available to a State before the State meets the requirements of paragraphs (2) and (4).

"(B) ADDITIONAL HCBS IMPROVEMENT EFFORTS. — Subject to paragraph (5), in addition to the increase to the Federal medical assistance percentage under subparagraph (A)(i) for amounts expended during a quarter for medical assistance for home and community-based services by an HCBS program improvement State that meets the requirements of paragraphs (2) and (4) for the quarter, the Federal medical assistance percentage for amounts expended by the State during the quarter for medical assistance for home and community-based services shall be further increased by 2 percentage points (but not to exceed 95 percent) during the first 6 fiscal quarters throughout which the State has implemented and has in effect a program that meets the requirements of paragraph (3).

"(C) NONAPPLICATION OF TERRITORIAL FUNDING CAPS. — Any payment made to Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, or American Samoa for expenditures that are subject to an increase in the Federal medical assistance percentage under subparagraph (A)(i) or (B), or an increase in an applicable Federal matching percentage under subparagraph (A)(ii), shall not be taken into account for purposes of applying payment limits under subsections (f) and (g) of section 1108.

"(D) NONAPPLICATION TO CHIP EFMAP. — Any increase described in subparagraph (A) (or payment made for expenditures on medical assistance that are subject to such increase) shall not be taken into account in calculating the enhanced FMAP of a State under section 2105.

"(2) REQUIREMENTS. — Subject to the last sentence of paragraph (1)(A), as conditions for receipt of the increase under paragraph (1) to the Federal medical assistance percentage determined for a State, with respect to a fiscal year quarter, the State shall meet each of the following requirements:

"(A) NONSUPPLANTATION. — The State uses the Federal funds attributable to the increase in the Federal medical assistance percentage for amounts expended during a quarter for medical assistance for home and community-based services under paragraph (1)(A) and paragraph (1)(B) (if applicable) to supplement, and not supplant, the level of State funds expended for home and community-based services for eligible individuals through programs in effect as of the date the State is awarded a planning grant under section 30711 of the Act titled 'An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14'. In applying this subparagraph, the Secretary shall provide that a State shall have a 3-year period, as specified by the Secretary, to spend any accumulated unspent State funds attributable to the increase described in clause (i) in the Federal medical assistance percentage.

"(B) MAINTENANCE OF EFFORT. —

"(i) IN GENERAL. — The State does not —

"(I) reduce the amount, duration, or scope of home and community-based services available under the State plan (or waiver of such plan) relative to the home and community-based services available under the plan or a waiver of such plan as of the date on which the State was awarded a planning grant under section 30711 of the Act titled 'An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14';

"(II) reduce payment rates for home and community-based services lower than such rates that were in place as of the date described in subclause (I), including, to the extent applicable, assumed payment rates for such services that are included in managed care capitation rates as such rates are being prospectively built; or

"(III) except to the extent permitted under clause (ii), adopt more restrictive standards, methodologies, or procedures for determining eligibility for or the scope of medical assistance of home and community-based services, including with respect to cost-sharing, than the standards, methodologies, or procedures applicable as of the date described in subclause (I).

"(ii) CONDITIONS FOR FLEXIBILITY. — A State may make modifications that would otherwise violate the maintenance of effort described in clause (i) if the State demonstrates to the satisfaction of the Secretary that such modifications shall not result in —

"(I) home and community-based services that are less comprehensive or lower in amount, duration, or scope;

"(II) fewer individuals (overall and within particular eligibility groups) receiving home and community-based services, the calculation of which may be adjusted for demographic changes since the date described in clause (i)(I); or

"(III) increased cost-sharing (other than resulting from the rate of inflation) for home and community-based services.

"(C) ACCESS TO SERVICES. — Not later than an implementation date as specified by the Secretary (which may vary for each of the following clauses) after the first day of the first fiscal quarter for which a State receives an increase to the Federal medical assistance percentage or other applicable Federal matching percentage under paragraph (1), the State does all of the following to improve access to services:

"(i) Reduce access barriers and disparities in access or utilization of home and community-based services, as described in the State HCBS improvement plan.

"(ii) Provides coverage of personal care services authorized under subsection (a)(24) for all individuals eligible for and enrolled in medical assistance in the State.

"(iii) Provides for navigation of home and community-based services through 'no wrong door' programs, provides expedited eligibility for home and community-based services, and improves home and community-based services counseling and education programs.

"(iv) Expands access to behavioral health services furnished in home and community-based settings.

"(v) Improves coordination of home and community-based services with employment, housing, and transportation supports.

"(vi) Provides supports to family caregivers.

"(vii) Newly provides coverage under, or expands existing eligibility criteria for, 1 or more of the eligibility categories authorized under subclause (XIII), (XV), or (XVI) of section 1902(a)(10)(A)(ii).

"(D) WORKFORCE. —

"(i) IN GENERAL. — The State strengthens and expands the direct care workforce that provides home and community-based services by —

"(I) adopting processes to ensure that payment rates for home and community-based services are sufficient (as defined by the Secretary) to ensure that care and services are available to the extent described in the State HCBS improvement plan; and

"(II) updating qualification standards as appropriate, and developing and adopting training opportunities for direct care workers and family caregivers, at such times as the Secretary shall prescribe.

"(ii) PAYMENT RATES. — In carrying out clause (i)(I), the State shall —

"(I) update and, as appropriate, increase payment rates for home and community-based services to support recruitment and retention of the direct care workforce by not later than 2 years after approval of the HCBS improvement plan and, at least every 3 years thereafter, using, through existing or other processes to determine provider payment, a transparent process involving meaningful input from nongovernmental stakeholders; and

"(II) ensure that increases in the payment rates for home and community-based services —

"(aa) at a minimum, result in a proportionate increase to payments for direct care workers and in a manner that is determined with input from the stakeholders described in subclause (I); and

"(bb) are incorporated into provider payment rates for home and community-based services provided under this title by a health plan, under a contract and paid through capitation rates with the State.

"(3) SELF-DIRECTED MODELS FOR THE DELIVERY OF SERVICES. — As conditions for receipt of the increase under paragraph (1)(B) to the Federal medical assistance percentage determined for a State, with respect to a fiscal year quarter, the State shall establish directly, or by contract with 1 or more entities, including an agency with choice or a similar service delivery model, a program for the performance of all of the following functions to facilitate beneficiary use of self-directed care in the case the State covers home and community-based services under authorities that permit self-direction:

"(A) Registering qualified direct care workers and assisting beneficiaries in finding direct care workers.

"(B) Undertaking activities to recruit and train independent providers to enable beneficiaries to direct their own care, including by providing or coordinating training for beneficiaries on self-directed care.

"(C) Ensuring the safety of, and supporting the quality of, care provided to beneficiaries.

"(D) Facilitating coordination between State and local agencies and direct care workers for matters of public health, training opportunities, changes in program requirements, workplace health and safety, or related matters.

"(E) Supporting beneficiary hiring, if selected by the beneficiary, of independent providers of home and community-based services, including by processing applicable tax information, collecting and processing timesheets, submitting claims and processing payments to such providers.

"(F) To the extent a State permits beneficiaries to hire a family member or individual with whom they have an existing relationship to provide home and community-based services, providing support to beneficiaries who wish to hire a caregiver who is a family member or individual with whom they have an existing relationship.

"(G) Ensuring that the program under this paragraph does not promote or deter the ability of workers to form a labor organization or discriminate against workers who may join or decline to join such an organization.

"(4) REPORTING AND OVERSIGHT. — As conditions for receipt of the increase under paragraph (1) to the Federal medical assistance percentage determined for a State, with respect to a fiscal year quarter, the State shall meet each of the following requirements:

"(A) The State designates (by a date specified by the Secretary) an HCBS ombudsman office (or a long-term care ombudsman program office) that —

"(i) operates independently from the State Medicaid agency and health plans;

"(ii) provides direct assistance to recipients of home and community-based services available under the State Medicaid program and their families; and

"(iii) identifies and reports systemic problems to State officials, the public, and the Secretary.

"(B) Beginning with the last day of the 5th fiscal quarter for which the state is an HCBS program improvement State, and annually thereafter, the State reports to the Secretary, in a manner the Secretary shall prescribe, on the progress of implementation of the activities described in subparagraphs (C) and

(D) of paragraph (2), paragraph (3) (if applicable), the use of enhanced Federal funding provided under this subsection, and progress with respect to home and community-based services availability, utilization, disparities in access and use of services, spending on HCBS, and the status of the direct care workforce.

"(5) BENCHMARKS FOR DEMONSTRATING IMPROVEMENTS. — An HCBS program improvement State shall cease to be eligible for an increase in the Federal medical assistance percentage under paragraph (1)(A)(i) or (1)(B) or an increase in an applicable Federal matching percentage under paragraph (1)(A)(ii) on or after the first date on which a State is an HCBS program improvement State if the State is found to be out of compliance with the requirements of this subsection and unless, at the end of the 29th fiscal quarter, the State demonstrates the following in the annual report required in paragraph (4) for such quarter:

"(A) Increased availability (above a marginal increase) of home and community-based services in the State relative to such availability as reported in the State HCBS improvement plan and adjusted for demographic changes in the State since the submission of such plan.

"(B) With respect to the percentage of expenditures made by the State for long-term services and supports that are for home and community-based services, in the case of an HCBS program improvement State for which such percentage (as reported in the State HCBS improvement plan) was —

"(i) less than 50 percent, the State demonstrates that the percentage of such expenditures has increased to at least 50 percent since the plan was approved; and

"(ii) at least 50 percent, the State demonstrates that such percentage has not decreased since the plan was approved.

"(6) DEFINITIONS. — In this subsection, the terms 'State Medicaid plan', 'direct care worker', 'HCBS program improvement State', 'health plan'; and 'home and community-based services' have the meaning given those terms in section 30711(e) of the Act titled 'An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14'.".

SEC. 30713. FUNDING FOR FEDERAL ACTIVITIES RELATED TO MEDICAID HCBS.

In addition to amounts otherwise available, there is appropriated to the Secretary for fiscal year 2022, out of any money in the Treasury not otherwise appropriated, $40,000,000, to remain available until expended, to carry out section 30712 (including the amendments made by such section), including by issuing necessary guidance and technical assistance to States, conducting program integrity and oversight efforts, and preparing and submitting to the Committee on Energy and Commerce of the House of Representatives and the Committee on Finance of the Senate, beginning 5 years after the date of the enactment of this Act and every three years thereafter, a report describing the progress of the HCBS planning and improvement activities undertaken by States as applicable and as described in sections 30711 and 30712 (including the amendments made by such sections), and describing the impact of such activities on access to care, including with respect to disparities in access and utilization, and the direct care workforce.

SEC. 30714. FUNDING FOR HCBS QUALITY MEASUREMENT AND IMPROVEMENT.

(a) INCREASED FEDERAL MATCHING RATE FOR ADOPTION AND REPORTING OF HCBS QUALITY MEASURES. —

(1) IN GENERAL. — Section 1903(a)(3) of the Social Security Act (42 U.S.C. 1396b(a)(3)) is amended —

(A) in subparagraph (F)(ii), by striking "plus" after the semicolon and inserting "and"; and

(B) by inserting after subparagraph (F), the following:

"(G) 80 percent of so much of the sums expended during such quarter as are attributable to the reporting of information regarding the quality of home and community-based services in accordance with sections 1139A(a)(4)(B)(ii) and 1139B(b)(3)(C); and".

(2) EXEMPTION FROM TERRITORIES' PAYMENT LIMITS. — Section 1108(g)(4) of the Social Security Act is amended by adding at the end the following new subparagraph:

"(C) ADDITIONAL EXEMPTION RELATING TO HCBS QUALITY REPORTING. — Payments under section 1903(a)(3)(G) shall not be taken into account in applying payment limits under subsections (f) and (g) of this subsection.".

(b) HCBS QUALITY MEASURES FOR INCREASE. — Title XI of the Social Security Act (42 U.S.C. 1301 through 1320e-3) is amended —

(1) in section 1139A —

(A) in subsection (a)(4)(B) —

(i) by striking "Beginning with the annual State report on fiscal year 2024" and inserting the following:

"(i) IN GENERAL. — Subject to clause (ii), beginning with the annual State report on fiscal year 2024"; and

(ii) by adding at the end the following new clause:

"(ii) REPORTING HCBS QUALITY MEASURES. — With respect to reporting on information regarding the quality of home and community-based services provided to children under title XIX or title XXI, beginning with the annual State report required under subsection (c)(1) for the first fiscal year that begins on or after the date that is 2 years after the date that the Secretary publishes the home and community-based services quality measures developed under subsection (b)(5)(B) the Secretary shall require States to report such information using the standardized format for reporting information and procedures developed under subparagraph (A) and using all such home and community-based quality measures developed under subsection (b)(5) (including any updates or changes to such measures)."; and

(B) in subsection (b)(5) —

(i) by striking "Beginning no later than January 1, 2013" and inserting the following:

"(A) IN GENERAL. — Beginning no later than January 1, 2013"; and

(ii) by adding at the end the following new subparagraph:

"(B) HCBS QUALITY MEASURES. — Beginning with the first year that begins on the date that is 2 years after the date of enactment of this subparagraph (or, in the case of measures that require development and testing prior to availability, not later than 4 years after the date of enactment of this subparagraph), the requirements of subparagraph (A) shall apply, and the core measures described in subsection (a) (and any updates or changes to such measures) shall include home and community-based services quality measures developed by the Secretary. The Secretary shall ensure that such measures reflect the full array of home and community-based services, and consult with nongovernmental stakeholders with expertise in home and community-based services (including recipients and providers of such services).";

(C) in subsection (b)(6) —

(i) by inserting "or support services" before "that is capable of";

(ii) by striking "and ambulatory health care settings" and inserting ", ambulatory health care, and home and community-based settings"; and

(iii) by inserting "and home and community-based" before "care system"; and

(D) in subsection (c)(1), in the matter preceding subparagraph (A), by inserting ", subject to subsection (a)(4)(B)(ii)," before "annually report"; and

(2) in section 1139B —

(A) in subsection (b) —

(i) in paragraph (3), by adding at the end the following new subparagraph:

"(C) MANDATORY REPORTING WITH RESPECT TO HCBS QUALITY MEASURES. — Beginning with the State report required under subsection (d)(1) for the first year that begins on or after the date that is 2 years after the date that the Secretary publishes the home and community-based quality measures developed under paragraph (5)(D), the Secretary shall require States to report information, using the standardized format for reporting information and procedures developed under subparagraph (A), regarding the quality of home and community-based services for Medicaid eligible adults using all of the home and community-based services quality measures included in the core set of adult health quality measures under paragraph (5)(D), and any updates or changes to such measures."; and

(ii) in paragraph (5), by adding at the end the following new subparagraph:

"(D) HCBS QUALITY MEASURES. —

"(i) FUNDING. — In addition to amounts otherwise available, there is appropriated to the Secretary, for fiscal year 2022, to be available until expended, out of any money in the Treasury not otherwise appropriated, $22,000,000, for carrying out this subparagraph.

"(ii) INCLUSION OF HCBS QUALITY MEASURES. — Beginning with respect to State reports required under subsection (d)(1) for the first year that begins on or after the date that is 2 years after the date of enactment of this subparagraph (or, in the case of measures that require development and testing prior to availability, not later than 4 years after the date of enactment of this subparagraph) the core set of adult health quality measures maintained under this paragraph (and any updates or changes to such measures) shall include home and community-based services quality measures developed in accordance with this subparagraph.

"(iii) REQUIREMENTS. —

"(I) IN GENERAL. — In developing, reviewing and updating the home and community-based services quality measures included in the core set of adult health quality measures maintained under this paragraph, the Secretary shall consult with nongovernmental stakeholders with expertise in home and community-based services (including recipients and providers of such services) and ensure such measures reflect the full array of home and community-based services and recipients of such services.

"(II) DEFINITION. — For purposes of this section and section 1139A, the term 'home and community-based services' has the meaning given such term in section 30711(e) of the Act titled 'An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14'."; and

(B) in subsection (d)(1)(A), by striking "; and" and inserting "and, beginning with the report for the first year that begins after the date that is 2 years after the Secretary publishes the home and community-based quality measures developed under subsection (b)(5)(D), all home and community-based services quality measures included in the core set of adult health quality measures maintained under subsection (b)(5) and any updates or changes to such measures; and".

SEC. 30715. PERMANENT EXTENSION OF MEDICAID PROTECTIONS AGAINST SPOUSAL IMPOVERISHMENT FOR RECIPIENTS OF HOME AND COMMUNITY-BASED SERVICES.

(a) IN GENERAL. — Section 1924(h)(1)(A) of the Social Security Act (42 U.S.C. 1396r-5(h)(1)(A)) is amended by striking "(at the option of the State) is described in section 1902(a)(10)(A)(ii)(VI)" and inserting the following: "is eligible for medical assistance for home and community-based services provided under subsection (c), (d), or (i) of section 1915 or under a waiver approved under section 1115, or who is eligible for such medical assistance by reason of being determined eligible under section 1902(a)(10)(C) or by reason of section 1902(f) or otherwise on the basis of a reduction of income based on costs incurred for medical or other remedial care, or who is eligible for medical assistance for home and community-based attendant services and supports under section 1915(k)".

(b) CONFORMING AMENDMENT. — Section 2404 of the Patient Protection and Affordable Care Act (42 U.S.C. 1396r-5 note) is amended by striking "September 30, 2023" and inserting "the date of the enactment of the Act titled 'An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14' ".

SEC. 30716. PERMANENT EXTENSION OF MONEY FOLLOWS THE PERSON REBALANCING DEMONSTRATION.

(a) IN GENERAL. — Subsection (h) of section 6071 of the Deficit Reduction Act of 2005 (42 U.S.C. 1396a note) is amended —

(1) in paragraph (1) —

(A) in subparagraph (I), by inserting "and" after the semicolon;

(B) by amending subparagraph (J) to read as follows:

"(J) $450,000,000 for each fiscal year after fiscal year 2022.";

(C) by striking subparagraph (K);

(2) in paragraph (2), by striking "September 30, 2023" and inserting "September 30 of the subsequent fiscal year"; and

(3) by adding at the end the following new paragraph:

"(3) TECHNICAL ASSISTANCE. — In addition to amounts otherwise available, there is appropriated to the Secretary for fiscal year 2022 and for each subsequent 3-year period, out of any money in the Treasury not otherwise appropriated, $5,000,000, to remain available until expended, for carrying out subsections (f), (g), and (i).".

(b) REDISTRIBUTION OF UNEXPENDED GRANT AWARDS. — Subsection (e)(2) of section 6071 of the Deficit Reduction Act of 2005 (42 U.S.C. 1396a note) is amended by adding at the end the following new sentence: "Any portion of a State grant award for a fiscal year under this section that is unexpended by the State at the end of the fourth succeeding fiscal year shall be rescinded by the Secretary and added to the appropriation for the fifth succeeding fiscal year.".

SEC. 30717. FUNDING TO IMPROVE THE ACCURACY AND RELIABILITY OF CERTAIN SKILLED NURSING FACILITY DATA.

Section 1888 of the Social Security Act (42 U.S.C. 1395yy) is amended —

(1) in subsection (h)(12) —

(A) in subparagraph (A), by striking "and the data submitted under subsection (e)(6) a process to validate such measures and data"

SEC. 62002. FEDERAL TRADE COMMISSION FUNDING FOR UNFAIR COMPETITION AND ANTITRUST ENFORCEMENT WORK.

In addition to amounts otherwise available, there is appropriated to the Federal Trade Commission for fiscal year 2022, out of any money in the Treasury not otherwise appropriated, $500,000,000 to remain available until September 30, 2031, for carrying out work of the Commission related to unfair methods of competition or enforcement of the antitrust laws.

Subtitle D — Revenue Matters

SEC. 63001. ADDITIONAL APPROPRIATION FOR ENFORCEMENT RELATING TO FEDERAL INCOME TAX EVASION.

In addition to amounts otherwise available, there is appropriated to the Attorney General for fiscal year 2022, out of any money in the Treasury not otherwise appropriated, $498,000,000, to remain available until September 30, 2030, for necessary expenses for the Department of Justice Tax Division for purposes of enforcing Federal laws against tax evasion, including by pursuing civil cases or prosecuting criminal violations.

* * *

"SEC. 2047. INCENTIVES FOR DEVELOPING AND SUSTAINING STRUCTURAL COMPETENCY IN PROVIDING HEALTH AND HUMAN SERVICES.

"(a) GRANTS TO STATES TO SUPPORT LINKAGES TO LEGAL SERVICES AND MEDICAL LEGAL PARTNERSHIPS. —

"(1) APPROPRIATION. — Out of any money in the Treasury not otherwise appropriated, in addition to amounts otherwise available, there are appropriated to the Secretary $530,225,000 for fiscal year 2023, to remain available for the purposes of this subsection through fiscal year 2028.

"(2) GRANTS. — Within 2 years after the date of the enactment of this section, the Secretary shall establish and administer a program of grants to States to support the adoption of evidence-based approaches to establishing or improving and maintaining real-time linkages between health and social services and supports for vulnerable elders or in conjunction with authorized representatives of vulnerable elders, including through the following:

"(A) MEDICAL-LEGAL PARTNERSHIPS. — The establishment and support of medical-legal partnerships, the incorporation of the partnerships in the elder justice framework and health and human services safety net, and the implementation and operation of such a partnership by an eligible grantee —

"(i) at the option of a State, in conjunction with an area agency on aging;

"(ii) in a solo provider practice in a health professional shortage area (as defined in section 332(a) of the Public Health Service Act), a medically underserved community (as defined in section 399V of such Act), or a rural area (as defined in section 330J of such Act);

"(iii) in a minority-serving institution of higher learning with health, law, and social services professional programs;

"(iv) in a federally qualified health center, as described in section 330 of the Public Health Service Act, or look-alike, as described in section 1905(l)(2)(B) of this Act; or

"(v) in certain hospitals that are critical access hospitals, Medicare-dependent hospitals, sole community hospitals, rural emergency hospitals, or that serve a high proportion of Medicare or Medicaid patients.

"(B) LEGAL HOTLINES DEVELOPMENT OR EXPANSION. — The provision of incentives to develop, enhance, and integrate platforms, such as legal assistance hotlines, that help to facilitate the identification of older adults who could benefit from linkages to available legal services such as those described in subparagraph (A).

"(3) STATE REPORTS. — Each State to which a grant is made under this subsection shall submit to the Secretary biannual reports on the activities carried out by the State pursuant to this subsection, which shall include assessments of the effectiveness of the activities with respect to —

"(A) the number of unique individuals identified through the mechanism outlined in paragraph (2)(B) who are referred to services described in paragraph (2)(A), and the average time period associated with resolving issues;

"(B) the success rate for referrals to community-based resources; and

"(C) other factors determined relevant by the Secretary.

"(4) EVALUATION. — The Secretary shall, by grant, contract, or interagency agreement, evaluate the activities conducted pursuant to this subsection, which shall include a comparison among the States.

"(5) SUPPLEMENT NOT SUPPLANT. — Support provided to area agencies on aging, State units on aging, eligible entities, or other community-based organizations pursuant to this subsection shall be used to supplement and not supplant any other Federal, State, or local funds expended to provide the same or comparable services described in this subsection.

"(b) GRANTS AND TRAINING TO SUPPORT AREA AGENCIES ON AGING OR OTHER COMMUNITY-BASED ORGANIZATIONS TO ADDRESS SOCIAL ISOLATION AMONG VULNERABLE OLDER ADULTS AND PEOPLE WITH DISABILITIES. —

"(1) APPROPRIATION. — Out of any money in the Treasury not otherwise appropriated, in addition to amounts otherwise available, there are appropriated to the Secretary $265,112,500 for fiscal year 2023, to remain available for the purposes of this subsection through fiscal year 2028.

"(2) GRANTS. — The Secretary shall make grants to eligible area agencies on aging or other community-based organizations for the purpose of —

"(A) conducting outreach to individuals at risk for, or already experiencing, social isolation or loneliness, through established screening tools or other methods identified by the Secretary;

"(B) developing community-based interventions for the purposes of mitigating loneliness or social isolation (including evidence-based programs, as defined by the Secretary, developed with multi-stakeholder input for the purposes of promoting social connection, mitigating social isolation or loneliness, or preventing social isolation or loneliness) among at-risk individuals;

"(C) connecting at-risk individuals with community social and clinical supports; and

"(D) evaluating the effect of programs developed and implemented under subparagraphs (B) and (C).

"(3) TRAINING. — The Secretary shall establish programs to provide and improve training for area agencies on aging or community-based organizations with respect to addressing and preventing social isolation and loneliness among older adults and people with disabilities.

"(4) EVALUATION. — Not later than 3 years after the date of the enactment of this section and at least once after fiscal year 2025, the Secretary shall submit to the Congress a written report which assesses the extent to which the programs established under this subsection address social isolation and loneliness among older adults and people with disabilities.

"(5) COORDINATION. — The Secretary shall coordinate with resource centers, grant programs, or other funding mechanisms established under section 411(a)(18) of the Older Americans Act (42 U.S.C. 3032(a)(18)), section 417(a)(1) of such Act (42 U.S.C. 3032F(a)(1)), or other programs as determined by the Secretary.

"(c) DEFINITIONS. — In this section:

"(1) AREA AGENCY ON AGING. — The term 'area agency on aging' means an area agency on aging designated under section 305 of the Older Americans Act of 1965.

"(2) SOCIAL ISOLATION. — The term 'social isolation' means objectively being alone, or having few relationships or infrequent social contact.

"(3) LONELINESS. — The term 'loneliness' means subjectively feeling alone, or the discrepancy between one's desired level of social connection and one's actual level of social connection.

"(4) SOCIAL CONNECTION. — The term 'social connection' means the variety of ways one can connect to others socially, through physical, behavioral, social-cognitive, and emotional channels.

"(5) COMMUNITY-BASED ORGANIZATION. — The term 'community-based organization' includes, except as otherwise provided by the Secretary, a nonprofit community-based organization, a consortium of nonprofit community-based organizations, a national nonprofit organization acting as an intermediary for a community-based organization, or a community-based organization that has a fiscal sponsor that allows the organization to function as an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code.".

(e) TECHNICAL AMENDMENT. — Section 2011(12)(A) of the Social Security Act (42 U.S.C. 1397j(12)(A)) is amended by striking "450b" and inserting "5304".

SEC. 134202. APPROPRIATION FOR ASSESSMENTS.

Out of any money in the Treasury not otherwise appropriated, in addition to amounts otherwise available, there are appropriated to the Secretary of Health and Human Services $5,302,250 for each of fiscal years 2023 through 2026 to prepare and submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate, not later than 3 years after the date of enactment of this Act, and at least once after fiscal year 2025, reports on the programs, coordinating bodies, registries, and activities established or authorized under subtitle B of title XX of the Social Security Act or section 6703(b) of the Patient Protection and Affordable Care Act (42 U.S.C. 1395i-3a), which shall assess the extent to which such programs, coordinating bodies, registries, and activities have improved access to, and the quality of, resources available to aging Americans and their caregivers to ultimately prevent, detect, and treat abuse, neglect, and exploitation, and shall include, as appropriate, recommendations to Congress on funding levels and policy changes to help these programs, coordinating bodies, registries, and activities better prevent, detect, and treat abuse, neglect, and exploitation of aging Americans.

Subtitle E — Infrastructure Financing and Community Development

SEC. 135001. AMENDMENT OF 1986 CODE.

Except as otherwise expressly provided, whenever in this subtitle 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.

PART 1 — LOW INCOME HOUSING CREDIT

SEC. 135101. INCREASES IN STATE ALLOCATIONS.

(a) IN GENERAL. — Section 42(h)(3)(I) is amended to read as follows:

"(I) INCREASE IN STATE HOUSING CREDIT CEILING AFTER 2021. —

"(i) IN GENERAL. — In the case of calendar years 2022 through 2025, the dollar amounts under subclauses (I) and (II) of subparagraph (C)(ii) for any such calendar year shall be determined in accordance with the following table:

"In the case of calendar year:	The subclause (I) amount shall be:	The subclause (II) amount shall be:
2022	$3.14	$3,629,096
2023	$3.54	$4,081,825
2024	$3.97	$4,582,053
2025	$2.65	$3,120,000

"(ii) INFLATION ADJUSTMENT AFTER 2025. — In the case of calendar years after 2025, the subclause (I) and (II) dollar amounts shall be the respective dollar amounts corresponding to calendar year 2025 in the table under clause (i) each increased by an amount equal to —

"(I) such dollar amount, multiplied by

"(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting 'calendar year 2024' for 'calendar year 2016' in paragraph (A)(ii) thereof.

Any increase under this clause shall be rounded to the nearest cent in the case of the subclause (I) amount and the nearest dollar in the case of the subclause (II) amount.".

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to calendar years beginning after December 31, 2021.

SEC. 135102. TAX-EXEMPT BOND FINANCING REQUIREMENT.

(a) IN GENERAL. — Section 42(h)(4)(B) is amended to read as follows:

"(B) SPECIAL RULE WHERE A REQUIRED 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 any such building and the land on which the building is located is financed by any obligation described in subparagraph (A), or

"(ii) 25 percent or more of the aggregate basis of such building and the land on which the building is located is financed by any obligation described in subparagraph

(A) and issued in calendar year 2022, 2023, 2024, 2025, or 2026.".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to any building some portion of which, or of the land on which the building is located, is financed by an obligation which is described in section 42(h)(4)(A) and which is part of an issue the issue date of which is after December 31, 2021.

SEC. 135103. BUILDINGS DESIGNATED TO SERVE EXTREMELY LOW-INCOME HOUSEHOLDS.

(a) RESERVED STATE ALLOCATION. —

(1) IN GENERAL. — Section 42(h) is amended —

(A) by redesignating paragraphs (6), (7), and (8) as paragraphs (7), (8), and (9), respectively, and

(B) by inserting after paragraph (5) the following new paragraph:

"(6) PORTION OF STATE CEILING SET-ASIDE FOR PROJECTS DESIGNATED TO SERVE EXTREMELY LOW-INCOME HOUSEHOLDS. —

"(A) IN GENERAL. — Not more than 92 percent of the portion of the State housing credit ceiling amount described in paragraph (3)(C)(ii) for any State for any calendar year shall be allocated to buildings other than buildings described in subparagraph (B).

"(B) BUILDINGS DESCRIBED. — A building is described in this subparagraph if 20 percent or more of the residential units in such building are rent-restricted (determined as if the imputed income limitation applicable to such units were 30 percent of area median gross income) and are designated by the taxpayer for occupancy by households the aggregate household income of which does not exceed the greater of —

"(i) 30 percent of area median gross income, or

"(ii) 100 percent of an amount equal to the Federal poverty line (within the meaning of section 36B(d)(3)).

"(C) EXCEPTION. — A building shall not be treated as described in subparagraph (B) if such building is a part of a qualified low-income housing project elected by the taxpayer to meet the requirements of subsection (f)(1)(C).

"(D) STATE MAY NOT OVERRIDE SET-ASIDE. — Nothing in subparagraph (F) of paragraph (3) shall be construed to permit a State not to comply with subparagraph (A) of this paragraph.".

(2) CONFORMING AMENDMENT. — Section 42(b)(4)(C) is amended by striking "(h)(7)" and inserting "(h)(8)".

(b) INCREASE IN CREDIT. — Paragraph (5) of section 42(d) is amended by adding at the end the following new subparagraph:

"(C) INCREASE IN CREDIT FOR PROJECTS DESIGNATED TO SERVE EXTREMELY LOW-INCOME HOUSEHOLDS. —

"(i) IN GENERAL. — In the case of any building —

"(I) which is described in subsection (h)(6)(B), and

"(II) which is designated by the housing credit agency as requiring the increase in credit under this subparagraph in order for such building to be financially feasible as part of a qualified low-income housing project, subparagraph (B) shall not apply to the portion of such building which is comprised of such units, and the eligible basis of such portion of the building shall be 150 percent of such basis determined without regard to this subparagraph.

"(ii) ALLOCATION RULES APPLICABLE TO PROJECTS TO WHICH CLAUSE (i) APPLIES. —

"(I) STATE HOUSING CREDIT CEILING. — For any calendar year, the housing credit agency shall not allocate more than 13 percent of the portion of the State housing credit ceiling amount described in subsection (h)(3)(C)(ii) to buildings to which clause (i) applies, and

"(II) PRIVATE ACTIVITY BOND VOLUME CAP. — In the case of projects financed by tax-exempt bonds as described in subsection (h)(4), for any calendar year, the State shall not issue more than 8 percent of the private activity bond volume cap as described in section 146(d)(1) to buildings to which clause (i) applies.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to allocations of housing credit dollar amount after December 31, 2021, and to buildings that are described in section 42(h)(4)(B) taking into account only obligations that are part of an issue the issue date of which is after December 31, 2021.

SEC. 135104. REPEAL OF QUALIFIED CONTRACT OPTION.

(a) TERMINATION OF OPTION FOR CERTAIN BUILDINGS. —

(1) IN GENERAL. — Subclause (II) of section 42(h)(7)(E)(i), as redesignated by section 135403, is amended by inserting "in the case of a building described in clause (iii)," before "on the last day".

(2) BUILDINGS DESCRIBED. — Subparagraph (E) of section 42(h)(7), as so redesignated, is amended by adding at the end the following new clause:

"(iii) BUILDINGS DESCRIBED. — A building described in this clause is a building —

"(I) which received its allocation of housing credit dollar amount before January 1, 2022, or

"(II) in the case of a building any portion of which is financed as described in paragraph (4), and which received before January 1, 2022, under the rules of paragraphs (1) and (2) of subsection (m), a determination from the issuer of the tax-exempt bonds or the housing credit agency that the building would be eligible under the qualified allocation plan to receive an allocation of housing credit dollar amount or that the credits to be earned are necessary for financial feasibility of the project and its viability as a qualified low-income housing project throughout the credit period.".

(b) RULES RELATING TO EXISTING PROJECTS. — Subparagraph (F) of section 42(h)(7), as redesignated by section 135403, is amended by striking "the nonlow-income portion" and all that follows and inserting "the nonlow-income portion and the low-income portion of the building for fair market value (determined by the housing credit agency by taking into account the rent restrictions required for the low-income portion of the building to continue to meet the standards of paragraphs (1) and (2) of subsection (g)). The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this paragraph.".

(c) CONFORMING AMENDMENTS. —

(1) Paragraph (7) of section 42(h), as redesignated by section 135403, is amended by striking subparagraph (G) and by redesignating subparagraphs (H), (I), (J), and (K) as subparagraphs (G), (H), (I), and (J), respectively.

(2) Subclause (II) of section 42(h)(7)(E)(i), as so redesignated and as amended by subsection (a), is further amended by striking "subparagraph (I)" and inserting "subparagraph (H)".

(d) EFFECTIVE DATES. —

(1) IN GENERAL. — Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act.

(2) SUBSECTION (b). — The amendments made by subsection (b) shall apply to buildings with respect to which a written request described in section 42(h)(7)(H) of the Internal Revenue Code of 1986, as redesignated by section 135403 and subsection (c), is submitted after the date of the enactment of this Act.

SEC. 135105. MODIFICATION AND CLARIFICATION OF RIGHTS RELATING TO BUILDING PURCHASE.

(a) MODIFICATION OF RIGHT OF FIRST REFUSAL. —

(1) IN GENERAL. — Subparagraph (A) of section 42(i)(7) is amended by striking "a right of 1st refusal" and inserting "an option".

(2) CONFORMING AMENDMENT. — The heading of paragraph (7) of section 42(i) is amended by striking "RIGHT OF 1ST REFUSAL" and inserting "OPTION".

(b) CLARIFICATION WITH RESPECT TO RIGHT OF FIRST REFUSAL AND PURCHASE OPTIONS. —

(1) PURCHASE OF PARTNERSHIP INTEREST. —

(A) IN GENERAL. — Subparagraph (A) of section 42(i)(7), as amended by subsection (a), is amended by striking "the property" and inserting "the property or all of the partnership interests (other than interests of the person exercising such option or a related party thereto (within the meaning of section 267(b) or 707(b)(1))) relating to the property".

(B) APPLICATION TO S CORPORATIONS AND OTHER PASS-THROUGH ENTITIES. — Subparagraph (A) of section 42(i)(7) is amended by adding at the end the following: "Except as provided by the Secretary, the rules of this paragraph shall apply to S corporations and other pass-through entities in the same manner as such rules apply to partnerships."

(C) CONFORMING AMENDMENT. — Subparagraph (B) of section 42(i)(7) is amended by adding at the end the following: "In the case of a purchase of all of the partnership interests, the minimum purchase price under this subparagraph shall be an amount not less than the sum of the interests' shares of the amount which would be determined with respect to the property under this subparagraph without regard to this sentence.".

(2) PROPERTY INCLUDES ASSETS RELATING TO THE BUILDING. — Paragraph (7) of section 42(i) is amended by adding at the end the following new subparagraph:

"(C) PROPERTY. — For purposes of subparagraph (A), the term 'property' may include all or any of the assets held for the development, operation, or maintenance of a building.".

(3) EXERCISE OF RIGHT OF FIRST REFUSAL AND PURCHASE OPTIONS. — Subparagraph (A) of section 42(i)(7), as amended by subsection (a) and paragraph (1)(A), is amended by adding at the end the following: "For purposes of determining whether an option, including a right of first refusal, to purchase property or all of the partnership interests holding (directly or indirectly) such property is described in the preceding sentence —

"(i) such option or right of first refusal shall be exercisable with or without the approval of any owner of the project (including any partner, member, or affiliated organization of such an owner), and

"(ii) a right of first refusal shall be exercisable in response to any offer to purchase the property or all of the partnership interests, including an offer by a related party.".

(c) OTHER CONFORMING AMENDMENT. — Subparagraph (B) of section 42(i)(7), as amended by subsection (b), is amended by striking "the sum of" and all that follows through "application of clause (ii)." and inserting the following: "the principal amount of outstanding indebtedness secured by the building (other than indebtedness incurred within the 5-year period ending on the date of the sale to the tenants).".

(d) EFFECTIVE DATES. —

(1) MODIFICATION OF RIGHT OF FIRST REFUSAL. — The amendments made by subsections (a) and (c) shall apply to agreements entered into or amended after the date of the enactment of this Act.

(2) CLARIFICATION. — The amendments made by subsection (b) shall apply to agreements among the owners of the project (including partners, members, and their affiliated organizations) and persons described in section 42(i)(7)(A) of the Internal Revenue Code of 1986 entered into before, on, or after the date of the enactment of this Act.

(3) NO EFFECT ON AGREEMENTS. — None of the amendments made by this section is intended to supersede express language in any agreement with respect to the terms of a right of first refusal or option permitted by section 42(i)(7) of the Internal Revenue Code of 1986 in effect on the date of the enactment of this Act.

PART 2 — NEIGHBORHOOD HOMES INVESTMENT ACT

SEC. 135201. NEIGHBORHOOD HOMES CREDIT.

(a) IN GENERAL. — Subpart D of part IV of subchapter A of chapter 1 is amended by inserting after section 42 the following new section:

"SEC. 42A. NEIGHBORHOOD HOMES CREDIT.

"(a) ALLOWANCE OF CREDIT. — For purposes of section 38, the neighborhood homes credit determined under this section for the taxable year is, with respect to each qualified residence sold by the taxpayer during such taxable year in an affordable sale, the lesser of —

"(1) the excess (if any) of —

"(A) the reasonable development costs paid or incurred by the taxpayer with respect to such qualified residence, over

"(B) the sale price of such qualified residence (reduced by any reasonable expenses paid or incurred by the taxpayer in connection with such sale), or

"(2) 35 percent of the lesser of —

"(A) the eligible development costs paid or incurred by the taxpayer with respect to such qualified residence, or

"(B) 80 percent of the national median sale price for new homes (as determined pursuant to the most recent census data available as of the date on which the neighborhood homes credit agency makes an allocation for the qualified project).

"(b) DEVELOPMENT COSTS. — For purposes of this section —

"(1) REASONABLE DEVELOPMENT COSTS. —

"(A) IN GENERAL. — The term 'reasonable development costs' means amounts paid or incurred for the acquisition of buildings and land, construction, substantial rehabilitation, demolition of structures, or environmental remediation, to the extent that the neighborhood homes credit agency determines that such amounts meet the standards specified pursuant to subsection (f)(1)(C) (as of the date on which construction or substantial rehabilitation is substantially complete, as determined by such agency) and are necessary to ensure the financial feasibility of such qualified residence.

"(B) CONSIDERATIONS IN MAKING DETERMINATION. — In making the determination under subparagraph (A), the neighborhood homes credit agency shall consider —

"(i) the sources and uses of funds and the total financing,

"(ii) any proceeds or receipts generated or expected to be generated by reason of tax benefits, and

"(iii) the reasonableness of the developmental costs and fees.

"(2) ELIGIBLE DEVELOPMENT COSTS. — The term 'eligible development costs' means the amount which would be reasonable development costs if the amounts taken into account as paid or incurred for the acquisition of buildings and land did not exceed 75 percent of such costs determined without regard to any amount paid or incurred for the acquisition of buildings and land.

"(3) SUBSTANTIAL REHABILITATION. — The term 'substantial rehabilitation' means amounts paid or incurred for rehabilitation of a qualified residence if such amounts exceed the greater of —

"(A) $20,000, or

"(B) 20 percent of the amounts paid or incurred by the taxpayer for the acquisition of buildings and land with respect to such qualified residence.

"(4) CONSTRUCTION AND REHABILITATION ONLY AFTER ALLOCATION TAKEN INTO ACCOUNT. —

"(A) IN GENERAL. — The terms 'reasonable development costs' and 'eligible development costs' shall not include any amount paid or incurred before the date on which an allocation is made to the taxpayer under subsection (e) with respect to the qualified project of which the qualified residence is part unless such amount is paid or incurred for the acquisition of buildings or land.

"(B) LAND AND BUILDING ACQUISITION COSTS. — Amounts paid or incurred for the acquisition of buildings or land shall be included under paragraph (A) only if paid or incurred not more than 3 years before the date on which the allocation referred to in subparagraph (A) is made. If the taxpayer acquired any building or land from an entity (or any related party to such entity) that holds an ownership interest in the taxpayer, then such entity must also have acquired such property within such 3-year period, and the acquisition cost included under subparagraph (A) with respect to the taxpayer shall not exceed the amount such entity paid or incurred to acquire such property.

"(c) QUALIFIED RESIDENCE. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified residence' means a residence that —

"(A) is real property affixed on a permanent foundation,

"(B) is —

"(i) a house which is comprised of 4 or fewer residential units,

"(ii) a condominium unit, or

"(iii) a house or an apartment owned by a cooperative housing corporation (as defined in section 216(b)),

"(C) is part of a qualified project with respect to the neighborhood homes credit agency has made an allocation under subsection (e), and

"(D) is located in a qualified census tract (determined as of the date of such allocation).

"(2) QUALIFIED CENSUS TRACT. —

"(A) IN GENERAL. — The term 'qualified census tract' means a census tract —

"(i) which —

"(I) has a median family income which does not exceed 80 percent of the median family income for the applicable area,

"(II) has a poverty rate that is not less than 130 percent of the poverty rate of the applicable area, and

"(III) has a median value for owner-occupied homes that does not exceed the median value for owner-occupied homes in the applicable area,

"(ii) which —

"(I) is located in a city which has a population of not less than 50,000 and such city has a poverty rate that is not less than 150 percent of the poverty rate of the applicable area,

"(II) has a median family income which does not exceed the median family income for the applicable area, and

"(III) has a median value for owner-occupied homes that does not exceed 80 percent of the median value for owner-occupied homes in the applicable area,

"(iii) which —

"(I) is located in a nonmetropolitan county,

"(II) has a median family income which does not exceed the median family income for the applicable area, and

"(III) has been designated by a neighborhood homes credit agency under this clause, or

"(iv) which is not otherwise a qualified census tract and is located in a disaster area (as defined in section 7508A(d)(3)), but only with respect to credits allocated in any period during which the President of the United States has determined that such area warrants individual or individual and public assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

"(B) APPLICABLE AREA. — The term 'applicable area' means —

"(i) in the case of a metropolitan census tract, the metropolitan area in which such census tract is located, and

"(ii) in the case of a census tract other than a census tract described in clause (i), the State.

"(d) AFFORDABLE SALE. — For purposes of this section —

"(1) IN GENERAL. — The term 'affordable sale' means a sale to a qualified homeowner of a qualified residence that the neighborhood homes credit agency certifies as meeting the standards promulgated under subsection (f)(1)(D) for a price that does not exceed —

"(A) in the case of any qualified residence not described in subparagraph (B), (C), or (D), the amount equal to the product of 4 multiplied by the median family income for the applicable area (as determined pursuant to the most recent census data available as of the date of the contract for such sale),

"(B) in the case of a house comprised of 2 residential units, 125 percent of the amount described in subparagraph (A),

"(C) in the case of a house comprised of 3 residential units, 150 percent of the amount described in subparagraph (A), or

"(D) in the case of a house comprised of 4 residential units, 175 percent of the amount described in subparagraph (A).

"(2) QUALIFIED HOMEOWNER. — The term 'qualified homeowner' means, with respect to a qualified residence, an individual —

"(A) who owns and uses such qualified residence as the principal residence of such individual, and

"(B) whose family income (determined as of the date that a binding contract for the affordable sale of such residence is entered into) is 140 percent or less of the median family income for the applicable area in which the qualified residence is located.

"(e) CREDIT CEILING AND ALLOCATIONS. —

"(1) CREDIT LIMITED BASED ON ALLOCATIONS TO QUALIFIED PROJECTS. —

"(A) IN GENERAL. — The credit allowed under subsection (a) to any taxpayer for any taxable year with respect to one or more qualified residences which are part of the same qualified project shall not exceed the excess (if any) of —

"(i) the amount allocated by the neighborhood homes credit agency under this paragraph to such taxpayer with respect to such qualified project, over

"(ii) the aggregate amount of credit allowed under subsection (a) to such taxpayer with respect to qualified residences which are a part of such qualified project for all prior taxable years.

"(B) DEADLINE FOR COMPLETION. — No credit shall be allowed under subsection (a) with respect to any qualified residence unless the affordable sale of such residence is during the 5-year period beginning on the date of the allocation to the qualified project of which such residence is a part (or, in the case of a qualified residence to which subsection (i) applies, the rehabilitation of such residence is completed during such 5-year period).

"(2) LIMITATIONS ON ALLOCATIONS TO QUALIFIED PROJECTS. —

"(A) ALLOCATIONS LIMITED BY STATE NEIGHBORHOOD HOMES CREDIT CEILING. — The aggregate amount allocated to taxpayers with respect to qualified projects by the neighborhood homes credit agency of any State for any calendar year shall not exceed the State neighborhood homes credit amount of such State for such calendar year.

"(B) SET-ASIDE FOR CERTAIN PROJECTS INVOLVING QUALIFIED NONPROFIT ORGANIZATIONS. — Rules similar to the rules of section 42(h)(5) shall apply for purposes of this section.

"(3) DETERMINATION OF STATE NEIGHBORHOOD HOMES CREDIT CEILING. —

"(A) IN GENERAL. — The State neighborhood homes credit amount for a State for a calendar year is an amount equal to the sum of —

"(i) the greater of —

"(I) the product of $3 ($6 in the case of calendar year 2025), multiplied by the State population (determined in accordance with section 146(j)), or

"(II) $4,000,000 ($8,000,000 in the case of calendar year 2025), and

"(ii) any amount previously allocated to any taxpayer with respect to any qualified project by the neighborhood homes credit agency of such State which can no longer be allocated to any qualified residence because the 5-year period described in paragraph (1)(B) expires during calendar year.

"(B) TERMINATION OF ADDITIONAL AMOUNTS. — The amount determined under subparagraph (A)(i) shall be zero with respect to any calendar year beginning after December 31, 2025.

"(C) 3-YEAR CARRYFORWARD OF UNUSED LIMITATION. — The State neighborhood homes credit amount for a State for a calendar year shall be increased by the excess (if any) of the State neighborhood homes credit amount for such State for the preceding calendar year over the aggregate amount allocated by the neighborhood homes credit agency of such State during such preceding calendar year. Any amount carried forward under the preceding sentence shall not be carried past the third calendar year after the calendar year in which such credit amount originally arose, determined on a firstin, first-out basis.

"(f) RESPONSIBILITIES OF NEIGHBORHOOD HOMES CREDIT AGENCIES. —

"(1) IN GENERAL. — Notwithstanding subsection (e), the State neighborhood homes credit dollar amount shall be zero for a calendar year unless the neighborhood homes credit agency of the State —

"(A) allocates such amount pursuant to a qualified allocation plan of the neighborhood homes credit agency,

"(B) allocates not more than 20 percent of amounts allocated in the previous year (or for allocations made in 2022, not more than 20 percent of the neighborhood homes credit ceiling for such year) to projects with respect to qualified residences which —

"(i) are located in census tracts described in subsection (c)(2)(A)(iii), (c)(2)(A)(iv), (i)(5), or

"(ii) are not located in a qualified census tract but meet the requirements of (i)(8),

"(C) promulgates standards with respect to reasonable qualified development costs and fees,

"(D) promulgates standards with respect to construction quality,

"(E) in the case of any neighborhood homes credit agency which makes an allocation to a qualified project which includes any qualified residence to which subsection (i) applies, promulgates standards with respect to protecting the owners of such residences, including the capacity of such owners to pay rehabilitation costs not covered by the credit provided by this section and providing for the disclosure to such owners of their rights and responsibilities with respect to the rehabilitation of such residences, and

"(F) submits to the Secretary (at such time and in such manner as the Secretary may prescribe) an annual report specifying —

"(i) the amount of the neighborhood homes credits allocated to each qualified project for the previous year,

"(ii) with respect to each qualified residence completed in the preceding calendar year —

"(I) the census tract in which such qualified residence is located,

"(II) with respect to the qualified project that includes such qualified residence, the year in which such project received an allocation under this section,

"(III) whether such qualified residence was new, substantially rehabilitated and sold to a qualified homeowner, or substantially rehabilitated pursuant to subsection (i),

"(IV) the eligible development costs of such qualified residence,

"(V) the amount of the neighborhood homes credit with respect to such qualified residence,

"(VI) the sales price of such qualified residence, if applicable, and

"(VII) the family income of the qualified homeowner (expressed as a percentage of the applicable area median family income for the location of the qualified residence), and

"(iii) such other information as the Secretary may require.

"(2) QUALIFIED ALLOCATION PLAN. — For purposes of this subsection, the term 'qualified allocation plan' means any plan which —

"(A) sets forth the selection criteria to be used to prioritize qualified projects for allocations of State neighborhood homes credit dollar amounts, including —

"(i) the need for new or substantially rehabilitated owner-occupied homes in the area addressed by the project,

"(ii) the expected contribution of the project to neighborhood stability and revitalization, including the impact on neighborhood residents,

"(iii) the capability and prior performance of the project sponsor, and

"(iv) the likelihood the project will result in long-term homeownership,

"(B) has been made available for public comment, and

"(C) provides a procedure that the neighborhood homes credit agency (or any agent or contractor of such agency) shall follow for purposes of —

"(i) identifying noncompliance with any provisions of this section, and

"(ii) notifying the Internal Revenue Service of any such noncompliance of which the agency becomes aware.

"(g) REPAYMENT. —

"(1) IN GENERAL. —

"(A) SOLD DURING 5-YEAR PERIOD. — If a qualified residence is sold during the 5-year period beginning immediately after the affordable sale of such qualified residence referred to in subsection (a), the seller (with respect to the sale during such 5-year period) shall transfer an amount equal to the repayment amount to the relevant neighborhood homes credit agency.

"(B) USE OF REPAYMENTS. — A neighborhood homes credit agency shall use any amount received pursuant to subparagraph (A) only for purposes of qualified projects.

"(2) REPAYMENT AMOUNT. — For purposes of paragraph (1)(A), the repayment amount is an amount equal to 50 percent of the gain from the sale to which the repayment relates, reduced by 20 percent for each year of the 5-year period referred to in paragraph (1)(A) which ends before the date of such sale.

"(3) LIEN FOR REPAYMENT AMOUNT. — A neighborhood homes credit agency receiving an allocation under this section shall place a lien on each qualified residence that is built or rehabilitated as part of a qualified project for an amount such agency deems necessary to ensure potential repayment pursuant to paragraph (1)(A).

"(4) DENIAL OF DEDUCTIONS IF CONVERTED TO RENTAL HOUSING. — If, during the 5-year period described in paragraph (1), an individual who owns a qualified residence fails to use such qualified residence as such individual's principal residence for any period of time, no deduction shall be allowed for expenses paid or incurred by such individual with respect to renting, during such period of time, such qualified residence.

"(5) WAIVER. — The neighborhood homes credit agency may waive the repayment required under paragraph (1)(A) in the case of homeowner experiencing a hardship.

"(h) OTHER DEFINITIONS AND SPECIAL RULES. — For purposes of this section —

"(1) NEIGHBORHOOD HOMES CREDIT AGENCY. — The term 'neighborhood homes credit agency' means the agency designated by the governor of a State as the neighborhood homes credit agency of the State.

"(2) QUALIFIED PROJECT. — The term 'qualified project' means a project that a neighborhood homes credit agency certifies will build or substantially rehabilitate one or more qualified residences.

"(3) DETERMINATIONS OF FAMILY INCOME. — Rules similar to the rules of section 143(f)(2) shall apply for purposes of this section.

"(4) POSSESSIONS TREATED AS STATES. — The term 'State' includes the District of Columbia and the possessions of the United States.

"(5) SPECIAL RULES RELATED TO CONDOMINIUMS AND COOPERATIVE HOUSING CORPORATIONS. —

"(A) DETERMINATION OF DEVELOPMENT COSTS. — In the case of a qualified residence described in clause (ii) or (iii) of subsection (c)(1)(A), the reasonable development costs and eligible development costs of such qualified residence shall be an amount equal to such costs, respectively, of the entire condominium or cooperative housing property in which such qualified residence is located, multiplied by a fraction —

"(i) the numerator of which is the total floor space of such qualified residence, and

"(ii) the denominator of which is the total floor space of all residences within such property.

"(B) TENANT-STOCKHOLDERS OF COOPERATIVE HOUSING CORPORATIONS TREATED AS OWNERS. — In the case of a cooperative housing corporation (as such term is defined in section 216(b)), a tenant-stockholder shall be treated as owning the house or apartment which such person is entitled to occupy.

"(6) RELATED PARTY SALES NOT TREATED AS AFFORDABLE SALES. —

"(A) IN GENERAL. — A sale between related persons shall not be treated as an affordable sale.

"(B) RELATED PERSONS. — For purposes of this paragraph, a person (in this subparagraph referred to as the 'related person') is related to any person if the related person bears a relationship to such person specified in section 267(b) or 707(b)(1), or the related person and such person are engaged in trades or businesses under common control (within the meaning of subsections (a) and (b) of section 52). For purposes of the preceding sentence, in applying section 267(b) or 707(b)(1), '10 percent' shall be substituted for '50 percent'.

"(7) INFLATION ADJUSTMENT. —

"(A) IN GENERAL. — In the case of a calendar year after 2022, the dollar amounts in subsections (b)(3)(A), (e)(3)(A)(i)(I), (e)(3)(A)(i)(II), and (i)(2)(C) shall each be increased by an amount equal to —

"(i) such dollar amount, multiplied by

"(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting 'calendar year 2021' for 'calendar year 2016' in subparagraph (A)(ii) thereof.

"(B) ROUNDING. —

"(i) In the case of the dollar amounts in subsection (b)(3)(A) and (i)(2)(C), any increase under paragraph (1) which is not a multiple of $1,000 shall be rounded to the nearest multiple of $1,000.

"(ii) In the case of the dollar amount in subsection (e)(3)(A)(i)(I), any increase under paragraph (1) which is not a multiple of $0.01 shall be rounded to the nearest multiple of $0.01.

"(iii) In the case of the dollar amount in subsection (e)(3)(A)(i)(II), any increase under paragraph (1) which is not a multiple of $100,000 shall be rounded to the nearest multiple of $100,000.

"(8) REPORT. —

"(A) IN GENERAL. — The Secretary shall annually issue a report, to be made available to the public, which contains the information submitted pursuant to subsection (f)(1)(F).

"(B) DE-IDENTIFICATION. — The Secretary shall ensure that any information made public pursuant to paragraph (1) excludes any information that would allow for the identification of qualified homeowners.

"(9) LIST OF QUALIFIED CENSUS TRACTS. — The Secretary of Housing and Urban Development shall, for each year, make publicly available a list of qualified census tracts under —

"(A) on a combined basis, clauses (i) and (ii) of subsection (c)(2)(A),

"(B) clause (iii) of such subsection, and

"(C) subsection (i)(5)(A).

"(i) APPLICATION OF CREDIT WITH RESPECT TO OWNER-OCCUPIED REHABILITATIONS. —

"(1) IN GENERAL. — In the case of a qualified rehabilitation by the taxpayer of any qualified residence which is owned (as of the date that the written binding contract referred to in paragraph (3) is entered into) by a specified homeowner, the rules of paragraphs (2) through (7) shall apply.

"(2) ALTERNATIVE CREDIT DETERMINATION. — In the case of any qualified residence described in paragraph (1), the neighborhood homes credit determined under subsection (a) with respect to such residence shall (in lieu of any credit otherwise determined under subsection (a) with respect to such residence) be allowed in the taxable year during which the qualified rehabilitation is completed (as determined by the neighborhood homes credit agency) and shall be equal to the least of —

"(A) the excess (if any) of —

"(i) the amounts paid or incurred by the taxpayer for the qualified rehabilitation of the qualified residence to the extent that such amounts are certified by the neighborhood homes credit agency (at the time of the completion of such rehabilitation) as meeting the standards specified pursuant to subsection (f)(1)(C), over

"(ii) any amounts paid to such taxpayer for such rehabilitation,

"(B) 50 percent of the amounts described in subparagraph (A)(i), or

"(C) $50,000.

"(3) QUALIFIED REHABILITATION. —

"(A) IN GENERAL. — For purposes of this subsection, the term 'qualified rehabilitation' means a rehabilitation or reconstruction performed pursuant to a written binding contract between the taxpayer and the qualified homeowner if the amount paid or incurred by the taxpayer in the performance of such rehabilitation or reconstruction exceeds the dollar amount in effect under subsection (b)(3)(A).

"(B) APPLICATION OF LIMITATION TO EXPENSES PAID OR INCURRED AFTER ALLOCATION. — A rule similar to the rule of section (b)(4) shall apply for purposes of this subsection.

"(4) SPECIFIED HOMEOWNER. — For purposes of this subsection, the term 'qualified homeowner' means, with respect to a qualified residence, an individual —

"(A) who owns and uses such qualified residence as the principal residence of such individual as of the date that the written binding contract referred to in paragraph (3) is entered into, and

"(B) whose family income (determined as of such date) does not exceed the median family income for the applicable area (with respect to the census tract in which the qualified residence is located).

"(5) ADDITIONAL CENSUS TRACTS IN WHICH OWNER-OCCUPIED RESIDENCES MAY BE LOCATED. — In the case of any qualified residence described in paragraph (1), the term 'qualified census tract' includes any census tract which —

"(A) meets the requirements of subsection (c)(2)(A)(i) without regard to subclause (III) thereof, and

"(B) is designated by the neighborhood homes credit agency for purposes of this paragraph.

"(6) MODIFICATION OF REPAYMENT REQUIREMENT. — In the case of any qualified residence described in paragraph (1), subsection (g) shall be applied by beginning the 5-year period otherwise described therein on the date on which the qualified owner acquired the residence.

"(7) RELATED PARTIES. — Paragraph (1) shall not apply if the taxpayer is the owner of the qualified residence described in paragraph (1) or is related (within the meaning of subsection (h)(6)(B)) to such owner.

"(8) PYRRHOTITE REMEDIATION. — The requirement of subsection (c)(1)(C) shall not apply to a qualified rehabilitation under this subsection of a qualified residence that is documented by an engineer's report and core testing to have a foundation that is adversely impacted by pyrrhotite or other iron sulfide minerals.

"(j) REGULATIONS. — The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations that prevent avoidance of the rules, and abuse of the purposes, of this section.".

(b) CREDIT ALLOWED AS PART OF GENERAL BUSINESS CREDIT. — Section 38(b), as amended by the preceding provisions of this Act, is amended by striking "plus" at the end of paragraph (34), by striking the period at the end of paragraph (35) and inserting ", plus", and by adding at the end the following new paragraph:

"(36) the neighborhood homes credit determined under section 42A(a),".

(c) CREDIT ALLOWED AGAINST ALTERNATIVE MINIMUM TAX. — Section 38(c)(4)(B), as amended by the preceding provisions of this Act, is amended by redesginating clauses (iv) through (xiii) as clauses (v) through (xiv), respectively, and by inserting after clause (iii) the following new clause:

"(iv) the credit determined under section 42A,".

(d) CONFORMING AMENDMENTS. —

(1) Subsections (i)(3)(C), (i)(6)(B)(i), and (k)(1) of section 469 are each amended by inserting "or 42A" after "section 42".

(2) The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 42 the following new item:

"Sec. 42A. Neighborhood homes credit.".

(e) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

PART 3 — INVESTMENTS IN TRIBAL INFRASTRUCTURE

SEC. 135301. TREATMENT OF INDIAN TRIBES AS STATES WITH RESPECT TO BOND ISSUANCE.

(a) IN GENERAL. — Section 7871(c) is amended to read as follows:

"(c) SPECIAL RULES FOR TAX-EXEMPT BONDS. —

"(1) IN GENERAL. — In applying section 146 to bonds issued by Indian Tribal Governments the Secretary shall annually —

"(A) establish a national bond volume cap based on the greater of —

"(i) the State population formula approach in section 146(d)(1)(A) (using national Tribal population estimates supplied annually by the Department of the Interior in consultation with the Census Bureau), and

"(ii) the minimum State ceiling amount in section 146(d)(1)(B) (as adjusted in accordance with the cost of living provision in section 146(d)(2)), and

"(B) allocate such national bond volume cap among all Indian Tribal Governments seeking such an allocation in a particular year under regulations prescribed by the Secretary.

"(2) APPLICATION OF GEOGRAPHIC RESTRICTION. — In the case of national bond volume cap allocated under paragraph (1), section 146(k)(1) shall not apply to the extent that such cap is used with respect to financing for a facility located on qualified Indian lands.

"(3) RESTRICTION ON FINANCING OF CERTAIN GAMING FACILITIES. — No portion of the volume cap allocated under this subsection may be used with respect to the financing of any portion of a building in which class II or class III gaming (as defined in section 4 of the Indian Gaming Regulatory Act) is conducted or housed or any property actually used in the conduct of such gaming.

"(4) DEFINITIONS AND SPECIAL RULES. — For purposes of this subsection —

"(A) INDIAN TRIBAL GOVERNMENT. — The term 'Indian Tribal Government' means the governing body of an Indian Tribe, band, nation, or other organized group or community, or of Alaska Natives, which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians, and also includes any agencies, instrumentalities or political subdivisions thereof.

"(B) INTERTRIBAL CONSORTIUMS, ETC. — In any case in which an Indian Tribal Government has authorized an intertribal consortium, a Tribal organization, or an Alaska Native regional or village corporation, as defined in, or established pursuant to, the Alaska Native Claims Settlement Act, to plan for, coordinate or otherwise administer services, finances, functions, or activities on its behalf under this subsection, the authorized entity shall have the rights and responsibilities of the authorizing Indian Tribal Government only to the extent provided in the Authorizing resolution.

"(C) QUALIFIED INDIAN LANDS. — The term 'qualified Indian lands' shall mean an Indian reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U.S.C. 1452(d)), including lands which are within the jurisdictional area of an Oklahoma Indian Tribe (as determined by the Secretary of the Interior) and shall include lands outside a reservation where the facility is to be placed in service in connection with —

"(i) the active conduct of a trade or business by an Indian Tribe on, contiguous to, within reasonable proximity of, or with a substantial connection to, an Indian reservation or Alaska Native village, or

"(ii) infrastructure (including roads, power lines, water systems, railroad spurs, and communication facilities) serving an Indian reservation or Alaska Native village.".

(b) CONFORMING AMENDMENT. — Subparagraph (B) of section 45(c)(9) is amended to read as follows:

"(B) INDIAN TRIBE. — For purposes of this paragraph, the term 'Indian tribe' has the meaning given the term 'Indian Tribal Government' by section 7871(c)(3)(A).".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to obligations issued in calendar years beginning after the date of the enactment of this Act.

SEC. 135302. NEW MARKETS TAX CREDIT FOR TRIBAL STATISTICAL AREAS.

(a) ADDITIONAL ALLOCATIONS FOR TRIBAL STATISTICAL AREAS. — Section 45D(f) is amended by adding at the end the following new paragraph:

"(5) ADDITIONAL ALLOCATIONS FOR TRIBAL STATISTICAL AREAS. —

"(A) IN GENERAL. — In the case of calendar years 2022 through 2025, there is (in addition to any limitation under any other paragraph of this subsection) a new markets tax credit limitation of $175,000,000 which shall be allocated by the Secretary as provided in paragraph (2) except that such limitation may only be allocated with respect to Tribal Statistical Areas.

"(B) CARRYOVER OF UNUSED TRIBAL STATISTICAL AREA LIMITATION. —

"(i) IN GENERAL. — If the credit limitation under subparagraph (A) for any calendar year exceeds the amount of such limitation allocated by the Secretary for such calendar year, such limitation for the succeeding calendar year shall be increased by the amount of such excess.

"(ii) LIMITATION ON CARRYOVER. — No amount of credit limitation may be carried under clause (i) past the 5th calendar year following the calendar year in which such amount of credit limitation arose.

"(iii) TRANSFER OF EXPIRED TRIBAL STATISTICAL AREA LIMITATION TO GENERAL LIMITATION. — In the case of any amount of credit limitation which would (but for clause (ii)) be carried under clause (i) to the 6th calendar year following the calendar year in which such amount of credit limitation arose, the new market tax credit limitation under paragraph (1) for such 6th calendar year shall be increased by the amount of such credit limitation, except that no such increase shall be made for any calendar year after 2030.

"(C) TRIBAL STATISTICAL AREA. — For purposes of this paragraph, the term 'Tribal Statistical Area' means —

"(i) any low-income community which is located in any Tribal Census Tract, Oklahoma Tribal Statistical Area, TribalDesignated Statistical Area, Alaska Native Village Statistical Area, or Hawaiian Home Land, and

"(ii) any low-income community described in subsection (e)(1)(B).".

(b) ELIGIBILITY OF CERTAIN PROJECTS SERVING TRIBAL MEMBERS. — Section 45D(e)(1) is amended to read as follows:

"(1) IN GENERAL. — The term 'low-income community' means any area —

"(A) comprising a population census tract if —

"(i) the poverty rate for such tract is at least 20 percent, or

"(ii)(I) in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 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 does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income,

"(B) which is used for a qualified active low-income community business which —

"(i) services a significant population of Tribal or Alaska Native Village members who are residents of a low-income community described in subsection (f)(5)(C)(i), and

"(ii) obtains a written statement from the relevant Indian Tribal Government (within the meaning of section 7871(c)) that documents the eligibility such project with respect to the requirement of clause (i).

Subparagraph (A)(ii) shall be applied using possession wide median family income in the case of census tracts located within a possession of the United States.".

(c) COORDINATION WITH EXISTING CARRYOVER. — Section 45D(f)(3) is amended —

(1) is amended by inserting "under paragraph (1)" after "new markets tax credit limitation", and

(2) by striking "the aggregate amount allocated" and inserting "the amount of such limitation allocated by the Secretary".

(d) REGULATORY AUTHORITY. — Section 45D(i) is amended by striking "and" at the end of paragraph (5), by striking the period at the end of paragraph (6) and inserting ", and", and by adding at the end the following new paragraph:

"(7) which provide documentation requirements for the written statement required under subsection (e)(1)(B)(ii), and

"(8) which provide procedures for determining which projects under subsection (e)(1)(B) are qualified active low-income community businesses with respect to the populations described in such subsection. Such procedures shall take into account the location needs of such projects, especially with respect to projects that serve multiple tribal or Alaska Native Village communities.".

(e) EFFECTIVE DATE. — The amendments made by this section shall apply to new markets tax credit limitation determined for calendar years after December 31, 2021.

SEC. 135303. INCLUSION OF INDIAN AREAS AS DIFFICULT DEVELOPMENT AREAS FOR PURPOSES OF CERTAIN BUILDINGS.

(a) IN GENERAL. — Subclause (I) of section 42(d)(5)(B)(iii) is amended by inserting ", or any Indian area" before the period at the end.

(b) INDIAN AREA. — Clause (iii) of section 42(d)(5)(B) 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))).

"(III) 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.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to buildings placed in service after December 31, 2021.

PART 4 — OTHER PROVISIONS

SEC. 135401. POSSESSIONS ECONOMIC ACTIVITY CREDIT.

(a) IN GENERAL. — Subpart D of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is amended by adding at the end the following new section:

"SEC. 45V. POSSESSIONS ECONOMIC ACTIVITY CREDIT.

"(a) ALLOWANCE OF CREDIT. — For purposes of section 38, in the case of a qualified domestic corporation the possessions economic activity credit determined under this section for a taxable year is an amount equal to 20 percent of the sum of the qualified possession wages and allocable employee fringe benefit expenses paid or incurred by the taxpayer for the taxable year.

"(b) QUALIFIED DOMESTIC CORPORATION; QUALIFIED CORPORATION. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified domestic corporation' means any domestic corporation which is —

"(A) a qualified corporation, or

"(B) a United States shareholder of a foreign corporation which —

"(i) is a qualified corporation, and

"(ii) is wholly owned by the United States shareholder together with any corporations which are members of the same affiliated group (within the meaning of section 1504(a)) as such United States shareholder.

"(2) QUALIFIED CORPORATION. — The term 'qualified corporation' means any corporation if such corporation meets the following requirements:

"(A) SOURCE QUALIFICATION. — 80 percent or more of the gross income of the corporation for the 3-year period immediately preceding the close of the taxable year (or for such part of such period immediately preceding the close of such taxable year as may be applicable) was derived from sources within a possession of the United States (determined without regard to section 904(f)).

"(B) TRADE OR BUSINESS QUALIFICATION. — 75 percent or more of the gross income of the corporation for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the United States.

"(3) SPECIAL RULE FOR SEPARATE AND CLEARLY IDENTIFIED UNITS OF FOREIGN CORPORATIONS. —

"(A) IN GENERAL. — In the case of a United States shareholder of a foreign corporation which —

"(i) is not a qualified corporation but with respect to which the ownership requirements of paragraph (1)(B)(ii) are met, and

"(ii) has an eligible foreign business unit which, if such unit were a corporation, would be a qualified corporation with respect to which such ownership requirements would be met,

then, for purposes of this section, the United States shareholder may elect to treat such unit as a separate foreign corporation which meets the requirements of paragraph (1)(B) and with respect to which such shareholder is a United States shareholder.

"(B) ELIGIBLE FOREIGN BUSINESS UNIT. — For purposes of this paragraph, the term 'eligible foreign business unit' means a separate and clearly identified foreign unit of a trade or business, including a partnership or an entity treated as disregarded as a separate entity from its owner (under section 7701 or other provision under this title), which maintains separate books and records.

"(C) SPECIAL ELECTION FOR AFFILIATED GROUPS. — In the case of an affiliated group described in paragraph (1)(B)(ii), the election under subparagraph (A) with respect to any eligible foreign business unit shall be made by the common parent of such group and shall apply uniformly to all members of such group which are United States shareholders with respect to the foreign corporation which has such unit.

"(c) QUALIFIED POSSESSION WAGES. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified possession wages' means wages paid or incurred by the qualified corporation during the taxable year in connection with the active conduct of a trade or business within a possession of the United States to any employee for services performed in such possession, but only if such services are performed while the principal place of employment of such employee is within such possession.

"(2) LIMITATION ON AMOUNT OF WAGES TAKEN INTO ACCOUNT. —

"(A) IN GENERAL. — The amount of wages which may be taken into account under paragraph (1) with respect to any employee for any taxable year shall not exceed $50,000.

"(B) TREATMENT OF PART-TIME EMPLOYEES, ETC. — If —

"(i) any employee is not employed by the qualified corporation on a substantially full-time basis at all times during the taxable year, or

"(ii) the principal place of employment of any employee with the qualified corporation is not within a possession at all times during the taxable year, the limitation applicable under paragraph (1) with respect to such employee shall be the appropriate portion (as determined by the Secretary) of the limitation which would otherwise be in effect under paragraph (1).

"(C) WAGES. —

"(i) IN GENERAL. — Except as provided in clause (ii), the term 'wages' has the meaning given to such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section). For purposes of the preceding sentence, such subsection (b) shall be applied as if the term 'United States' included all possessions of the United States.

"(ii) SPECIAL RULE FOR AGRICULTURAL LABOR AND RAILWAY LABOR. — In any case to which subparagraph (A) or (B) of paragraph (1) of section 51(h) applies, the term 'wages' has the meaning given to such term by section 51(h)(2).

"(3) ALLOCABLE EMPLOYEE FRINGE BENEFIT EXPENSES. —

"(A) IN GENERAL. — The allocable employee fringe benefit expenses of any qualified corporation for any taxable year is an amount which bears the same ratio to the amount determined under subparagraph (B) for such taxable year as —

"(i) the aggregate amount of the qualified corporation's qualified possession wages for such taxable year, bears to

"(ii) the aggregate amount of the wages paid or incurred by such qualified corporation during such taxable year.

In no event shall the amount determined under the preceding sentence exceed 15 percent of the amount referred to in clause (i).

"(B) EXPENSES TAKEN INTO ACCOUNT. — For purposes of subparagraph (A), the amount determined under this subparagraph for any taxable year is the aggregate amount allowable (or, in the case of a foreign corporation, which would be allowable if such foreign corporation were a domestic corporation) as a deduction under this chapter to the qualified corporation for such taxable year with respect to —

"(i) employer contributions under a stock bonus, pension, profit-sharing, or annuity plan,

"(ii) employer-provided coverage under any accident or health plan for employees, and

"(iii) the cost of life or disability insurance provided to employees.

Any amount treated as wages under paragraph (2)(C) shall not be taken into account under this subparagraph.

"(d) SPECIAL RULE FOR QUALIFIED SMALL DOMESTIC CORPORATION. — For purposes of this section —

"(1) INCREASED CREDIT PERCENTAGE. — In the case of a qualified small domestic corporation, subsection (a) shall be applied by substituting '50 percent' for '20 percent'.

"(2) QUALIFIED SMALL DOMESTIC CORPORATION. —

"(A) IN GENERAL. — The term 'qualified small domestic corporation' means a qualified domestic corporation that meets the requirements of subparagraphs (B) and (C).

"(B) FULL-TIME EMPLOYMENT. — A qualified domestic corporation meets the requirements of this subparagraph if the qualified corporation which is the qualified domestic corporation under subsection (b)(1)(A) or the foreign corporation under subsection (b)(1)(B)(i) —

"(i) has at least 5 full-time employees in a possession of the United States for each year in the 3-year period immediately preceding the close of the taxable year (or for such part of such period immediately preceding the close of such taxable year as may be applicable), and

"(ii) has not more than a total of 30 full-time employees for each year in such 3-year period.

"(C) GROSS RECEIPTS. — A qualified domestic corporation meets the requirements of this subparagraph if the annual gross receipts of the qualified domestic corporation (and all persons related thereto) for each year in such 3-year period is not more than $50,000,000.

"(3) RELATED PERSONS. — In determining whether the limitations under subparagraphs (B)(ii) and (C) of paragraph (2) are met, all persons who are treated as a single employer for purposes of subsection (a) or (b) of section 52 shall be taken into account.

"(4) AMOUNT OF WAGES TAKEN INTO ACCOUNT. — Subsection (c)(2)(A) shall be applied by substituting '$142,800' for '$50,000'.

"(e) POSSESSION OF THE UNITED STATES. —

"(1) IN GENERAL. — The term 'possession of the United States' means American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the Virgin Islands.

"(2) MIRROR CODE POSSESSIONS. — In the case of any possession of the United States with a mirror code tax system (as defined in section 24(k)), this section shall not be treated as part of the income tax laws of the United States for purposes of determining the income tax law of such possession unless such possession elects to have this section be so treated.

"(f) SEPARATE APPLICATION TO EACH POSSESSION. — For purposes of determining the amount of the credit allowed under this section, this section shall be applied separately with respect to each possession of the United States.

"(g) TERMINATION. — No credit shall be allowed under this section for any taxable year beginning after December 31, 2031.".

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT. — Subsection (b) of section 38, as amended by the preceding provisions of this Act, is amended by striking "plus" at the end of paragraph (34), by striking the period at the end of paragraph (35) and inserting ", plus", and by adding at the end the following new paragraph:

"(36) the possessions economic activity credit determined under section 45V.".

(c) CLERICAL AMENDMENT. — The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by adding at the end the following:

"Sec. 45V. Possessions economic activity credit.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act, and in the case of a qualified corporation that is a foreign corporation, to taxable years 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.

SEC. 135402. TAX TREATMENT OF CERTAIN ASSISTANCE TO FARMERS, ETC.

(a) IN GENERAL. — For purposes of the Internal Revenue Code of 1986, in the case of any payment described in section 1005(b) or 1006(e) of the American Rescue Plan Act of 2021 (as amended by this Act) —

(1) such payment shall not be included in the gross income of the person on whose behalf, or to whom, such payment is made,

(2) no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by paragraph (1), and

(3) in the case of a partnership or S corporation on whose behalf, or to whom, such a payment is made —

(A) any amount excluded from income by reason of paragraph (1) shall be treated as tax exempt income for purposes of sections 705 and 1366 of such Code, and

(B) except as provided by the Secretary of the Treasury (or the Secretary's delegate), any increase in the adjusted basis of a partner's interest in a partnership under section 705 of such Code with respect to any amount described in subparagraph (A) shall equal the partner's distributive share of deductions resulting from interest that is part of such payment and the partner's share, as determined under section 752 of such Code, of principal that is part of such payment.

(b) AUTHORITY TO WAIVE CERTAIN INFORMATION REPORTING REQUIREMENTS. — The Secretary of the Treasury (or the Secretary's delegate) may provide an exception from any requirement to file an information return otherwise required by chapter 61 of the Internal Revenue Code of 1986 with respect to any amount excluded from gross income by reason of subsection (a).

SEC. 135403. EXCLUSION OF AMOUNTS RECEIVED FROM STATE-BASED CATASTROPHE LOSS MITIGATION PROGRAMS.

(a) IN GENERAL. — Section 139 is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection:

"(h) STATE-BASED CATASTROPHE LOSS MITIGATION PROGRAMS. —

"(1) IN GENERAL. — Gross income shall not include any amount received by an individual as a qualified catastrophe mitigation payment under a program established by —

"(A) a State, or a political subdivision or instrumentality thereof,

"(B) a joint powers authority, or

"(C) an entity created under State law to ensure the availability of an adequate market of last resort for essential property insurance, over which a State agency or State department of insurance has regulatory oversight.

"(2) QUALIFIED CATASTROPHE MITIGATION PAYMENT. — For purposes of this section, the term 'qualified catastrophe mitigation payment' means any amount which is received by an individual to make improvements to such individual's residence for the sole purpose of reducing the damage that would be done to such residence by a windstorm, earthquake, or wildfire.

"(3) NO INCREASE IN BASIS. — Rules similar to the rules of subsection (g)(3) shall apply in the case of this subsection.".

(b) CONFORMING AMENDMENTS. —

(1) Section 139(d) is amended by striking "and qualified" and inserting ", qualified catastrophe mitigation payments, and qualified".

(2) Section 139(i) (as redesignated by subsection (a)) is amended by striking "or qualified" and inserting ", qualified catastrophe mitigation payment, or qualified".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2020.

Subtitle F — Green Energy

SEC. 136001. AMENDMENT OF 1986 CODE.

Except as otherwise expressly provided, whenever in this subtitle 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.

PART 1 — RENEWABLE ELECTRICITY AND REDUCING CARBON EMISSIONS

SEC. 136101. EXTENSION AND MODIFICATION OF CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES.

(a) IN GENERAL. — The following provisions of section 45(d) are each amended by striking "January 1, 2022" each place it appears and inserting "January 1, 2027":

(1) Paragraph (2)(A).

(2) Paragraph (3)(A).

(3) Paragraph (4)(B).

(4) Paragraph (6).

(5) Paragraph (7).

(6) Paragraph (9).

(7) Paragraph (11)(B).

(b) BASE CREDIT AMOUNT. — Section 45 is amended by striking "1.5 cents" each place it appears and inserting "0.3 cents".

(c) APPLICATION OF EXTENSION TO SOLAR. — Section 45(d)(4)(A) is amended by striking "is placed in service before January 1, 2006" and inserting "the construction of which begins before January 1, 2027.".

(d) EXTENSION OF ELECTION TO TREAT QUALIFIED FACILITIES AS ENERGY PROPERTY. — Section 48(a)(5)(C)(ii) is amended by striking "January 1, 2022" and inserting "January 1, 2027".

(e) APPLICATION OF EXTENSION TO WIND FACILITIES. —

(1) IN GENERAL. — Section 45(d)(1) is amended by striking "January 1, 2022" and inserting "January 1, 2027".

(2) APPLICATION OF PHASEOUT PERCENTAGE. —

(A) RENEWABLE ELECTRICITY PRODUCTION CREDIT. — Section 45(b)(5) is amended by inserting "placed in service before January 1, 2022" after "In the case of any facility".

(B) ENERGY CREDIT. — Section 48(a)(5)(E) is amended by inserting "placed in service before January 1, 2022" after "In the case of any facility".

(3) QUALIFIED OFFSHORE WIND FACILITIES UNDER ENERGY CREDIT. — Section 48(a)(5)(F)(i) is amended by striking "offshore wind facility — " and all that follows and inserting the following: "offshore wind facility, subparagraph (E) shall not apply.".

(f) WAGE AND APPRENTICESHIP REQUIREMENTS. — Section 45(b) is amended by adding at the end the following new paragraphs:

"(6) INCREASED CREDIT AMOUNT FOR QUALIFIED FACILITIES. —

"(A) IN GENERAL. — In the case of any qualified facility which satisfies the requirements of subparagraph (B), the amount of the credit determined under subsection (a) (determined after the application of paragraphs (1) through (5)) shall be equal to such amount multiplied by 5 (determined without regard to this sentence).

"(B) QUALIFIED FACILITY REQUIREMENTS. — A qualified facility meets the requirements of this subparagraph if it is one of the following:

"(i) A facility with a maximum net output of less than 1 megawatt.

"(ii) A facility the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (7) and (8).

"(iii) A facility which satisfies the requirements of paragraphs (7) and (8).

"(7) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this subparagraph with respect to any qualified facility are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in —

"(i) the construction of such facility, and

"(ii) for the period of the taxable year which is within the 10-year period beginning on the date the facility was originally placed in service, the alteration or repair of such facility, shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. For purposes of determining an increased credit amount under paragraph (6)(A) for a taxable year, the requirement under clause (ii) is applied to such taxable year in which the alteration or repair of the qualified facility occurs."

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. —

"(i) IN GENERAL. — In the case of any taxpayer which fails to satisfy the requirement under subparagraph (A) with respect to the construction of any qualified facility or with respect to the alteration or repair of a facility in any year during the period described in subparagraph (A)(ii), such taxpayer shall be deemed to have satisfied such requirement under such subparagraph with respect to such facility for any year if, with respect to any laborer or mechanic who was paid wages at a rate below the rate described in such subparagraph for any period during such year, such taxpayer —

"(I) makes payment to such laborer or mechanic in an amount equal to the sum of —

"(aa) an amount equal to the difference between —

"(AA) the amount of wages paid to such laborer or mechanic during such period, and

"(BB) the amount of wages required to be paid to such laborer or mechanic pursuant to such subparagraph during such period, plus

"(bb) interest on the amount determined under item (aa) at the underpayment rate established under section 6621 (determined by substituting '6 percentage points' for '3 percentage points' in subsection (a)(2) of such section) for the period described in such item, and

"(II) makes payment to the Secretary of a penalty in an amount equal to the product of —

"(aa) $5,000, multiplied by

"(bb) the total number of laborers and mechanics who were paid wages at a rate below the rate described in subparagraph (A) for any period during such year.

"(ii) DEFICIENCY PROCEDURES NOT TO APPLY. — Subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes) shall not apply with respect to the assessment or collection of any penalty imposed by this paragraph.

"(iii) INTENTIONAL DISREGARD. — If the Secretary determines that any failure described in subclause (i) is due to intentional disregard of the requirements under subparagraph (A), subclause (I) shall be applied by substituting 'three times the sum' for 'the sum' in item (aa) thereof and subclause (II) shall be applied by substituting '$10,000' for '5,000' in item (aa) thereof.

"(iv) LIMITATION ON PERIOD FOR PAYMENT. — Pursuant to rules issued by the Secretary which are similar to the rules under chapter 63, in the case of a final determination by the Secretary with respect to any failure by the taxpayer to satisfy the requirement under subparagraph (A), subparagraph (B)(i) shall not apply unless the payments described in subclauses (I) and (II) of such clause are made by the taxpayer on or before the date which is 180 days after the date of such determination.

"(8) APPRENTICESHIP REQUIREMENTS. — The requirements described in this subparagraph with respect to the construction of any qualified facility are as follows:

"(A) LABOR HOURS. —

"(i) PERCENTAGE OF TOTAL LABOR HOURS. — Taxpayers shall ensure that not less than the applicable percentage of the total labor hours of the construction, alteration, or repair work (including such work performed by any contractor or subcontractor) on any qualified facility shall, subject to subparagraph (B), be performed by qualified apprentices.

"(ii) APPLICABLE PERCENTAGE. — For purposes of clause (i), the applicable percentage shall be —

"(I) in the case of a qualified facility the construction of which begins before January 1, 2023, 10 percent,

"(II) in the case of a qualified facility the construction of which begins after December 31, 2022, and before January 1, 2024, 12.5 percent, and

"(III) in the case of a qualified facility the construction of which begins after December 31, 2023, 15 percent.

"(B) APPRENTICE TO JOURNEYWORKER RATIO. — The requirement under subparagraph (A)(i) shall be subject to any applicable requirements for apprentice-to-journeyworker ratios of the Department of Labor or the applicable State apprenticeship agency.

"(C) PARTICIPATION. — Each contractor and subcontractor who employs 4 or more individuals to perform construction, alteration, or repair work on a qualified facility shall employ 1 or more qualified apprentices to perform such work.

"(D) EXCEPTION. —

"(i) IN GENERAL. — A taxpayer shall not be treated as failing to satisfy the requirements of this paragraph if such taxpayer —

"(I) makes a good faith effort to comply with the requirements of this paragraph, or

"(II) subject to clause (iii), in the case of any failure by the taxpayer to satisfy the requirement under subparagraphs (A) and (C) with respect to the construction, alteration, or repair work on any qualified facility to which subclause (I) does not apply, makes payment to the Secretary of a penalty in an amount equal to the product of —

"(aa) $50, multiplied by

"(bb) the total labor hours for which the requirement described in such subparagraph was not satisfied with respect to the construction, alteration, or repair work on such qualified facility.

"(ii) GOOD FAITH EFFORT. — For purposes of clause (i), a taxpayer shall be deemed to have satisfied the requirements under such paragraph with respect to a qualified facility if such taxpayer has requested qualified apprentices from a registered apprenticeship program, as defined in section 3131(e)(3)(B), and —

"(I) such request has been denied, provided that such denial is not the result of a refusal by the contractors or subcontractors engaged in the performance of construction, alteration, or repair work on such qualified facility to comply with the established standards and requirements of the registered apprenticeship program, or

"(II) the registered apprentice ship program fails to respond to such request within 5 business days after the date on which such registered apprenticeship program received such request.

"(iii) INTENTIONAL DISREGARD. — If the Secretary determines that any failure described in subclause (i)(II) is due to intentional disregard of the requirements under subparagraphs (A) and (C), subclause (i)(II) shall be applied by substituting '$500' for '$50' in item (aa) thereof.

"(E) DEFINITIONS. — For purposes of this paragraph —

"(i) LABOR HOURS. — The term 'labor hours' —

"(I) means the total number of hours devoted to the performance of construction, alteration, or repair work by employees of the taxpayer (including construction, alteration, or repair work by any contractor or subcontractor), and

"(II) excludes any hours worked by —

"(aa) foremen,

"(bb) superintendents,

"(cc) owners, or

"(dd) persons employed in a bona fide executive, administrative, or professional capacity (within the meaning of those terms in part 541 of title 29, Code of Federal Regulations).

"(ii) QUALIFIED APPRENTICE. — The term 'qualified apprentice' means an individual who is an employee of the contractor or subcontractor and who is participating in a registered apprenticeship program, as defined in section 3131(e)(3)(B).

"(9) DOMESTIC CONTENT BONUS CREDIT AMOUNT. —

"(A) IN GENERAL. — In the case of any qualified facility which satisfies the requirement under subparagraph (B), the amount of the credit determined under subsection (a) (determined after the application of paragraphs (1) through (8)) shall be increased by an amount equal to 10 percent of the amount otherwise in effect under such subsection.

"(B) REQUIREMENT. —

"(i) IN GENERAL. — The requirement described in this subclause with respect to any qualified facility is satisfied if the taxpayer certifies to the Secretary (at such time, and in such form and manner, as the Secretary may prescribe) that any steel, iron, or manufactured product which is a component of such facility (upon completion of construction) was produced in the United States.

"(ii) STEEL AND IRON. —

"(I) IN GENERAL. — In the case of steel or iron, clause (i) shall be applied in a manner consistent with section 661.5(b) of title 49, Code of Federal Regulations.

"(II) EXCEPTION. — Subclause (I) shall not apply with respect to any steel or iron which is used as a component or subcomponent of a manufactured product which is not primarily made of steel or iron.

"(iii) MANUFACTURED PRODUCT. —  For purposes of clause (i), the manufactured products which are components of a qualified facility upon completion of construction shall be deemed to have been produced in the United States if not less than the adjusted percentage of the total costs across all such manufactured products of such facility are attributable to manufactured products (including components) which are mined, produced, or manufactured in the United States.

"(C) ADJUSTED PERCENTAGE. —

"(i) IN GENERAL. — Subject to subclause (ii), for purposes of subparagraph (B)(iii), the adjusted percentage shall be —

"(I) in the case of a facility the construction of which begins before January 1, 2025, 40 percent,

"(II) in the case of a facility the construction of which begins after December 31, 2024, and before January 1, 2026, 45 percent,

"(III) in the case of a facility the construction of which begins after December 31, 2025, and before January 1, 2027, 50 percent, and

"(IV) in the case of a facility the construction of which begins after December 31, 2026, 55 percent.

"(ii) OFFSHORE WIND FACILITY. —  For purposes of subparagraph (B)(iii), in the case of a qualified facility which is an offshore wind facility, the adjusted percentage shall be —

"(I) in the case of a facility the construction of which begins before January 1, 2025, 20 percent,

"(II) in the case of a facility the construction of which begins after December 31, 2024, and before January 1, 2026, 27.5 percent,

"(III) in the case of a facility the construction of which begins after December 31, 2025, and before January 1, 2027, 35 percent,

"(IV) in the case of a facility the construction of which begins after December 31, 2026, and before January 1, 2028, 45 percent, and

"(V) in the case of a facility the construction of which begins after December 31, 2027, 55 percent.

"(10) PHASEOUT FOR ELECTIVE PAYMENT. —

"(A) IN GENERAL. — In the case of a taxpayer making an election under section 6417 with respect to a credit under this section, the amount of such credit shall be replaced with —

"(i) the value of such credit (determined without regard to this paragraph), multiplied by

"(ii) the applicable percentage.

"(B) 100 PERCENT APPLICABLE PERCENTAGE FOR CERTAIN QUALIFIED FACILITIES. — In the case of any qualified facility —

"(i) which satisfies the requirements under paragraph (9) with respect to the construction of such facility, or

"(ii) with a maximum net output of less than 1 megawatt, the applicable percentage shall be 100 percent.

"(C) PHASED DOMESTIC CONTENT REQUIREMENT. — Subject to subparagraph (D), in the case of any qualified facility which is not described in subparagraph (B), the applicable percentage shall be —

"(i) if construction of such facility began before January 1, 2024, 100 percent,

"(ii) if construction of such facility began in calendar year 2024, 90 percent,

"(iii) if construction of such facility began in calendar year 2025, 85 percent, and

"(iv) if construction of such facility began after December 31, 2025, 0 percent.

"(D) EXCEPTION. —

"(i) IN GENERAL. — For purposes of this paragraph, the Secretary shall provide appropriate exceptions to the requirements under subparagraph (B) for the construction of qualified facilities if —

"(I) the inclusion of domestic products increases the overall costs of construction of qualified facilities by more than 25 percent, or

"(II) relevant domestic products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.

"(ii) APPLICABLE PERCENTAGE. — In any case in which the Secretary provides an exception pursuant to clause (i), the applicable percentage shall be 100 percent.

"(11) SPECIAL RULE FOR QUALIFIED FACILITY LOCATED IN ENERGY COMMUNITY. —

"(A) IN GENERAL. — In the case of a qualified facility which is located in an energy community, the credit determined under subsection (a) shall be increased by an amount equal to 10 percent of the amount otherwise in effect under such subsection (without application of subsection (b)(9)).

"(B) ENERGY COMMUNITY. — The term 'energy community' means a census tract or any directly adjoining census tract in which —

"(i) after December 31, 1999, a coal mine has closed, or

"(ii) after December 31, 2009, a coalfired electric generating unit has been retired.

"(12) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of establishing the requirements of this subsection.".

(g) CREDIT REDUCED FOR TAX-EXEMPT BONDS. — Section 45(b)(3) is amended to read as follows:

"(3) CREDIT REDUCED FOR TAX-EXEMPT BONDS. — The amount of the credit determined under subsection (a) with respect to any facility for any taxable year (determined after the application of paragraphs (1) and (2)) shall be reduced by the amount which is the product of the amount so determined for such year and the lesser of 15 percent or a fraction —

"(A) the numerator of which is the sum, for the taxable year and all prior taxable years, of proceeds of an issue of any obligations used to provide financing for the qualified facility the interest on which is exempt from tax under section 103, and

"(B) the denominator of which is the aggregate amount of additions to the capital account for the qualified facility for the taxable year and all prior taxable years.

The amounts under the preceding sentence for any taxable year shall be determined as of the close of the taxable year.".

(h) ROUNDING ADJUSTMENT. — Section 45(b)(2) is amended by striking "If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent" and inserting "If the 0.3 cent amount as increased under the preceding sentence is not a multiple of 0.05 cent, such amount shall be rounded to the nearest multiple of 0.05 cent. In any other case, if an amount as increased under this paragraph is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent".

(i) CONFORMING AMENDMENT. — Section 45(b)(4)(A) is amended by striking "last sentence" and inserting "last two sentences".

(j) EFFECTIVE DATES. —

(1) The amendments made by subsections (a), (b), (c), (d), (e), (f), (h), and (i) of this section shall apply to facilities placed in service after December 31, 2021.

(2) The amendment made by subsection (g) shall apply to facilities the construction of which begins after December 31, 2021.

SEC. 136102. EXTENSION AND MODIFICATION OF ENERGY CREDIT.

(a) EXTENSION OF CREDIT. — The following provisions of section 48 are each amended by striking "January 1, 2024" each place it appears and inserting "January 1, 2027":

(1) Subsection (a)(2)(A)(i)(II).

(2) Subsection (a)(3)(A)(ii).

(3) Subsection (c)(1)(D).

(4) Subsection (c)(2)(D).

(5) Subsection (c)(4)(C).

(b) FURTHER EXTENSION FOR CERTAIN ENERGY PROPERTY. — The following provisions of section 48 are each amended by striking "January 1, 2024" each place it appears and inserting "January 1, 2034":

(1) Subsection (a)(3)(A)(vii).

(2) Subsection (c)(3)(A)(iv).

(c) PHASEOUT OF CREDIT. — Section 48(a) is amended by striking paragraphs (6) and (7) and inserting the following new paragraph:

"(6) PHASEOUT FOR CERTAIN ENERGY PROPERTY. — In the case of any qualified fuel cell property, qualified small wind property, or energy property described in clause (i) or clause (ii) of paragraph (3)(A) the construction of which begins after December 31, 2019 and which is placed in service before January 1, 2022, the energy percentage determined under paragraph (2) shall be equal to 26 percent.".

(d) BASE ENERGY PERCENTAGE AMOUNT. — Section 48(a) is amended —

(1) in paragraph (2)(A) —

(A) in clause (i), by striking "30 percent" and inserting "6 percent", and

(B) in clause (ii), by striking "10 percent" and inserting "2 percent", and

(2) in paragraph (5)(A)(ii), by striking "30 percent" and inserting "6 percent".

(e) 6 PERCENT CREDIT FOR GEOTHERMAL. — Section 48(a)(2)(A)(i)(II) is amended by striking "paragraph (3)(A)(i)" and inserting "clause (i) or (iii) of paragraph (3)(A)".

(f) ENERGY STORAGE TECHNOLOGIES; QUALIFIED BIOGAS PROPERTY; MICROGRID CONTROLLERS; EXTENSION OF WASTE ENERGY RECOVERY PROPERTY. —

(1) IN GENERAL. — Section 48(a)(3)(A) is amended by striking "or" at the end of clause (vii), and by adding at the end the following new clauses:

"(ix) energy storage technology,

"(x) qualified biogas property, or

"(xi) microgrid controllers,".

(2) APPLICATION OF 6 PERCENT CREDIT. — Section 48(a)(2)(A)(i) is amended by striking "and" at the end of subclauses (IV) and (V) and adding at the end the following new subclauses:

"(VI) energy storage technology,

"(VII) qualified biogas property,

"(VIII) microgrid controllers, and

"(IX) energy property described in clauses (v) and (vii) of paragraph (3)(A), and".

(3) DEFINITIONS. — Section 48(c) is amended by adding at the end the following new paragraphs:

"(6) ENERGY STORAGE TECHNOLOGY. —

"(A) IN GENERAL. — The term 'energy storage technology' means 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 5 kilowatt hours.

"(B) MODIFICATIONS OF CERTAIN PROPERTY. — In the case of any equipment which either —

"(i) would be described in subparagraph (A) except that such equipment has a capacity of less than 5 kilowatt hours and is modified such that such equipment (after such modification) has a nameplate capacity of not less than 5 kilowatt hours, or

"(ii) is described in subparagraph (A) and which has a capacity of not less than 5 kilowatt hours and is modified such that such equipment (after such modification) has an increased nameplate capacity, such equipment shall be treated as described in subparagraph (A) except that the basis of any property which was part of such equipment before such modification shall not be taken into account for purposes of this section. In the case of any property to which this subparagraph applies, subparagraph (C) shall be applied by substituting 'modification' for 'construction'.

"(C) TERMINATION. — The term 'energy storage technology' shall not include any property the construction of which does not begin before January 1, 2027.

"(7) QUALIFIED BIOGAS PROPERTY. —

"(A) IN GENERAL. — The term 'qualified biogas property' means property comprising a system which —

"(i) converts biomass (as defined in section 45K(c)(3), as in effect on the date of enactment of this paragraph) into a gas which —

"(I) consists of not less than 52 percent methane by volume, or

"(II) is concentrated by such system into a gas which consists of not less than 52 percent methane, and

"(ii) captures such gas for sale or productive use, and not for disposal via combustion.

"(B) INCLUSION OF CLEANING AND CONDITIONING PROPERTY. — The term 'qualified biogas property' includes any property which is part of such system which cleans or conditions such gas.

"(C) TERMINATION. — The term 'qualified biogas property' shall not include any property the construction of which does not begin before January 1, 2027.

"(8) MICROGRID CONTROLLER. —

"(A) IN GENERAL. — The term 'microgrid controller' means equipment which is —

"(i) part of a qualified microgrid, and

"(ii) designed and used to monitor and control the energy resources and loads on such microgrid.

"(B) QUALIFIED MICROGRID. — The term 'qualified microgrid' means an electrical system which —

"(i) includes equipment which is capable of generating not less than 4 kilowatts and not greater than 20 megawatts of electricity,

"(ii) is capable of operating —

"(I) in connection with the electrical grid and as a single controllable entity with respect to such grid, and

"(II) independently (and disconnected) from such grid, and

"(iii) is not part of a bulk-power system (as defined in section 215 of the Federal Power Act (16 U.S.C. 24o)).

"(C) TERMINATION. — The term 'microgrid controller' shall not include any property the construction of which does not begin before January 1, 2027.".

(4) DENIAL OF DOUBLE BENEFIT FOR QUALIFIED BIOGAS PROPERTY. — Section 45(e) is amended by adding at the end the following new paragraph:

"(12) COORDINATION WITH ENERGY CREDIT FOR QUALIFIED BIOGAS PROPERTY. — The term 'qualified facility' shall not include any facility which produces electricity from gas produced by qualified biogas property (as defined in section 48(c)(7)) if a credit is determined under section 48 with respect to such property for the taxable year or any prior taxable year.".

(5) EXTENSION OF WASTE ENERGY RECOVERY PROPERTY. — Section 48(c)(5)(D) is amended by striking "January 1, 2024" and inserting "January 1, 2034".

(6) PHASEOUT OF CERTAIN OTHER ENERGY PROPERTY. — Section 48(a) is amended by adding at the end the following new paragraph:

"(7) PHASEOUT FOR CERTAIN OTHER ENERGY PROPERTY. — In the case of any energy property described in clause (v), (vii) or (viii) of paragraph (3)(A), the energy percentage determined under paragraph (2) shall be equal to —

"(A) in the case of any property described in paragraph (3)(A)(viii) the construction of which begins after December 31, 2019, and which is placed in service before January 1, 2022, 26 percent,

"(B) in the case of any property the construction of which begins before January 1, 2032, and which is placed in service after December 31, 2021, 6 percent,

"(C) in the case of any property the construction of which begins after December 31, 2031 and before January 1, 2033, 5.2 percent, and

"(D) in the case of any property the construction of which begins after December 31, 2032 and before January 1, 2034, 4.4 percent.".

(g) FUEL CELLS USING ELECTROMECHANICAL PROCESSES. —

(1) IN GENERAL. — Section 48(c)(1) is amended —

(A) in subparagraph (A)(i) —

(i) by inserting "or electromechanical" after "electrochemical", and

(ii) by inserting "(1 kilowatt in the case of a fuel cell power plant with a linear generator assembly)" after "0.5 kilowatt", and

(B) in subparagraph (C) —

(i) by inserting ", or linear generator assembly," after "a fuel cell stack assembly", and

(ii) by inserting "or electromechanical" after "electrochemical".

(2) LINEAR GENERATOR ASSEMBLY LIMITATION. — Section 48(c)(1) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph:

"(D) LINEAR GENERATOR ASSEMBLY. —  The term 'linear generator assembly' does not include any assembly which contains rotating parts.".

(h) DYNAMIC GLASS. — Section 48(a)(3)(A)(ii) is amended by inserting ", or electrochromic glass which uses electricity to change its light transmittance properties in order to heat or cool a structure," after "sunlight".

(i) COORDINATION WITH LOW INCOME HOUSING TAX CREDIT. — Paragraph (3) of section 50(c) of the Internal Revenue Code of 1986 is amended —

(1) by striking "and" at the end of subparagraph (A),

(2) by striking the period at the end of subparagraph (B) and inserting ", and", and

(3) by adding at the end the following new subparagraph:

"(C) paragraph (1) shall not apply for purposes of determining eligible basis under section 42.".

(j) INTERCONNECTION PROPERTY. — Section 48(a) is amended by adding at the end the following new paragraph:

"(8) INTERCONNECTION PROPERTY. —

"(A) IN GENERAL. — For purposes of determining the credit under subsection (a), energy property shall include amounts paid or incurred by the taxpayer for qualified interconnection property in connection with the installation of energy property (described in paragraph (3)(A)) which has a maximum net output of not greater than 5 megawatts, to provide for the transmission or distribution of the electricity produced or stored by such property, and which are properly chargeable to the capital account of the taxpayer.

"(B) QUALIFIED INTERCONNECTION PROPERTY. — The term 'qualified interconnection property' means, with respect to an energy project which is not a microgrid controller, any tangible property —

"(i) which is part of an addition, modification, or upgrade to a transmission or distribution system which is required at or beyond the point at which the energy project interconnects to such transmission or distribution system in order to accommodate such interconnection,

"(ii) either —

"(I) which is constructed, reconstructed, or erected by the taxpayer, or

"(II) for which the cost with respect to the construction, reconstruction, or erection of such property is paid or incurred by such taxpayer, and

"(iii) the original use of which, pursuant to an interconnection agreement, commences with a utility.

"(C) INTERCONNECTION AGREEMENT. —  The term 'interconnection agreement' means an agreement with a utility for the purposes of interconnecting the energy property owned by such taxpayer to the transmission or distribution system of such utility.

"(D) UTILITY. — The term 'utility' means the owner or operator of an electrical transmission or distribution system which is subject to the regulatory authority of a State or political subdivision thereof, any agency or instrumentality of the United States, a public service or public utility commission or other similar body of any State or political subdivision thereof, or the governing or ratemaking body of an electric cooperative.

"(E) SPECIAL RULE FOR INTERCONNECTION PROPERTY. — In the case of expenses paid or incurred for interconnection property, amounts otherwise chargeable to capital account with respect to such expenses shall be reduced under rules similar to the rules of section 50(c).".

(k) WAGE AND APPRENTICESHIP REQUIREMENTS. — Section 48(a) is amended by adding at the end the following new paragraphs:

"(9) INCREASED CREDIT AMOUNT FOR ENERGY PROJECTS. —

"(A) IN GENERAL. —

"(i) RULE. — In the case of any energy project which satisfies the requirements of subparagraph (B), the amount of the credit determined under this subsection (determined after the application of paragraphs (1) through (8) shall be equal to such amount multiplied by 5 (determined without regard to this sentence).

"(ii) ENERGY PROJECT DEFINED. —  For purposes of this subsection the term 'energy project' means a project consisting of one or more energy properties that are part of a single project. The requirements of this paragraph shall be applied to such project.

"(B) PROJECT REQUIREMENTS. — A project meets the requirements of this subparagraph if it is one of the following:

"(i) A project with a maximum net output of less than 1 megawatt of electrical or thermal energy.

"(ii) A project the construction of which begins before the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (10) and (11).

"(iii) A project which satisfies the requirements of paragraphs (10) and (11).

"(10) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this subparagraph with respect to any energy project are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in —

"(i) the construction of such energy project, and

"(ii) for the five-year period beginning on the date such project is originally placed in service, the alteration or repair of such project, shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — Rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(C) RECAPTURE. — The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under this subsection by reason of this paragraph with respect to any project which does not satisfy the requirements under subparagraph (A) (after application of subparagraph (B)) for the period described in clause (ii) of subparagraph (A) (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a).

"(11) APPRENTICESHIP REQUIREMENTS. —  Rules similar to the rules of section 45(b)(8) shall apply.

"(12) DOMESTIC CONTENT BONUS CREDIT AMOUNT. —

"(A) IN GENERAL. — In the case of any energy project which satisfies the requirement under subparagraph (B), for purposes of applying paragraph (2) with respect to such property, the energy percentage shall be increased by the applicable credit rate increase.

"(B) REQUIREMENT. — Rules similar to the rules of section 45(b)(9)(B) shall apply.

"(C) APPLICABLE CREDIT RATE INCREASE. — For purposes of subparagraph (A), the applicable credit rate increase shall be —

"(i) in the case of an energy project that does not satisfy the requirements of paragraph (9)(B), 2 percentage points, and

"(ii) in the case of an energy project that satisfies the requirements of paragraph (9)(B), 10 percentage points.

"(13) PHASEOUT FOR ELECTIVE PAYMENT. —  Rules similar to the rules of section 45(b)(10) shall apply.

"(14) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of establishing the requirements of this subsection.".

(l) SPECIAL RULE FOR PROPERTY FINANCED BY TAX-EXEMPT BONDS. — Section 48(a)(4) is amended to read as follows:

"(4) SPECIAL RULE FOR PROPERTY FINANCED BY TAX-EXEMPT BONDS. — Rules similar to the rule under section 45(b)(3) shall apply for purposes of this section.".

(m) TREATMENT OF CERTAIN CONTRACTS INVOLVING ENERGY STORAGE. — Section 7701(e) is amended —

(1) in paragraph (3) —

(A) in subparagraph (A)(i), by striking "or" at the end of subclause (II), by striking "and" at the end of subclause (III) and inserting "or", and by adding at the end the following new subclause:

"(IV) the operation of a storage facility, and", and

(B) by adding at the end the following new subparagraph:

"(F) STORAGE FACILITY. — For purposes of subparagraph (A), the term 'storage facility' means a facility which uses energy storage technology within the meaning of section 48(c)(6).", and

(2) in paragraph (4), by striking "or water treatment works facility" and inserting "water treatment facility, or storage facility".

(n) INCREASE IN CREDIT RATE FOR ENERGY COMMUNITIES. — Section 48(a) is amended by adding at the end the following new paragraph:

"(15) INCREASE IN CREDIT RATE FOR ENERGY COMMUNITIES. —

"(A) IN GENERAL. — In the case of any energy project that is placed in service within an energy community (as defined in section 45(b)(11)(B)), for purposes of applying paragraph (2) with respect to such property, the energy percentage shall be increased by the applicable credit rate increase.

"(B) APPLICABLE CREDIT RATE INCREASE. — For purposes of subparagraph (A), the applicable credit rate increase shall be equal to —

"(i) in the case of any energy project that does not satisfy the requirements of paragraph (9)(B), 2 percentage points, and

"(ii) in the case of any energy project that satisfies the requirements of paragraph (9)(B), 10 percentage points.".

(o) EFFECTIVE DATES. —

(1) The amendments made by subsections (a), (b), (c), (d), (h), (i), (j), (l), (m), and (n) of this section shall apply to property placed in service after December 31, 2021.

(2) The amendments made by subsections (e), (f), and (g) shall apply to property placed in service after December 31, 2021, and, for any property the construction of which begins prior to January 1, 2022, only to the extent of the basis thereof attributable to the construction, reconstruction, or erection after December 31, 2021.

(3) The amendments made by subsection (k) shall apply to property the construction of which begins after December 31, 2021.

SEC. 136103. INCREASE IN ENERGY CREDIT FOR SOLAR FACILITIES PLACED IN SERVICE IN CONNECTION WITH LOW-INCOME COMMUNITIES.

(a) IN GENERAL. — Section 48 is amended by adding at the end the following new subsection:

"(e) SPECIAL RULES FOR CERTAIN SOLAR AND WIND FACILITIES PLACED IN SERVICE IN CONNECTION WITH LOW-INCOME COMMUNITIES. —

"(1) IN GENERAL. — In the case of any qualified solar and wind facility with respect to which the Secretary makes an allocation of environmental justice solar and wind capacity limitation under paragraph (4) —

"(A) the energy percentage otherwise determined under subsection (a)(2) with respect to any eligible property which is part of such facility shall be increased by —

"(i) in the case of a facility described in subclause (I) of paragraph (2)(A)(iii) and not described in subclause (II) of such paragraph, 10 percentage points, and

"(ii) in the case of a facility described in subclause (II) of paragraph (2)(A)(iii), 20 percentage points, and

"(B) the increase in the credit determined under subsection (a) by reason of this subsection for any taxable year with respect to all property which is part of such facility shall not exceed the amount which bears the same ratio to the amount of such increase (determined without regard to this subparagraph) as —

"(i) the environmental justice solar and wind capacity limitation allocated to such facility, bears to

"(ii) the total megawatt nameplate capacity of such facility, as measured in direct current.

"(2) QUALIFIED SOLAR AND WIND FACILITY. —  For purposes of this subsection —

"(A) IN GENERAL. — The term 'qualified solar and wind facility' means any facility —

"(i) which generates electricity solely from property described in section 45(d)(1) or in clause (i) or (vi) of subsection (a)(3)(A),

"(ii) which has a maximum net output of less than 5 megawatts, and

"(iii) which —

"(I) is 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. 3501(2))), or

"(II) is part of a qualified low-income residential building project or a qualified low-income economic benefit project.

"(B) QUALIFIED LOW-INCOME RESIDENTIAL BUILDING PROJECT. — A facility shall be treated as part of a qualified low-income residential building project if —

"(i) such facility is installed on a residential rental building 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 Development Fund Corporation cooperative under Article XI of the New York State Private Housing Finance Law, 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

"(ii) the financial benefits of the electricity produced by such facility are allocated equitably among the occupants of the dwelling units of such building.

"(C) QUALIFIED LOW-INCOME ECONOMIC BENEFIT PROJECT. — A facility shall be 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 —

"(i) less than 200 percent of the poverty line applicable to a family of the size involved, or

"(ii) less than 80 percent of area median gross income (as determined under section 142(d)(2)(B)).

"(D) FINANCIAL BENEFIT. — For purposes of subparagraphs (B) and (C), electricity acquired at a below-market rate shall not fail to be taken into account as a financial benefit.

"(3) ELIGIBLE PROPERTY. — For purposes of this section, the term 'eligible property' means energy property which is part of a facility described in section 45(d)(1) or in clause (i) or (vi) of subsection (a)(3)(A), including energy storage property (described in subsection (a)(3)(A)(viii)) installed in connection with such energy property.

"(4) ALLOCATIONS. —

"(A) IN GENERAL. — Not later than 270 days after the date of enactment of this subsection, the Secretary shall establish a program to allocate amounts of environmental justice solar and wind capacity limitation to qualified solar and wind facilities.

"(B) LIMITATION. — The amount of environmental justice solar and wind capacity limitation allocated by the Secretary under subparagraph (A) during any calendar year shall not exceed the annual capacity limitation with respect to such year.

"(C) ANNUAL CAPACITY LIMITATION. — For purposes of this paragraph, the term 'annual capacity limitation' means 1.8 gigawatts of direct current capacity for each of calendar years 2022 through 2026, and zero thereafter.

"(D) CARRYOVER OF UNUSED LIMITATION. — If the annual capacity limitation for any calendar year exceeds the aggregate amount allocated for such year under this paragraph, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2026 except as provided in section 48F(i)(4)(D)(ii).

"(E) PLACED IN SERVICE DEADLINE. —

"(i) IN GENERAL. — Paragraph (1) shall not apply with respect to any property which is placed in service 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.

"(ii) APPLICATION OF CARRYOVER. —  Any amount of environmental justice solar and wind capacity limitation which expires under clause (i) during any calendar year shall be taken into account as an excess described in subparagraph (D) (or as an increase in such excess) for such calendar year, subject to the limitation imposed by the last sentence of such subparagraph.

"(F) SELECTION CRITERIA. —

"(i) IN GENERAL. — In determining to which qualified solar and wind facilities to allocate environmental justice solar and wind capacity limitation under this paragraph, the Secretary shall take into consideration which facilities will result in —

"(I) the greatest health and economic benefits, including the ability to withstand extreme weather events, for individuals described in section 45D(e)(2),

"(II) the greatest employment and wages for such individuals, and

"(III) the greatest engagement with, outreach to, or ownership by, such individuals, including through partnerships with local governments, community-based organizations, an Indian tribal government (as defined in clause (ii)), or any Alaska Native Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)).

"(ii) INDIAN TRIBAL GOVERNMENT. —  For purposes of this subparagraph, the term 'Indian tribal government' means the recognized governing body of any Indian or Alaska Native tribe, band, nation, pueblo, village, community, component band, or component reservation, individually identified (including parenthetically) in the list published most recently as of the date of enactment of this subsection pursuant to section 104 of the Federally Recognized Indian Tribe List Act of 1994 (25 U.S.C. 5131).

"(G) DISCLOSURE OF ALLOCATIONS. — The Secretary shall, upon making an allocation of environmental justice solar and wind capacity limitation under this paragraph, publicly disclose the identity of the applicant, the amount of the environmental justice solar and wind capacity limitation allocated to such applicant, and the location of the facility for which such allocation is made.

"(5) RECAPTURE. — The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under subsection (a) by reason of this subsection with respect to any property which ceases to be property eligible for such increase (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a). To the extent provided by the Secretary, such recapture may not apply with respect to any property if, within 12 months after the date the taxpayer becomes aware (or reasonably should have become aware) of such property ceasing to be property eligible for such increase, the eligibility of such property for such increase is restored. The preceding sentence shall not apply more than once with respect to any facility.".

(b) EFFECTIVE DATE. — The amendments made by this section shall take effect on January 1, 2022.

SEC. 136104. ELECTIVE PAYMENT FOR ENERGY PROPERTY AND ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES, ETC.

(a) IN GENERAL. — Subchapter B of chapter 65 is amended by inserting after section 6416 the following new section:

"SEC. 6417. ELECTIVE PAYMENT OF APPLICABLE CREDITS.

"(a) IN GENERAL. — In the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this section with respect to any applicable credit determined with respect to such taxpayer, such taxpayer shall be treated as making a payment against the tax imposed by subtitle A (for the taxable year with respect to which such credit was determined) equal to the amount of such credit.

"(b) APPLICABLE CREDIT. — The term 'applicable credit' means each of the following:

"(1) So much of the renewable electricity production credit determined under section 45 as is attributable to qualified facilities which are originally placed in service after December 31, 2021, and with respect to which an election is made under subsection (c)(3).

"(2) The energy credit determined under section 48.

"(3) So much of the credit for carbon oxide sequestration determined under section 45Q as is attributable to carbon capture equipment which is originally placed in service after December 31, 2021, and with respect to which an election is made under subsection (c)(3).

"(4) The credit for alternative fuel vehicle refueling property allowed under section 30C.

"(5) The qualifying advanced energy project credit determined under section 48C.

"(c) SPECIAL RULES. — For purposes of this section —

"(1) APPLICATION TO TAX-EXEMPT AND GOVERNMENTAL ENTITIES. — In the case of any organization exempt from the tax imposed by subtitle A, any State or local government (or political subdivision thereof), the Tennessee Valley Authority, an Indian tribal government (as defined in section 48(e)(4)(F)(ii)), or any Alaska Native Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)) which makes the election described in subsection (a), any applicable credit shall be determined —

"(A) without regard to paragraphs (3) and (4)(A)(i) of section 50(b), and

"(B) by treating any property with respect to which such credit is determined as used in a trade or business of the taxpayer.

"(2) APPLICATION TO PARTNERSHIPS AND S CORPORATIONS. —

"(A) IN GENERAL. — In the case of any applicable credit determined with respect to any facility or property held directly by a partnership or S corporation, if such partnership or S corporation makes an election under this subsection (in such manner as the Secretary may provide) with respect to such credit —

"(i) the Secretary shall make a payment to such partnership or S corporation equal to the amount of such credit,

"(ii) subsection (d) shall be applied with respect to such credit before determining any partner's distributive share, or shareholder's pro rata share, of such credit,

"(iii) any amount with respect to which the election in subsection (a) is made shall be treated as tax exempt income for purposes of sections 705 and 1366, and

"(iv) a partner's distributive share of such tax exempt income shall be based on such partner's distributive share of the otherwise applicable credit for each taxable year.

"(B) COORDINATION WITH APPLICATION AT PARTNER OR SHAREHOLDER LEVEL. — In the case of any partnership or S corporation, subsection (a) shall be applied at the partner or shareholder level after application of subparagraph (A)(ii).

"(3) ELECTIONS. —

"(A) IN GENERAL. — Any election under this subsection shall be made not later than the due date (including extensions of time) for the return of tax for the taxable year for which the election is made, but in no event earlier than 270 days after the date of the enactment of this section. Any such election, once made, shall be irrevocable. Except as otherwise provided in this paragraph, any election under this subsection shall apply with respect to any credit for the taxable year for which the election is made.

"(B) RENEWABLE ELECTRICITY PRODUCTION CREDIT. — In the case of the credit described in subsection (b)(1), any election under this subsection shall —

"(i) apply separately with respect to each qualified facility,

"(ii) be made for the taxable year in which such qualified facility is originally placed in service, and

"(iii) shall apply to such taxable year and all subsequent taxable years with respect to such qualified facility.

"(C) CREDIT FOR CARBON OXIDE SEQUESTRATION. — In the case of the credit described in subsection (b)(3), any election under this subsection shall —

"(i) apply separately with respect to the carbon capture equipment originally placed in service by the taxpayer during a taxable year, and

"(ii) shall apply to such taxable year and all subsequent taxable years with respect to such equipment.

"(4) TIMING. — The payment described in subsection (a) shall be treated as made on —

"(A) in the case of any government, or political subdivision, described in paragraph (1) and for which no return is required under section 6011 or 6033(a), the later of the date that a return would be due under section 6033(a) if such government or subdivision were described in that section or the date on which such government or subdivision submits a claim for credit or refund (at such time and in such manner as the Secretary shall provide), and

"(B) in any other case, the later of the due date (determined without regard to extensions) of the return of tax for the taxable year or the date on which such return is filed.

"(5) TREATMENT OF PAYMENTS TO PARTNERSHIPS AND S CORPORATIONS. — For purposes of section 1324 of title 31, United States Code, the payments under paragraph (2)(A)(ii) shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.

"(6) ADDITIONAL INFORMATION. — As a condition of, and prior to, a payment under this section, the Secretary may require such information or registration as the Secretary deems necessary or appropriate for purposes of preventing duplication, fraud, improper payments, or excessive payments under this section.

"(7) EXCESSIVE PAYMENT. —

"(A) IN GENERAL. — In the case of a payment made to a taxpayer under this subsection or any amount treated as a payment which is made by the taxpayer under subsection (a) which the Secretary determines constitutes an excessive payment, the tax imposed on such taxpayer by chapter 1 for the taxable year in which such determination is made shall be increased by an amount equal to the sum of —

"(i) the amount of such excessive payment, plus

"(ii) an amount equal to 20 percent of such excessive payment.

"(B) REASONABLE CAUSE. — Subparagraph (A)(ii) shall not apply if the taxpayer demonstrates to the satisfaction of the Secretary that the excessive payment resulted from reasonable cause.

"(C) EXCESSIVE PAYMENT DEFINED. — For purposes of this paragraph, the term 'excessive payment' means, with respect to a facility for which an election is made under this section for any taxable year, an amount equal to the excess of —

"(i) the amount of the payment made to the taxpayer under this subsection or any amount treated as a payment which is made by the taxpayer under subsection (a) with respect to such facility for such taxable year, over

"(ii) the amount of the credit which, without application of this subsection, would be otherwise allowable (determined without regard to section 38(c)) under this section with respect to such facility for such taxable year.

"(d) DENIAL OF DOUBLE BENEFIT. — In the case of a taxpayer making an election under this section with respect to an applicable credit, such credit shall be reduced to zero and shall, for any other purposes under this title, be deemed to have been allowed to the taxpayer for such taxable year.

"(e) MIRROR CODE POSSESSIONS. — In the case of any possession of the United States with a mirror code tax system (as defined in section 24(k)), this section shall not be treated as part of the income tax laws of the United States for purposes of determining the income tax law of such possession unless such possession elects to have this section be so treated.

"(f) BASIS REDUCTION AND RECAPTURE. — Except as otherwise provided in subsection (c)(1)(A), rules similar to the rules of section 50 shall apply for purposes of this section.

"(g) REGULATIONS. — The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including —

"(1) regulations or other guidance providing rules for determining a partner's distributive share of the tax exempt income described in subsection (c)(2)(A)(iii), and

"(2) guidance to ensure that the amount of the payment or deemed payment made under this section is commensurate with the amount of the credit that would be otherwise allowable (determined without regard to section 38(c)).".

(b) APPLICATION WITH RESPECT TO REAL ESTATE INVESTMENT TRUSTS. — Section 50(d) is amended by adding at the end the following: "In the case of a real estate investment trust making an election under section 6417, paragraphs (1)(B) and (2)(B) of the section 46(e) referred to in paragraph (1) of this subsection shall not apply to any qualified investment credit property of a real estate investment trust.".

(c) GROSS-UP OF PAYMENTS IN CASE OF SEQUESTRATION. — In the case of any payment made as a refund due to an overpayment as a result of section 6417 of the Internal Revenue Code of 1986 after the date of the enactment of this Act to which sequestration applies, the amount of such payment shall be increased to an amount equal to —

(1) such payment (determined before such sequestration), multiplied by

(2) the quotient obtained by dividing 1 by the amount by which 1 exceeds the percentage reduction in such payment pursuant to such sequestration.

For purposes of this subsection, the term "sequestration" means any reduction in direct spending ordered in accordance with a sequestration report prepared by the Director of the Office and Management and Budget pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985 or the Statutory Pay-As-You-Go Act of 2010.

(d) CLERICAL AMENDMENT. — The table of sections for subchapter B of chapter 65 is amended by inserting after the item relating to section 6416 the following new item:

"Sec. 6417. Elective payment of applicable credits.".

(e) IN GENERAL. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 136105. INVESTMENT CREDIT FOR ELECTRIC TRANSMISSION PROPERTY.

(a) IN GENERAL. — Subpart E of part IV of subchapter A of chapter 1 is amended by inserting after section 48C the following new section:

"SEC. 48D. QUALIFYING ELECTRIC TRANSMISSION PROPERTY.

"(a) ALLOWANCE OF CREDIT. — For purposes of section 46, the qualifying electric transmission property credit for any taxable year is an amount equal to 6 percent of the basis of qualifying electric transmission property placed in service by the taxpayer during such taxable year.

"(b) QUALIFYING ELECTRIC TRANSMISSION PROPERTY. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualifying electric transmission property' means tangible property —

"(A) which is a qualifying electric transmission line or related transmission property,

"(B)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

"(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer, and

"(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.

"(2) QUALIFYING ELECTRIC TRANSMISSION LINE. —

"(A) IN GENERAL. — The term 'qualifying electric transmission line' means an electric transmission line which —

"(i) is capable of transmitting electricity at a voltage of not less than 275 kilovolts or is a superconducting line, and

"(ii) has a transmission capacity of not less than 500 megawatts.

"(B) SUPERCONDUCTING LINE. — For purposes of subparagraph (A), the term 'superconducting line' means a transmission line that conducts all of its current over a superconducting material.

"(3) RELATED TRANSMISSION PROPERTY. —

"(A) IN GENERAL. — The term 'related transmission property' means, with respect to any electric transmission line, any property which —

"(i) is listed as a 'transmission plant' in the Uniform System of Accounts for the Federal Energy Regulatory Commission under part 101 of subchapter C of chapter I of title 18, Code of Federal Regulations, and

"(ii) is —

"(I) necessary for the operation of such electric transmission line, or

"(II) conversion equipment along such electric transmission line.

"(B) CREDIT NOT ALLOWED SEPARATELY WITH RESPECT TO RELATED PROPERTY. — No credit shall be allowed to any taxpayer under this section with respect to any related transmission property unless such taxpayer is allowed a credit under this section with respect to the qualifying electric transmission line to which such related transmission property relates.

"(c) APPLICATION TO REPLACEMENT AND UPGRADED SYSTEMS. —

"(1) IN GENERAL. — In the case of any qualifying electric transmission line (determined without regard to this subsection) which replaces any existing electric transmission line —

"(A) the 500 megawatts referred to in subsection (b)(2)(A)(ii) shall be increased by the transmission capacity of such existing electric transmission line, and

"(B) in no event shall the basis of such existing electric transmission line (or related transmission property with respect to such existing electric transmission line) be taken into account in determining the credit allowed under this section.

"(2) UPGRADES TREATED AS REPLACEMENTS. — For purposes of this subsection, any upgrade of an existing electric transmission line shall be treated as a replacement of such line.

"(d) EXCEPTION FOR CERTAIN PROPERTY AND PROJECTS ALREADY IN PROCESS. —

"(1) IN GENERAL. — No credit shall be allowed under this section with respect to —

"(A) any property that is selected for cost allocation in a regional transmission plan approved by a transmission planning region that was approved by the Federal Energy Regulatory Commission prior to January 1, 2022, or

"(B) any property if —

"(i) construction of such property begins before January 1, 2022, or

"(ii) construction of any portion of the qualifying electric transmission line to which such property relates begins before such date.

"(2) WHEN CONSTRUCTION BEGINS. — For purposes of subparagraph (B) of paragraph (1), construction of property begins when the taxpayer has begun on-site physical work of a significant nature with respect to such property.

"(e) CERTAIN QUALIFIED PROGRESS EXPENDITURES RULES MADE APPLICABLE. — Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.

"(f) CREDIT ADJUSTMENTS; WAGE AND APPRENTICESHIP REQUIREMENTS. —

"(1) INCREASED CREDIT AMOUNT FOR APPLICABLE FACILITIES. —

"(A) IN GENERAL. —

"(i) RULE. — In the case of any applicable facility which satisfies the requirements of subparagraph (B), the amount of the credit determined under subsection (a) shall be such amount multiplied by 5 (determined without regard to this sentence).

"(ii) APPLICABLE FACILITY DEFINED. — For purposes of this subsection, the term 'applicable facility' means a qualifying electric transmission line and related transmission property to which such qualifying electric transmission line relates.

"(B) APPLICABLE FACILITY REQUIREMENTS. — An applicable facility meets the requirements of this subparagraph if it is one of the following:

"(i) An applicable facility the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (2) and (3).

"(ii) An applicable facility which satisfies the requirements of paragraphs (2) and (3).

"(2) PREVAILING WAGE REQUIREMENTS. — Rules similar to the rules of section 48(a)(10) shall apply.

"(3) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(4) DOMESTIC CONTENT BONUS CREDIT AMOUNT. — Rules similar to the rules of section 48(a)(12) shall apply.

"(5) PHASEOUT FOR ELECTIVE PAYMENT. — Rules similar to the rules of section 48(a)(13) shall apply.

"(g) TERMINATION. — This section shall not apply to any qualifying electric transmission property unless such property is placed in service before January 1, 2032.

"(h) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for record-keeping or information reporting for purposes of establishing the requirements of this subsection.".

(b) ELECTIVE PAYMENT OF CREDIT. — Section 6417(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(6) The qualifying electric transmission property credit determined under section 48D.".

(c) SPECIAL RULE FOR PROPERTY FINANCED BY TAX-EXEMPT BONDS. — Section 48D, as added by subsection (a), is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection:

"(h) SPECIAL RULE FOR PROPERTY FINANCED BY TAX-EXEMPT BONDS. — Rules similar to the rules of section 45(b)(3) shall apply.".

(d) CONFORMING AMENDMENTS. —

(1) Section 46 is amended —

(A) by striking "and" at the end of paragraph (5),

(B) by striking the period at the end of paragraph (6) and inserting ", and", and

(C) by adding at the end the following new paragraph:

"(7) the qualifying electric transmission property credit.".

(2) Section 49(a)(1)(C) is amended —

(A) by striking "and" at the end of clause (vii),

(B) by striking the period at the end of clause (viii) and inserting ", and", and

(C) by adding at the end the following new clause:

"(ix) the basis of any qualifying electric transmission property under section 48D.".

(3) Section 50(a)(2)(E) is amended by striking "or 48C(b)(2)" and inserting "48C(b)(2), or 48D(e)".

(4) The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48C the following new item:

"Sec. 48D. Qualifying electric transmission property.".

(e) EFFECTIVE DATE. —

(1) IN GENERAL. — The amendments made by subsections (a), (b), and (d) of this section shall apply to property placed in service after December 31, 2021.

(2) TAX-EXEMPT BONDS. — The amendment made by subsection (c) shall apply to property the construction of which begins after December 31, 2021.

(3) EXCEPTION FOR CERTAIN PROPERTY AND PROJECTS ALREADY IN PROCESS. — For exclusion of certain property and projects already in process, see section 48D(d) of the Internal Revenue Code of 1986 (as added by this section).

SEC. 136106. EXTENSION AND MODIFICATION OF CREDIT FOR CARBON OXIDE SEQUESTRATION.

(a) MODIFICATION OF CARBON OXIDE CAPTURE REQUIREMENTS. — Section 45Q(d) is amended to read as follows:

"(d) QUALIFIED FACILITY. —

"(1) IN GENERAL. — For purposes of this section, the term 'qualified facility' means a facility which captures —

"(A) in the case of a direct air capture facility, not less than 1,000 metric tons of qualified carbon oxide during the taxable year,

"(B) in the case of an electricity generating facility, not less than 18,750 metric tons of qualified carbon oxide during the taxable year and not less than 75 percent by mass of the carbon oxide that would otherwise be released into the atmosphere by such facility during such taxable year, and

"(C) in the case of any other facility, not less than 12,500 metric tons of qualified carbon oxide during the taxable year.

"(2) TERMINATION RULE. — The term 'qualified facility' means any industrial facility or direct air capture facility —

"(A) the construction of which begins before January 1, 2032, and

"(B) either —

"(i) the construction of carbon capture equipment of which begins before such date, or

"(ii) the original planning and design of which includes installation of carbon capture equipment.".

(b) DETERMINATION OF APPLICABLE DOLLAR AMOUNT. —

(1) IN GENERAL. — Section 45Q(b)(1) is amended by striking subparagraph (B) and by inserting after subparagraph (A) the following new subparagraphs:

"(B) SPECIAL RULE FOR DIRECT AIR CAPTURE FACILITIES. — For any qualified facility described in subsection (d)(1)(A), the construction of which begins after December 31, 2021, the applicable dollar amount shall be an amount equal to the applicable dollar amount otherwise determined with respect to such facility under subparagraph (A), except that such subparagraph shall be applied —

"(i) in clause (i)(I) of such subparagraph, by substituting '$36' for '$17', and

"(ii) in clause (i)(II) of such subparagraph, by substituting '$26' for '$12'.

"(C) APPLICABLE DOLLAR AMOUNT FOR ADDITIONAL CARBON CAPTURE EQUIPMENT. — In the case of any qualified facility the construction of which begins before January 1, 2022, if any additional carbon capture equipment is installed at such facility and construction of such equipment began after December 31, 2021, the applicable dollar amount shall be an amount equal to the applicable dollar amount otherwise determined under subparagraph (A), except that such subparagraph shall be applied by substituting 'carbon capture equipment' for 'qualified facility' each place it appears.".

(2) CONFORMING AMENDMENTS. —

(A) Section 45Q(b)(1)(A) is amended by striking "The applicable dollar amount" and inserting "Except as provided in subparagraph (B), the applicable dollar amount".

(B) Section 45Q(b)(1)(D), as redesignated by subparagraph (A), is amended by striking "subparagraph (A)" and inserting "subparagraph (A), (B), or (C)".

(C) Section 45Q(b)(2) is amended by inserting "Subject to paragraph (3)" before "in the case".

(c) WAGE AND APPRENTICESHIP REQUIREMENTS. — Section 45Q is amended by redesignating subsection (h) as subsection (i) and inserting after subsection (g) following new subsection:

"(h) INCREASED CREDIT AMOUNT FOR QUALIFIED FACILITIES AND CARBON CAPTURE EQUIPMENT. —

"(1) IN GENERAL. — In the case of any qualified facility and any carbon capture equipment which satisfy the requirements of paragraph (2), the amount of the credit determined under subsection (a) shall be equal to such amount multiplied by 5 (determined without regard to this sentence).

"(2) REQUIREMENTS. — The requirements described in this subparagraph are that —

"(A) with respect to any qualified facility the construction of which begins on or after the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3) and (4), as well as any carbon capture equipment placed in service at such facility —

"(i) subject to subparagraph (B) of paragraph (3), such facility and equipment satisfy the requirements under subparagraph (A) of such paragraph, and

"(ii) the construction of such facility and equipment satisfy the requirements under paragraph (4),

"(B) with respect to any carbon capture equipment the construction of which begins after the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3) and (4), and which is installed at a qualified facility the construction of which began prior to such date —

"(i) subject to subparagraph (B) of paragraph (3), such equipment satisfies the requirements of subparagraphs (A) of such paragraph, and

"(ii) the construction of such facility and equipment satisfy the requirements under paragraph (4), and

"(C) the construction of carbon capture equipment begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3) and (4), and such equipment is installed at a qualified facility the construction of which begins prior to such date.

"(3) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this subparagraph with respect to any qualified facility and any carbon capture equipment placed in service at such facility are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in —

"(i) in the case of —

"(I) any qualified facility described in subparagraph (A)(i) of paragraph (2), the construction of such facility and carbon capture equipment placed in service at such facility, or

"(II) any carbon capture equipment described in subparagraph (A)(ii) of paragraph (2), the construction of such equipment, and

"(ii) for the period of the taxable year which is within the 12-year period beginning on the date on which any carbon capture equipment is originally placed in service at any qualified facility (as described in paragraphs (3)(A) and (4)(A) of subsection (a)), the alteration or repair of such facility or such equipment, shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. For purposes of determining an increased credit amount under paragraph (1) for a taxable year, the requirement under clause (ii) of this paragraph is applied to such taxable year in which the alteration or repair of qualified facility occurs.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — Rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(4) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(5) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of establishing the requirements of this subsection.".

(d) INCREASED APPLICABLE DOLLAR AMOUNT. —

(1) IN GENERAL. — Section 45Q(b)(1) is amended —

(A) by amending clause (i) of subparagraph (A) to read as follows:

"(i) for any taxable year beginning in a calendar year after 2016 and before 2027 —

"(I) for purposes of paragraph (3) of subsection (a), $17 for each calendar year during such period, and

"(II) for purposes of paragraph (4) of such subsection, $12 for each calendar year during such period, and", and

(B) in clause (ii) —

(i) in subclause (I), by striking "$50" and inserting "the amount determined under clause (i)(I) with respect to the qualified facility", and

(ii) in subclause (II), by striking "$35" and inserting "the amount determined under clause (i)(II) with respect to the qualified facility".

(e) INSTALLATION OF ADDITIONAL CARBON CAPTURE EQUIPMENT ON CERTAIN FACILITIES. — Section 45Q(b) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:

"(3) INSTALLATION OF ADDITIONAL CARBON CAPTURE EQUIPMENT ON CERTAIN FACILITIES. — In the case of a qualified facility described in paragraph (1)(C), for purposes of determining the amount of qualified carbon oxide which is captured by the taxpayer, rules similar to rules of paragraph (2) shall apply for purposes of subsection (a).".

(f) CREDIT REDUCED FOR TAX-EXEMPT BONDS. — Section 45Q(f) is amended by adding at the end the following new paragraph:

"(8) CREDIT REDUCED FOR TAX-EXEMPT BONDS. — Rules similar to the rule under section 45(b)(3) shall apply for purposes of this section.".

(g) APPLICATION OF SECTION FOR CERTAIN CARBON CAPTURE EQUIPMENT. — Section 45Q(g) is amended by inserting "the earlier of January 1, 2023 and" before "the end of the calendar year".

(h) ELECTION. — Section 45Q(f) is amended by adding at the end the following new paragraph:

"(9) ELECTION. — For purposes of paragraphs (3) and (4) of subsection (a), a person described in paragraph (3)(A)(ii) 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 under this section is claimed with respect to carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018 (after application of subsection (f)(6) where applicable) if —

"(A) no taxpayer claimed a credit under this section with respect to such carbon capture equipment for any prior taxable year,

"(B) 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

"(C) such federally–declared disaster results in a cessation of the operation of the qualified facility after the carbon capture equipment is originally placed in service.".

(i) EFFECTIVE DATES. —

(1) The amendments made by subsections (a), (b), (c), (d), (e), (f), and (g) shall apply to facilities or equipment the construction of which begins after December 31, 2021.

(2) The amendments made by subsection (h) shall apply to carbon oxide captured and disposed of after December 31, 2021.

SEC. 136107. GREEN ENERGY PUBLICLY TRADED PARTNERSHIPS.

(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 generation of electric power or thermal energy exclusively using any qualified energy resource (as defined in section 45(c)(1)),

"(iii) the operation of energy property (as defined in section 48(a)(3), determined without regard to any date by which the construction of the facility is required to begin),

"(iv) in the case of a facility described in paragraph (3) or (7) of section 45(d) (determined without regard to any placed in service date or date by which construction of the facility is required to begin), the accepting or processing of open-loop biomass or municipal solid waste,

"(v) the transportation or storage of any fuel described in subsection (b), (c), (d), or (e) of section 6426,

"(vi) the conversion of renewable biomass (as defined in subparagraph (I) of section 211(o)(1) of the Clean Air Act (as in effect on the date of the enactment of this clause)) into renewable fuel (as defined in subparagraph (J) of such section as so in effect), or the storage or transportation of such fuel,

"(vii) the production, storage, or transportation of any fuel which —

"(I) uses as its primary feedstock carbon oxides captured from an anthropogenic source or the atmosphere,

"(II) does not use as its primary feedstock carbon oxide which is deliberately released from naturally occurring subsurface springs, and

"(III) is determined by the Secretary to achieve a reduction of not less than a 60 percent in lifecycle greenhouse gas emissions (as defined in section 211(o)(1)(H) of the Clean Air Act, as in effect on the date of the enactment of this clause) compared to baseline lifecycle greenhouse gas emissions (as defined in section 211(o)(1)(C) of such Act, as so in effect), or

"(viii) a qualified facility (as defined in section 45Q(d), without regard to any date by which construction of the facility is required to begin).".

(b) EFFECTIVE DATE. — The amendments made by this section apply to taxable years beginning after December 31, 2021.

SEC. 136108. ZERO-EMISSION NUCLEAR POWER PRODUCTION CREDIT.

(a) IN GENERAL. — Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

"SEC. 45W. ZERO-EMISSION NUCLEAR POWER PRODUCTION CREDIT.

"(a) AMOUNT OF CREDIT. — For purposes of section 38, the zero-emission nuclear power production credit for any taxable year is an amount equal to the amount by which —

"(1) the product of —

"(A) 0.3 cents, multiplied by

"(B) the kilowatt hours of electricity —

"(i) produced by the taxpayer at a qualified nuclear power facility, and

"(ii) sold by the taxpayer to an unrelated person during the taxable year, exceeds

"(2) the reduction amount for such taxable year.

"(b) DEFINITIONS. —

"(1) QUALIFIED NUCLEAR POWER FACILITY. — For purposes of this section, the term 'qualified nuclear power facility' means any nuclear facility —

"(A) which is owned by the taxpayer and which uses nuclear energy to produce electricity,

"(B) which is not an advanced nuclear power facility as defined in subsection (d)(1) of section 45J, and

"(C) which is placed in service before the date of the enactment of this section.

"(2) REDUCTION AMOUNT. —

"(A) IN GENERAL. — For purposes of this section, the term 'reduction amount' means, with respect to any qualified nuclear power facility for any taxable year, the amount equal to the lesser of —

"(i) the amount determined under subsection (a)(1), or

"(ii) the amount equal to 16 percent of the excess of —

"(I) subject to subparagraph (B), 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 such taxable year, over

"(II) the amount equal to the product of —

"(aa) 2.5 cents, multiplied by

"(bb) the amount determined under subsection (a)(1)(B).

"(B) TREATMENT OF CERTAIN RECEIPTS. —

"(i) IN GENERAL. — The amount determined under subparagraph (A)(ii)(I) shall include any amount received by the taxpayer during the taxable year with respect to the qualified nuclear power facility from a zero-emission credit program unless the amount received by the taxpayer is subject to reduction —

"(I) by the full amount of the credit determined under this section, or

"(II) by any lesser amount if such amount entirely offsets the amount received from a zero-emission credit program.

"(ii) ZERO-EMISSION CREDIT PROGRAM. — For purposes of this subparagraph, the term 'zero-emission credit program' means any payments 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.

"(3) ELECTRICITY. — For purposes of this section, the term 'electricity' means the energy produced by a qualified nuclear power facility from the conversion of nuclear fuel into electric power.

"(c) OTHER RULES. —

"(1) INFLATION ADJUSTMENT. — The 0.3 cent amount in subsection (a)(1)(A) and the 2.5 cent amount in subsection (b)(2)(A)(ii)(II)(aa) shall each be adjusted by multiplying such amount by the inflation adjustment factor (as determined under section 45(e)(2), as applied by substituting 'calendar year 2022' for 'calendar year 1992' in subparagraph (B) thereof) for the calendar year in which the sale occurs. If the 0.3 cent amount as increased under this paragraph is not a multiple of 0.05 cent, such amount shall be rounded to the nearest multiple of 0.05 cent. If the 2.5 cent amount as increased under this paragraph is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 1.1 cent.

"(2) SPECIAL RULES. — Rules similar to the rules of paragraphs (1), (3), (4), and (5) of section 45(e) shall apply for purposes of this section.

"(3) ULTIMATE PURCHASER. — For purposes of this section, electricity produced by the taxpayer shall be treated as sold to an unrelated person if the ultimate purchaser of such electricity is unrelated to such taxpayer.

"(d) WAGE REQUIREMENTS. —

"(1) INCREASED CREDIT AMOUNT FOR QUALIFIED NUCLEAR POWER FACILITIES. — In the case of any qualified nuclear power facility which satisfies the requirements of paragraph (2), the amount of the credit determined under subsection (a) shall be equal to such amount multiplied by 5 (determined without regard to this sentence).

"(2) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in the alteration or repair of a facility shall be paid wages at rates not less than the prevailing rates for alteration or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — Rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(3) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of establishing the requirements of this subsection.

"(e) TERMINATION. — This section shall not apply to taxable years beginning after December 31, 2027.".

(b) CONFORMING AMENDMENTS. —

(1) Section 38(b) of the Internal Revenue Code of 1986 is amended —

(A) in paragraph (32), by striking "plus" at the end,

(B) in paragraph (33), by striking the period at the end and inserting ", plus", and

(C) by adding at the end the following new paragraph:

"(34) the zero-emission nuclear power production credit determined under section 45W(a).".

(2) The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

"Sec. 45W. Zero-emission nuclear power production credit.".

(c) ELECTIVE PAYMENT OF CREDIT. — Section 6417(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(7) The zero-emission nuclear power production credit determined under section 45W.".

(d) EFFECTIVE DATE. — This section shall apply to electricity produced and sold after December 31, 2021, in taxable years beginning after such date.

PART 2 — RENEWABLE FUELS

SEC. 136201. EXTENSION OF INCENTIVES FOR BIODIESEL, RENEWABLE DIESEL AND ALTERNATIVE FUELS.

(a) BIODIESEL AND RENEWABLE DIESEL CREDIT. — Section 40A(g) is amended by striking "December 31, 2022" and inserting "December 31, 2026".

(b) BIODIESEL MIXTURE CREDIT. —

(1) IN GENERAL. — Section 6426(c)(6) is amended by striking "December 31, 2022" and inserting "December 31, 2026".

(2) FUELS NOT USED FOR TAXABLE PURPOSES. — Section 6427(e)(6)(B) is amended by striking "December 31, 2022" and inserting "December 31, 2026".

(c) ALTERNATIVE FUEL CREDIT. — Section 6426(d)(5) is amended by striking "December 31, 2021" and inserting "December 31, 2026".

(d) ALTERNATIVE FUEL MIXTURE CREDIT. — Section 6426(e)(3) is amended by striking "December 31, 2021" and inserting "December 31, 2026".

(e) PAYMENTS FOR ALTERNATIVE FUELS. — Section 6427(e)(6)(C) is amended by striking "December 31, 2021" and inserting "December 31, 2026".

(f) EFFECTIVE DATE. — The amendments made by this section shall apply to fuel sold or used after December 31, 2021.

SEC. 136202. EXTENSION OF SECOND GENERATION BIOFUEL INCENTIVES.

(a) IN GENERAL. — Section 40(b)(6)(J)(i) is amended by striking "2022" and inserting "2027".

(b) EFFECTIVE DATE. — The amendment made by subsection (a) shall apply to qualified second generation biofuel production after December 31, 2021.

SEC. 136203. SUSTAINABLE AVIATION FUEL CREDIT.

(a) IN GENERAL. — Subpart D of part IV of subchapter A of chapter 1 is amended by inserting after section 40A the following new section:

"SEC. 40B. SUSTAINABLE AVIATION FUEL CREDIT.

"(a) IN GENERAL. — For purposes of section 38, the sustainable aviation fuel credit for the taxable year is, with respect to any sale or use of a qualified mixture which occurs during such taxable year, an amount equal to the product of —

"(1) the number of gallons of sustainable aviation fuel in such mixture, multiplied by

"(2) the sum of —

"(A) $1.25, plus

"(B) the applicable supplementary amount with respect to such sustainable aviation fuel.

"(b) APPLICABLE SUPPLEMENTARY AMOUNT. — For purposes of this section, the term 'applicable supplementary amount' means, with respect to any sustainable aviation fuel, an amount equal to $0.01 for each percentage point by which the lifecycle greenhouse gas emissions reduction percentage with respect to such fuel exceeds 50 percent. In no event shall the applicable supplementary amount determined under this subsection exceed $0.50.

"(c) QUALIFIED MIXTURE. — For purposes of this section, the term 'qualified mixture' means a mixture of sustainable aviation fuel and kerosene if —

"(1) such mixture is produced by the taxpayer in the United States,

"(2) such mixture is used by the taxpayer (or sold by the taxpayer for use) in an aircraft,

"(3) such sale or use is in the ordinary course of a trade or business of the taxpayer, and

"(4) the transfer of such mixture to the fuel tank of such aircraft occurs in the United States.

"(d) SUSTAINABLE AVIATION FUEL. — For purposes of this section, the term 'sustainable aviation fuel' means liquid fuel which —

"(1) meets the requirements of —

"(A) ASTM International Standard D7566, or

"(B) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1,

"(2) is not derived from palm fatty acid distillates or petroleum, and

"(3) has been certified in accordance with subsection (e) as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent.

"(e) LIFECYCLE GREENHOUSE GAS EMISSIONS REDUCTION PERCENTAGE. — For purposes of this section, the term 'lifecycle greenhouse gas emissions reduction percentage' means, with respect to any sustainable aviation fuel, the percentage reduction in lifecycle greenhouse gas emissions —

"(1) as defined in accordance with —

"(A) the most recent Carbon Offsetting and Reduction Scheme for International Aviation which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or

"(B) 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)), and

"(2) achieved by such fuel as compared with petroleum-based jet fuel.

"(f) REGISTRATION OF SUSTAINABLE AVIATION FUEL PRODUCERS. — No credit shall be allowed under this section with respect to any sustainable aviation fuel unless the producer of such fuel is registered with the Secretary under section 4101 and has provided such other information with respect to such fuel as the Secretary may require for purposes of carrying out this section.

"(g) COORDINATION WITH CREDIT AGAINST EXCISE TAX. — The amount of the credit determined under this section with respect to any sustainable aviation fuel shall, under rules prescribed by the Secretary, be properly reduced to take into account any benefit provided with respect to such sustainable aviation fuel solely by reason of the application of section 6426 or 6427(e).

"(h) TERMINATION. — This section shall not apply to any sale or use after December 31, 2026.".

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT. — Section 38(b) is amended by striking "plus" at the end of paragraph (33), by striking the period at the end of paragraph (34) and inserting ", plus", and by inserting after paragraph (34) the following new paragraph:

"(35) the sustainable aviation fuel credit determined under section 40B.".

(c) COORDINATION WITH BIODIESEL INCENTIVES. —

(1) IN GENERAL. — Section 40A(d)(1) is amended by inserting "or 40B" after "determined under section 40".

(2) CONFORMING AMENDMENT. — Section 40A(f) is amended by striking paragraph (4).

(d) SUSTAINABLE AVIATION FUEL ADDED TO CREDIT FOR ALCOHOL FUEL, BIODIESEL, AND ALTERNATIVE FUEL MIXTURES. —

(1) IN GENERAL. — Section 6426 is amended by adding at the end the following new subsection:

"(k) SUSTAINABLE AVIATION FUEL CREDIT. —

"(1) IN GENERAL. — For purposes of this section, the sustainable aviation fuel credit for the taxable year is, with respect to any sale or use of a qualified mixture, an amount equal to the product of —

"(A) the number of gallons of sustainable aviation fuel in such mixture, multiplied by

"(B) the sum of —

"(i) $1.25, plus

"(ii) the applicable supplementary amount with respect to such sustainable aviation fuel.

"(2) APPLICABLE SUPPLEMENTARY AMOUNT. — For purposes of this subsection, the term 'applicable supplementary amount' has the meaning given such term in section 40B(b).

"(3) OTHER DEFINITIONS. — Any term used in this subsection which is also used in section 40B shall have the meaning given such term by section 40B.

"(4) REGISTRATION REQUIREMENT. — For purposes of this subsection, rules similar to the rules of section 40B(f) shall apply.".

(2) CONFORMING AMENDMENTS. —

(A) Section 6426 is amended —

(i) in subsection (a)(1), by striking "and (e)" and inserting "(e), and (k)", and

(ii) in subsection (h), by striking "under section 40 or 40A" and inserting "under section 40, 40A, or 40B".

(B) Section 6427(e)(6) is amended by striking the "and" at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting ", and", and by adding at the end the following new subparagraph:

"(E) any qualified mixture of sustainable aviation fuel (as defined in section 6426(k)(3)) sold or used after December 31, 2026.".

(C) Section 6427(e) is amended in the heading by striking "OR ALTERNATIVE FUEL" and inserting, "ALTERNATIVE FUEL, OR SUSTAINABLE AVIATION FUEL".

(D) Section 6427(e)(1) is amended by inserting "or the sustainable aviation fuel mixture credit" after "alternative fuel mixture credit".

(E) Section 4101(a)(1) is amended by inserting "every person producing sustainable aviation fuel (as defined in section 40B or section 6426(k)(3))," before "and every person producing second generation biofuel".

(e) GUIDANCE. — Under rules prescribed by the Secretary of the Treasury (or the Secretary's delegate), the amount of the credit allowed under section 40B of the Internal Revenue Code of 1986 (as added by this subsection) shall be properly reduced to take into account any benefit provided with respect to sustainable aviation fuel (as defined in such section 40B) by reason of the application of section 6426 or section 6427(e).

(f) AMOUNT OF CREDIT INCLUDED IN GROSS INCOME. — Section 87 is amended by striking "and" in 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) the sustainable aviation fuel credit determined with respect to the taxpayer for the taxable year under section 40B(a).".

(g) EFFECTIVE DATE. — The amendments made by this section shall apply to fuel sold or used after December 31, 2022.

SEC. 136204. CLEAN HYDROGEN.

(a) CREDIT FOR PRODUCTION OF CLEAN HYDROGEN. —

(1) 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. 45X. CREDIT FOR PRODUCTION OF CLEAN HYDROGEN.

"(a) AMOUNT OF CREDIT. — For purposes of section 38, the clean hydrogen production credit for any taxable year is an amount equal to the product of —

"(1) the applicable amount, multiplied by

"(2) the kilograms of qualified clean hydrogen produced by the taxpayer during such taxable year at a qualified clean hydrogen production facility during the 10-year period beginning on the date such facility was originally placed in service.

"(b) APPLICABLE AMOUNT. —

"(1) IN GENERAL. — For purposes of subsection (a)(1), the applicable amount shall be an amount equal to the applicable percentage of $0.60. If any amount as determined under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

"(2) APPLICABLE PERCENTAGE. — For purposes of paragraph (1), the term 'applicable percentage' shall be determined as follows:

"(A) In the case of any qualified clean hydrogen which is produced by a facility that is placed in service before January 1, 2027 through a process that results in a lifecycle greenhouse gas emissions rate of —

"(i) not greater than 6 kilograms of CO2e per kilogram of hydrogen, and

"(ii) not less than 4 kilograms of CO2e per kilogram of hydrogen, the applicable percentage shall be 15 percent.

"(B) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of —

"(i) less than 4 kilograms of CO2e per kilogram of hydrogen, and

"(ii) not less than 2.5 kilograms of CO2e per kilogram of hydrogen, the applicable percentage shall be 20 percent.

"(C) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of —

"(i) less than 2.5 kilograms of CO2e per kilogram of hydrogen, and

"(ii) not less than 1.5 kilograms of CO2e per kilogram of hydrogen, the applicable percentage shall be 25 percent.

"(D) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of —

"(i) less than 1.5 kilograms of CO2e per kilogram of hydrogen, and

"(ii) not less than 0.45 kilograms of CO2e per kilogram of hydrogen, the applicable percentage shall be 33.4 percent.

"(E) In the case of any 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, the applicable percentage shall be 100 percent.

"(3) INFLATION ADJUSTMENT. — The $0.60 amount in paragraph (1) shall be adjusted by multiplying such amount by the inflation adjustment factor (as determined under section 45(e)(2), determined by substituting '2020' for '1992' in subparagraph (B) thereof) for the calendar year in which the qualified clean hydrogen is produced. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

"(c) DEFINITIONS. — For purposes of this section —

"(1) LIFECYCLE GREENHOUSE GAS EMISSIONS. —

"(A) IN GENERAL. — Subject to subparagraph (B), 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 (42 U.S.C. 7545(o)(1)), as in effect on the date of enactment of this section.

"(B) GREET MODEL. — The term 'lifecycle greenhouse gas emissions' shall only include 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 (commonly referred to as the 'GREET model') developed by Argonne National Laboratory, or a successor model (as determined by the Secretary).

"(2) QUALIFIED CLEAN HYDROGEN. —

"(A) IN GENERAL. — The term 'qualified clean hydrogen' means hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of not greater than 6 kilograms of CO2e per kilogram of hydrogen.

"(B) ADDITIONAL REQUIREMENTS. — Such term shall not include any hydrogen unless such hydrogen is produced —

"(i) in the United States (as defined in section 638(1) or a possession of the United States (as defined in section 638(2)),

"(ii) in the ordinary course of a trade or business of the taxpayer, and

"(iii) for sale or use, as verified by an unrelated third party of such production and sale or use in such form or manner as the Secretary may prescribe under subsection (f)(2).

"(3) QUALIFIED CLEAN HYDROGEN PRODUCTION FACILITY. —

"(A) IN GENERAL. — The term 'qualified clean hydrogen production facility' means a facility owned by the taxpayer which produces qualified clean hydrogen and which meets the requirements of subparagraph (B).

"(B) TERMINATION. — The term 'qualified clean hydrogen production facility' shall not include any facility the construction of which begins after December 31, 2028.

"(d) SPECIAL RULES. —

"(1) TREATMENT OF FACILITIES OWNED BY MORE THAN 1 TAXPAYER. — Rules similar to the rules section 45(e)(3) shall apply for purposes of this section.

"(2) COORDINATION WITH CREDIT FOR CARBON OXIDE SEQUESTRATION. — No credit shall be allowed under this section with respect to any 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.

"(e) INCREASED CREDIT AMOUNT FOR QUALIFIED CLEAN HYDROGEN PRODUCTION FACILITIES. —

"(1) IN GENERAL. — In the case of any qualified clean hydrogen production facility which satisfies the requirements of paragraph (2), the amount of the credit determined under subsection (a) with respect to qualified clean hydrogen described in subsection (b)(2) shall be equal to such amount multiplied by 5 (determined without regard to this sentence).

"(2) REQUIREMENTS. — A facility meets the requirements of this subparagraph if it is one of the following:

"(A) A facility —

"(i) the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3) and (4), and

"(ii) which meets the requirements of paragraph (3) with respect to construction, alteration, or repair of facilities which occurs after such date.

"(B) A facility which satisfies the requirements of paragraphs (3) and (4).

"(3) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this subparagraph with respect to any qualified clean hydrogen production facility are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in —

"(i) the construction of such facility, and

"(ii) for the period of the taxable year which is within the 10-year period beginning on the date the facility was originally placed in service, the alteration or repair of such facility, shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. For purposes of determining an increased credit amount under paragraph (1) for a taxable year, the requirement under clause (ii) of this paragraph is applied to such taxable year in which the alteration or repair of qualified facility occurs.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — Rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(4) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(5) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of establishing the requirements of this subsection.

"(f) REGULATIONS. — Not later than 1 year after the date of enactment of this section, the Secretary shall issue regulations or other guidance to carry out the purposes of this section, including regulations or other guidance —

"(1) for determining lifecycle greenhouse gas emissions, and

"(2) which require verification by unrelated third parties of the production and sale or use of qualified clean hydrogen with respect to which credit is otherwise allowed under this section.".

(2) ELECTIVE PAYMENT OF CREDIT. —

(A) IN GENERAL. — Section 6417(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(8) So much of the the credit for production of clean hydrogen determined under section 45X as is attributable to qualified clean hydrogen production facilities which are originally placed in service after December 31, 2011, and with respect to which an election is made under subsection (c)(3).".

(B) ELECTION. — Section 6417(c)(3), as amended by the preceding provisions of this Act, is amended by adding at the end the following new subparagraph:

"(D) CREDIT FOR PRODUCTION OF CLEAN HYDROGEN. — In the case of the credit described in subsection (b)(8), any election under this subsection shall —

"(i) apply separately with respect to each qualified clean hydrogen production facility,

"(ii) be made for the taxable year in which the facility is placed in service (or within 90 days of date of enactment in the case of facilities placed in service before December 31, 2021),

"(iii) shall apply to such taxable year and all subsequent taxable years with respect to such facility.".

(3) CREDIT REDUCED FOR TAX-EXEMPT BONDS. — Section 45X(d), as added by this section, is amended by adding at the end the following new paragraph:

"(3) CREDIT REDUCED FOR TAX-EXEMPT BONDS. — Rules similar to the rule under section 45(b)(3) shall apply for purposes of this section.".

(4) CONFORMING AMENDMENTS. —

(A) Section 38(b) is amended —

(i) in paragraph (34), by striking "plus" at the end,

(ii) in paragraph (35), by striking the period at the end and inserting ", plus", and

(iii) by adding at the end the following new paragraph:

"(36) the clean hydrogen production credit determined under section 45X(a).".

(B) The table of sections for subpart D of part IV of subchapter A of chapter 1 amended by adding at the end the following new item:

"Sec. 45X. Credit for production of clean hydrogen.".

(5) EFFECTIVE DATES. —

(A) The amendments made by paragraphs (1), (2), and (4) of this subsection shall apply to hydrogen produced after December 31, 2021.

(B) The amendment made by paragraph (3) shall apply to facilities the construction of which begins after December 31, 2021.

(b) CREDIT FOR ELECTRICITY PRODUCED FROM RENEWABLE RESOURCES ALLOWED IF ELECTRICITY IS USED TO PRODUCE CLEAN HYDROGEN. —

(1) IN GENERAL. — Section 45(e) is amended by adding at the end the following new paragraph:

"(13) SPECIAL RULE FOR ELECTRICITY USED AT A QUALIFIED CLEAN HYDROGEN PRODUCTION FACILITY. — Electricity produced by the taxpayer shall be treated as sold by such taxpayer to an unrelated person during the taxable year if such electricity is used during such taxable year by the taxpayer or a person related to the taxpayer at a qualified clean hydrogen production facility (as defined in section 45X(c)(3)) to produce qualified clean hydrogen (as defined in section 45X(c)(2)) during the 10 year period after such facility is placed in service. The Secretary shall issue such regulations or other guidance as the Secretary determines appropriate to carry out the purposes of this paragraph, including regulations or other guidance to require verification by unrelated third parties of the production and use of electricity to which this paragraph applies.".

(2) EFFECTIVE DATE. — The amendment made by this subsection shall apply to electricity produced after December 31, 2021.

(c) ELECTION TO TREAT CLEAN HYDROGEN PRODUCTION FACILITIES AS ENERGY PROPERTY. —

(1) IN GENERAL. — Section 48(a) is amended by adding at the end the following new paragraph:

"(16) ELECTION TO TREAT CLEAN HYDROGEN PRODUCTION FACILITIES AS ENERGY PROPERTY. —

"(A) IN GENERAL. — In the case of any qualified property (as defined in paragraph (5)(D)) which is part of a specified clean hydrogen production facility —

"(i) such property shall be treated as energy property for purposes of this section, and

"(ii) the energy percentage with respect to such property is —

"(I) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (A) of section 45X(b)(2), 0.9 percent,

"(II) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (B) of such section, 1.2 percent,

"(III) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (C) of such section, 1.5 percent,

"(IV) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (D) of such section, 2 percent, and

"(V) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in subparagraph (E) of such section, 6 percent.

"(B) DENIAL OF PRODUCTION CREDIT. — No credit shall be allowed under section 45X 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.

"(C) SPECIFIED CLEAN HYDROGEN PRODUCTION FACILITY. — For purposes of this paragraph, the term 'specified clean hydrogen production facility' means any qualified clean hydrogen production facility (as defined in section 45X(c)(3)) or any portion of such facility —

"(i) which is placed in service after December 31, 2021, and

"(ii) with respect to which —

"(I) no credit has been allowed under section 45X or 45Q, and

"(II) the taxpayer makes an irrevocable election to have this paragraph apply.

"(D) QUALIFIED CLEAN HYDROGEN. — For purposes of this paragraph, the term 'qualified clean hydrogen' has the meaning given such term by section 45X(c)(2).

"(E) REGULATIONS. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which —

"(i) requires verification by one or more unrelated third parties that the facility produces hydrogen which is consistent with the hydrogen that such facility was designed and expected to produce under subparagraph (A)(ii), and

"(ii) recaptures so much of any credit allowed under this section as exceeds the amount of the credit which would have been allowed if the expected production were consistent with the actual verified production (or all of the credit so allowed in the absence of such verification).".

(2) EFFECTIVE DATE. — The amendments made by this subsection shall apply to property placed in service after December 31, 2021 and, for any property the construction of which begins prior to January 1, 2022, only to the extent of the basis thereof attributable to the construction, reconstruction, or erection after December 31, 2021.

(d) TERMINATION OF EXCISE TAX CREDIT FOR HYDROGEN. —

(1) IN GENERAL. — Section 6426(d)(2) is amended by striking subparagraph (D) and by redesignating subparagraphs (E), (F), and (G) as subparagraphs (D), (E), and (F), respectively.

(2) CONFORMING AMENDMENT. — Section 6426(e)(2) is amended by striking "(F)" and inserting "(E)".

(3) EFFECTIVE DATE. — The amendments made by this subsection shall apply to fuel sold or used after December 31, 2021.

PART 3 — GREEN ENERGY AND EFFICIENCY INCENTIVES FOR INDIVIDUALS

SEC. 136301. EXTENSION, INCREASE, AND MODIFICATIONS OF NONBUSINESS ENERGY PROPERTY CREDIT.

(a) EXTENSION OF CREDIT. — Section 25C(g)(2) is amended by striking "December 31, 2021" and inserting "December 31, 2031".

(b) ALLOWANCE OF CREDIT. — Section 25C(a) is amended to read as follows:

"(a) ALLOWANCE OF CREDIT. — In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 30 percent of the sum of —

"(1) the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during such taxable year, and

"(2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during such taxable year.".

(c) APPLICATION OF ANNUAL LIMITATION IN LIEU OF LIFETIME LIMITATION. — Section 25C(b) is amended to read as follows:

"(b) LIMITATIONS. —

"(1) IN GENERAL. — The credit allowed under this section with respect to any taxpayer for any taxable year shall not exceed $1,200.

"(2) ENERGY PROPERTY. — The credit allowed under this subsection by reason of subsection (a)(1) with respect to any taxpayer for any taxable year shall not exceed, with respect to any item of qualified energy property, $600.

"(3) WINDOWS. — The credit allowed under this section by reason of subsection (a)(1) with respect to any taxpayer for any taxable year shall not exceed, in the aggregate with respect to all exterior windows and skylights, $600.

"(4) DOORS. — The credit allowed under this section by reason of subsection (a)(1) with respect to any taxpayer for any taxable year shall not exceed —

"(A) $250 in the case of any exterior door, and

"(B) $500 in the aggregate with respect to all exterior doors.

"(5) CERTAIN PROPERTY EXCLUDED FROM LIMITATION. — Amounts paid or incurred for property described in clause (i) or (ii) of subsection (d)(2)(A) or subsection (d)(2)(B) shall not be subject to the limitations in paragraphs (1) and (2) or factored in for purposes of calculating the limitation under such paragraph.".

(d) MODIFICATIONS RELATED TO QUALIFIED ENERGY EFFICIENCY IMPROVEMENTS. —

(1) STANDARDS FOR ENERGY EFFICIENT BUILDING ENVELOPE COMPONENTS. — Section 25C(c)(2) is amended by striking "meets — " and all that follows through the period at the end and inserting the following: "meets —

"(A) in the case of an exterior window or skylight, Energy Star most efficient certification requirements

"(B) in the case of any other component, the prescriptive criteria for such component established by the most recent International Energy Conservation Code standard in effect as of the beginning of the calendar year which is 2 years prior to the calendar year in which such component is placed in service.".

(2) ROOFS NOT TREATED AS BUILDING ENVELOPE COMPONENTS. — Section 25C(c)(3) is amended by adding "and" at the end of subparagraph (B), by striking ", and" at the end of subparagraph (C) and inserting a period, and by striking subparagraph (D).

(3) AIR SEALING INSULATION ADDED TO DEFINITION OF BUILDING ENVELOPE COMPONENT. — Section 25C(c)(3)(A) is amended by striking "material or system" and inserting "material or system, including air sealing material or system,".

(e) MODIFICATION OF RESIDENTIAL ENERGY PROPERTY EXPENDITURES. — Section 25C(d) is amended to read as follows:

"(d) RESIDENTIAL ENERGY PROPERTY EXPENDITURES. — For purposes of this section —

"(1) IN GENERAL. — The term 'residential energy property expenditures' means expenditures made by the taxpayer for qualified energy property which is —

"(A) installed on or in connection with a dwelling unit located in the United States and used as a residence by the taxpayer, and

"(B) originally placed in service by the taxpayer.

Such term includes expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property.

"(2) QUALIFIED ENERGY PROPERTY. — The term 'qualified energy property' means:

"(A) 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:

"(i) An electric heat pump water heater.

"(ii) An electric heat pump.

"(iii) A central air conditioner.

"(iv) A natural gas, propane, or oil water heater.

"(v) A natural gas, propane, or oil furnace or hot water boiler.

"(B) A biomass stove —

"(i) which 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) which has a thermal efficiency rating of at least 75 percent (measured by the higher heating value of the fuel).

"(C) Any oil furnace or hot water boiler which —

"(i) is placed in service after December 31, 2021 and before January 1, 2027 and meets or exceeds 2021 Energy Star efficiency criteria and is rated by the manufacturer for use with eligible fuel blends of 20 percent or more, or

"(ii) is placed in service after December 31, 2026 and achieves an annual fuel utilization efficiency rate of not less than 90 and is rated by the manufacturer for use with eligible fuel blends of 50 percent or more.

"(3) ELIGIBLE FUEL. — For purposes of paragraph (2), the term 'eligible fuel' means biodiesel and renewable diesel (within the meaning of section 40A) and second generation biofuel (within the meaning of section 40).".

(f) HOME ENERGY AUDITS. —

(1) IN GENERAL. — Section 25C(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) 30 percent of the amount paid or incurred by the taxpayer during the taxable year for home energy audits.".

(2) LIMITATION. — Section 25C(b), as amended by subsection (c), is amended adding at the end the following new paragraph:

"(5) HOME ENERGY AUDITS. —

"(A) DOLLAR LIMITATION. — The amount of the credit allowed under this section by reason of subsection (a)(3) shall not exceed $150.

"(B) SUBSTANTIATION REQUIREMENT. —

No credit shall be allowed under this section by reason of subsection (a)(3) unless the taxpayer includes with the taxpayer's return of tax such information or documentation as the Secretary may require.".

(3) HOME ENERGY AUDITS. —

(A) IN GENERAL. — Section 25C, as amended by subsection (a), is amended by redesignating subsections (e), (f), and (g), as subsections (f), (g), and (h), respectively, and by inserting after subsection (d) the following new subsection:

"(e) HOME ENERGY AUDITS. — For purposes of this section, the term 'home energy audit' means an inspection and written report with respect to a dwelling unit located in the United States and owned or used by the taxpayer as the taxpayer's principal residence (within the meaning of section 121) which —

"(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 (not later than 365 days after the date of the enactment of this subsection) in regulations or other guidance.".

(B) CONFORMING AMENDMENT. — Section 1016(a)(33) is amended by striking "section 25C(f)" and inserting "section 25C(g)".

(4) LACK OF SUBSTANTIATION TREATED AS MATHEMATICAL OR CLERICAL ERROR. — Section 6213(g)(2) is amended —

(A) in subparagraph (P), by striking "and" at the end,

(B) in subparagraph (Q), by striking the period at the end and inserting ", and", and

(C) by adding at the end the following:

"(R) an omission of correct information or documentation required under section 25C(b)(5)(B) (relating to home energy audits) to be included on a return.".

(g) IDENTIFICATION NUMBER REQUIREMENT. —

(1) IN GENERAL. — Section 25C, as amended by subsections (a) and (f), is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection:

"(h) PRODUCT IDENTIFICATION NUMBER REQUIREMENT. —

"(1) IN GENERAL. — No credit shall be allowed under subsection (a) with respect to any item of specified property placed in service after December 31, 2023, unless —

"(A) such item is produced by a qualified manufacturer, and

"(B) the taxpayer includes the qualified product identification number of such item on the return of tax for the taxable year.

"(2) QUALIFIED PRODUCT IDENTIFICATION NUMBER. — For purposes of this section, the term 'qualified product identification number' means, with respect to any item of specified property, the product identification number assigned to such item by the qualified manufacturer pursuant to the methodology referred to in paragraph (3).

"(3) QUALIFIED MANUFACTURER. — For purposes of this section, the term 'qualified manufacturer' means any manufacturer of specified property which enters into an agreement with the Secretary which provides that such manufacturer will —

"(A) assign a product identification number to each item of specified property produced by such manufacturer utilizing a methodology that will ensure that such number (including any alphanumeric) is unique to each such item (by utilizing numbers or letters which are unique to such manufacturer or by such other method as the Secretary may provide),

"(B) label such item with such number in such manner as the Secretary may provide, and

"(C) make periodic written reports to the Secretary (at such times and in such manner as the Secretary may provide) of the product identification numbers so assigned and including such information as the Secretary may require with respect to the item of specified property to which such number was so assigned.

"(4) SPECIFIED PROPERTY. — For purposes of this subsection, the term 'specified property' means any qualified energy property and any property described in subparagraph (B) or (C) of subsection (c)(3).".

(2) OMISSION OF CORRECT PRODUCT IDENTIFICATION NUMBER TREATED AS MATHEMATICAL OR CLERICAL ERROR. — Section 6213(g)(2), as amended by the preceding provisions of this Act, is amended —

(A) in subparagraph (Q), by striking "and" at the end,

(B) in subparagraph (R), by striking the period at the end and inserting ", and", and

(C) by adding at the end the following:

"(S) an omission of a correct product identification number required under section 25C(h) (relating to credit for nonbusiness energy property) to be included on a return.".

(h) EFFECTIVE DATES. —

(1) IN GENERAL. — Except as otherwise provided by this subsection, the amendments made by this section shall apply to property placed in service after December 31, 2021.

(2) HOME ENERGY AUDITS. — The amendments made by subsection (f) shall apply to amounts paid or incurred after December 31, 2021.

(3) IDENTIFICATION NUMBER REQUIREMENT. — The amendments made subsection (g) shall apply to property placed in service after December 31, 2023.

SEC. 136302. RESIDENTIAL ENERGY EFFICIENT PROPERTY.

(a) EXTENSION OF CREDIT. —

(1) IN GENERAL. — Section 25D(h) is amended by striking "December 31, 2023" and inserting "December 31, 2033".

(2) APPLICATION OF PHASEOUT. — Section 25D(g) is amended —

(A) by striking "before January 1, 2023" in paragraph (2) and inserting "before January 1, 2022",

(B) by striking "and" at the end of paragraph (2),

(C) by redesignating paragraph (3) as paragraph (5) and by inserting after paragraph

(2) the following new paragraphs:

"(3) in the case of property placed in service after December 31, 2021, and before January 1, 2032, 30 percent,

"(4) in the case of property placed in service after December 31, 2031, and before January 1, 2033, 26 percent, and", and

(D) by striking "December 31, 2022, and before January 1, 2024" in paragraph (5) (as so redesignated) and inserting "December 31, 2032, and before January 1, 2034".

(b) RESIDENTIAL ENERGY EFFICIENT PROPERTY CREDIT FOR BATTERY STORAGE TECHNOLOGY. —

(1) IN GENERAL. — Section 25D(a) is amended by striking "and" at the end of paragraph (5) and by inserting after paragraph (6) the following new paragraph:

"(7) the qualified battery storage technology expenditures,".

(2) QUALIFIED BATTERY STORAGE TECHNOLOGY EXPENDITURE. — Section 25D(d) is amended by adding at the end the following new paragraph:

"(7) QUALIFIED BATTERY STORAGE TECHNOLOGY EXPENDITURE. — The term 'qualified battery storage technology expenditure' means an expenditure for battery storage technology which —

"(A) is installed in connection with a dwelling unit located in the United States and used as a residence by the taxpayer, and

"(B) has a capacity of not less than 3 kilowatt hours.".

(c) CREDIT MADE REFUNDABLE; INSTALLER REQUIREMENTS; TREATMENT OF CERTAIN POSSESSIONS. — Section 25D is amended by redesignating subsection (h) as subsection (k) and by inserting after subsection (g) the following new subsections:

"(h) CREDIT MADE REFUNDABLE FOR TAXABLE YEARS AFTER 2023. — In the case of any taxable year beginning after December 31, 2023, the credit allowed under subsection (a) (excluding any credit carried forward from a previous taxable year) shall be treated as a credit allowed under subpart C (and not allowed under this subpart).

"(i) REQUIREMENT FOR QUALIFIED INSTALLER. —

"(1) IN GENERAL. — No credit shall be allowed under this section with respect to any property described in subsection (a) placed in service after December 31, 2023 unless —

"(A) such property is installed by a qualified installer, and

"(B) the taxpayer includes the qualified installation identification number described in paragraph (3) on the return of tax for the taxable year.

"(2) QUALIFIED INSTALLER. —

"(A) IN GENERAL. — For purposes of this section, the term 'qualified installer' means an installer who enters into an agreement with the Secretary which provides that such installer will, with respect to expenditures described in subsection (a) in connection with the residence of a taxpayer —

"(i) provide the taxpayer with a qualified installation identification number and a written receipt of the purchase and installation of such property in a manner prescribed by the Secretary, and

"(ii) make periodic written reports to the Secretary (in such manner as the Secretary may provide) of installation identification numbers assigned by the installer corresponding to such expenditures, including such information as the Secretary may require with respect to such expenditures.

"(B) INSTALLER DEEMED TO MEET REQUIREMENT. — For purposes of subparagraph (A), to the extent provided by the Secretary, an installer may be deemed to meet the requirement under clause (ii) of such subparagraph on the basis of information available to the Secretary which the Secretary determines is reasonably reliable for purposes of determining the amount of qualified expenditures under subsection (a) made by a taxpayer in connection with a residence of such taxpayer.

"(3) QUALIFIED INSTALLATION IDENTIFICATION NUMBER. — For purposes of this section, the term 'qualified installation identification number' means a unique identification number with respect to expenditures described in subsection (a) in connection with a residence of a taxpayer that is installed by a qualified installer.

"(4) REGISTRATION. — The Secretary may require such information or registration of a qualified installer as the Secretary deems necessary or appropriate for purposes of preventing duplication, fraud, or improper claims with respect to property described in subsection (a). Under regulations or other guidance prescribed by the Secretary, the registration of any person under this section may be denied, revoked, or suspended if the Secretary determines that such denial, revocation, or suspension is necessary to prevent duplication, fraud, or improper claims with respect to property described in subsection (a).

"(j) TREATMENT OF CERTAIN POSSESSIONS. —

"(1) PAYMENTS TO POSSESSIONS WITH MIRROR CODE TAX SYSTEMS. — The Secretary shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of the provisions of this section. Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.

"(2) PAYMENTS TO OTHER POSSESSIONS. — The Secretary shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the provisions of this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan which has been approved by the Secretary under which such possession will promptly distribute such payments to its residents.

"(3) MIRROR CODE TAX SYSTEM; TREATMENT OF PAYMENTS. — Rules similar to the rules of paragraphs (3), (4), and (5) of section 21(h) shall apply for purposes of this section.".

(d) CERTAIN EXPENDITURES DISALLOWED. — Section 25D is amended —

(1) in subsection (a), by adding "and" at the end of paragraph (4), by striking the comma at the end of paragraph (5) and inserting a period, and by striking paragraph (6), and

(2) in subsection (d), by striking paragraph (6).

(e) CARRYFORWARD OF UNUSED CREDIT DISALLOWED. — Section 25D is amended by striking subsection (c).

(f) CONFORMING AMENDMENT. — Section 6213(g)(2), as amended by the preceding provisions of this Act, is amended —

(1) in subparagraph (T), by striking "and" at the end,

(2) in subparagraph (U), by striking the period at the end and inserting ", and", and

(3) by adding at the end the following:

"(V) an omission of a correct qualified installation identification number required under section 25D (relating to credit for residential energy efficient property) to be included on a return.".

(g) EFFECTIVE DATES. —

(1) The amendments made by subsections (a), (b), (d), and (f) shall apply to expenditures made after December 31, 2021.

(2) The amendments made by subsections (c) and (e) shall apply to expenditures made after December 31, 2022.

SEC. 136303. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

(a) PLACED IN SERVICE REQUIREMENT. — Section 179D(c)(2) is amended to read as follows:

"(2) REFERENCE STANDARD 90.1. — The term 'Reference Standard 90.1' means, with respect to any property, the more recent of —

"(A) Standard 90.1-2007 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America, or

"(B) the most recent Standard 90.1 published by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America for which the Department of Energy has issued a final determination and which has been affirmed by the Secretary for purposes of this section not later than the date that is 4 years before the date such property is placed in service.".

(b) TEMPORARY INCREASE IN DEDUCTION, ETC.. — Section 179D is amended by adding at the end the following:

"(i) TEMPORARY RULES. —

"(1) PERIOD OF APPLICATION. — The provisions of this subsection shall apply only to taxable years beginning after December 31, 2021, and before January 1, 2032.

"(2) MODIFICATION OF EFFICIENCY STANDARD. — Subsection (c)(1)(D) shall be applied by substituting '25' for '50'.

"(3) MAXIMUM AMOUNT OF DEDUCTION. —

"(A) IN GENERAL. — The deduction under subsection (a) with respect to any building for any taxable year shall not exceed the excess (if any) of —

"(i) the product of —

"(I) the applicable dollar value, and

"(II) the square footage of the building, over

"(ii) the aggregate amount of the deductions under subsection (a) and paragraph (6) with respect to the building for the 3 taxable years immediately preceding such taxable year (or, in the case of any such deduction allowable to a person other than the taxpayer, for any taxable year ending during the 4-taxable-year period ending with such taxable year).

"(B) APPLICABLE DOLLAR VALUE. — For purposes of paragraph (3)(A)(i), the applicable dollar value shall be an amount equal to $0.50 increased (but not above $1.00) by $0.02 for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25 percent.

"(C) APPLICATION OF INFLATION ADJUSTMENT. — Subsection (g) shall be applied —

"(i) by substituting '2022' for '2020',

"(ii) by substituting 'subsection (i)(3)(B)' for 'subsection (b) or subsection (d)(1)(A)', and

"(iii) by substituting '2021' for '2019'.

"(D) LIMITATION TO APPLY IN LIEU OF CURRENT LIMITATION AND PARTIAL ALLOWANCE. — Subsections (b) and (d)(1) shall not apply.

"(4) INCREASED CREDIT AMOUNT FOR CERTAIN PROPERTY. —

"(A) IN GENERAL. — In the case of any property which satisfies the requirements of subparagraph (B), paragraph (3)(B) shall be applied by substituting '$2.50' for '$0.50', '$.10' for '$.02', and '$5.00' for '$1.00'.

"(B) PROJECT REQUIREMENTS. — A project meets the requirements of this subparagraph if it is one of the following:

"(i) A building or qualified retrofit plan the construction of which begins prior to 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (5) and (6).

"(ii) A building or qualified retrofit plan the construction of which satisfies the requirements of paragraphs (5) and (6).

"(5) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this subparagraph with respect to any project are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in the construction of any property or with respect to building modifications made as part of a qualified retrofit plan shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — Rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(6) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(7) ALLOCATION OF DEDUCTION BY CERTAIN TAX-EXEMPT ENTITIES. —

"(A) IN GENERAL. — A specified tax-exempt entity shall be treated in the same manner as a Federal, State, or local government for purposes of applying subsection (d)(4).

"(B) SPECIFIED TAX-EXEMPT ENTITY. —

For purposes of this paragraph, the term 'specified tax-exempt entity' means —

"(i) the United States, any State or political subdivision thereof, any possession of the United States, or any agency or instrumentality of any of the foregoing,

"(ii) an Indian tribal government (as defined in section 48(e)(4)(F)(ii)) or Alaska Native Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)), and

"(iii) any organization exempt from tax imposed by this chapter.

"(8) ALTERNATIVE DEDUCTION FOR ENERGY EFFICIENT RETROFIT BUILDING PROPERTY. —

"(A) IN GENERAL. — In the case of a taxpayer which elects (at such time and in such manner as the Secretary may provide) the application of this paragraph with respect to any qualified building, there shall be allowed as a deduction for the taxable year which includes the date of the qualifying final certification with respect to the qualified retrofit plan of such building, an amount equal to the lesser of —

"(i) the excess described in paragraph (3) (determined by substituting 'energy usage intensity' for 'total annual energy and power costs' in subparagraph (B) thereof), or

"(ii) the aggregate adjusted basis (determined after taking into account all adjustments with respect to such taxable year other than the reduction under subsection (e)) of energy efficient retrofit building property placed in service by the taxpayer pursuant to such qualified retrofit plan.

"(B) QUALIFIED RETROFIT PLAN. — For purposes of this paragraph, the term 'qualified retrofit plan' means a written plan prepared by a qualified professional which specifies modifications to a building which, in the aggregate, are expected to reduce such building's energy usage intensity by 25 percent or more in comparison to the baseline energy usage intensity of such building. Such plan shall provide for a qualified professional to —

"(i) as of any date during the 1-year period ending on the date of the first certification described in clause (ii), certify the energy usage intensity of such building as of such date,

"(ii) certify the status of property installed pursuant to such plan as meeting the requirements of clauses (ii) and (iii) subparagraph (C), and

"(iii) as of any date that is more than 1 year after completion of the plan, certify the energy usage intensity of such building as of such date.

"(C) ENERGY EFFICIENT RETROFIT BUILDING PROPERTY. — For purposes of this paragraph, the term 'energy efficient retrofit building property' means property —

"(i) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

"(ii) which is installed on or in any qualified building,

"(iii) which is installed as part of —

"(I) the interior lighting systems,

"(II) the heating, cooling, ventilation, and hot water systems, or

"(III) the building envelope, and

"(iv) which is certified in accordance with subparagraph (B)(ii) as meeting the requirements of clauses (ii) and (iii).

"(D) QUALIFIED BUILDING. — For purposes of this paragraph, the term 'qualified building' means any building which —

"(i) is located in the United States, and

"(ii) was originally placed in service not less than 5 years before the establishment of the qualified retrofit plan with respect to such building.

"(E) QUALIFYING FINAL CERTIFICATION. — For purposes of this paragraph, the term 'qualifying final certification' means, with respect to any qualified retrofit plan, the certification described in subparagraph (B)(iii) if the energy usage intensity certified in such certification is not more than 75 percent of the baseline energy usage intensity of the building.

"(F) BASELINE ENERGY USAGE INTENSITY. —

"(i) IN GENERAL. — The term 'baseline energy usage intensity' means the energy usage intensity certified under subparagraph (B)(i), as adjusted to take into account weather as compared to the energy usage intensity determined under subparagraph (B)(iii).

"(ii) DETERMINATION OF ADJUSTMENT. — For purposes of clause (i), the adjustments described in such clause shall be determined in such manner as the Secretary may provide.

"(G) OTHER DEFINITIONS. — For purposes of this paragraph —

"(i) ENERGY USAGE INTENSITY. — The term 'energy usage intensity' means the annualized, measured site energy usage intensity determined in accordance with such regulations or other guidance as the Secretary may provide and measured in British thermal units.

"(ii) QUALIFIED PROFESSIONAL. —

The term 'qualified professional' means an individual who is a licensed architect or a licenced engineer and meets such other requirements as the Secretary may provide.

"(H) COORDINATION WITH DEDUCTION OTHERWISE ALLOWED UNDER SUBSECTION (a). —

"(i) IN GENERAL. — In the case of any building with respect to which an election is made under subparagraph (A), the term 'energy efficient commercial building property' shall not include any energy efficient retrofit building property with respect to which a deduction is allowable under this paragraph.

"(ii) CERTAIN RULES NOT APPLICABLE. —

"(I) IN GENERAL. — Except as provided in subclause (II), subsection (d) shall not apply for purposes of this paragraph.

"(II) ALLOCATION OF DEDUCTION BY CERTAIN TAX-EXEMPT ENTITIES. — Rules similar to subsection (d)(4) (determined after application of paragraph (5)) shall apply for purposes of this paragraph.".

(c) APPLICATION TO REAL ESTATE INVESTMENT TRUST EARNINGS AND PROFITS. — Section 312(k)(3)(B) is amended —

(1) by striking "for purposes of computing the earnings and profits of a corporation" and inserting the following:

"(i) IN GENERAL. — For purposes of computing the earnings and profits of a corporation, except as provided in clause (ii)", and

(2) by adding at the end the following new clause:

"(ii) SPECIAL RULE. — In the case of a corporation that is a real estate investment trust, any amount deductible under section 179D shall be allowed in the year in which the property giving rise to such deduction is placed in service.".

(d) CONFORMING AMENDMENT. — Section 179D(d)(2) is amended by striking "not later than the date that is 2 years before the date that construction of such property begins" and inserting "not later than the date that is 4 years before the date such property is placed in service".

(e) EFFECTIVE DATE. —

(1) IN GENERAL. — Except as otherwise provided in this subsection, the amendment made by this section shall apply to taxable years beginning after December 31, 2021.

(2) ALTERNATIVE DEDUCTION FOR ENERGY EFFICIENT RETROFIT BUILDING PROPERTY. — Paragraph (8) of section 179D(i) of the Internal Revenue Code of 1986 (as added by this section), and any other provision of such section solely for purposes of applying such paragraph, shall apply to property placed in service after December 31, 2021 (in taxable years ending after such date) if such property is placed in service pursuant to qualified retrofit plan (within the meaning of such section) established after such date.

SEC. 136304. EXTENSION, INCREASE, AND MODIFICATIONS OF NEW ENERGY EFFICIENT HOME CREDIT.

(a) EXTENSION OF CREDIT. — Section 45L(g) is amended by striking "December 31, 2021" and inserting "December 31, 2031".

(b) INCREASE IN CREDIT AMOUNTS. — Section 45L(a)(2) is amended to read as follows:

"(2) APPLICABLE AMOUNT. — For purposes of paragraph (1), the applicable amount is an amount equal to —

"(A) in the case of a dwelling unit which is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes program —

"(i) that is described in subsection (c)(1)(A) (and not described in subsection (c)(1)(B)), $2,500, and

"(ii) that is described in subsection (c)(1)(B), $5000, and

"(B) in the case of a dwelling unit which is part of a building eligible to participate in the Energy Star Multifamily New Construction Program —

"(i) that is described in subsection (c)(1)(A) (and not described in subsection (c)(1)(B)), $500, and

"(ii) that is described in subsection (c)(1)(B), $1000.".

(c) MODIFICATION OF ENERGY SAVING REQUIREMENTS. — Section 45L(c) is amended to read as follows:

"(c) ENERGY SAVING REQUIREMENTS. —

"(1) IN GENERAL. — A dwelling unit meets the energy saving requirements of this subsection if —

"(A) such dwelling unit meets the requirements of paragraph (2) or (3) (whichever is applicable), or

"(B) such dwelling unit is certified as a zero energy ready home under the zero energy ready home program of the Department of Energy (or any successor program determined by the Secretary) as in effect on January 1, 2022.

"(2) SINGLE-FAMILY HOME REQUIREMENTS. — A dwelling unit meets the requirements of this paragraph if —

"(A) such dwelling unit meets —

"(i) 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

"(ii) in the case of a dwelling unit acquired after December 31, 2024, the Energy Star Single-Family New Homes National Program Requirements 3.2,

"(B) such dwelling unit meets 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, 2022 or January 1 of two calendar years prior to the date the dwelling unit was acquired), or

"(C) such dwelling unit meets the most recent Energy Star Manufactured Home National program requirements as in effect on the latter of January 1, 2022 or January 1 of two calendar years prior to the date such dwelling unit is acquired.

"(3) MULTI-FAMILY HOME REQUIREMENTS. — A dwelling unit meets the requirements of this paragraph if —

"(A) such dwelling unit meets the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on either January 1, 2022 or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later), and

"(B) such dwelling unit meets the most recent Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (as in effect on either January 1, 2022 or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later).".

(d) PREVAILING WAGE REQUIREMENT. — Section 45L is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection:

"(g) PREVAILING WAGE REQUIREMENT. —

"(1) IN GENERAL. — In the case of a qualifying residence described in subsection (b)(2)(B) meeting the prevailing wage requirements of paragraph (2), the credit amount allowed with respect to such residence shall be —

"(A) $2,500 in the case of a residence described in subparagraph (A) of subsection (c)(1) (and not described in subparagraph (B) of such subsection), and

"(B) $5,000 in the case of a residence described in (c)(1)(B).

"(2) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this paragraph with respect to any qualified residence are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in the construction of such residence shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — Rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(3) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of establishing the requirements of this subsection.".

(e) EFFECTIVE DATES. — The amendments made by this section shall apply to dwelling units acquired after December 31, 2021.

SEC. 136305. MODIFICATIONS TO INCOME EXCLUSION FOR CONSERVATION SUBSIDIES.

(a) IN GENERAL. — Section 136(a) is amended —

(1) by striking "any subsidy provided" and inserting "any subsidy —

"(1) provided",

(2) by striking the period at the end and inserting a comma, and

(3) by adding at the end the following new paragraphs:

"(2) provided (directly or indirectly) by a public utility to a customer, or by a State or local government to a resident of such State or locality, for the purchase or installation of any water conservation or efficiency measure,

"(3) provided (directly or indirectly) by a storm water management provider to a customer, or by a State or local government to a resident of such State or locality, for the purchase or installation of any storm water management measure, or

"(4) provided (directly or indirectly) by a State or local government to a resident of such State or locality for the purchase or installation of any wastewater management measure, but only if such measure is with respect to the taxpayer's principal residence.".

(b) CONFORMING AMENDMENTS. —

(1) DEFINITION OF WATER CONSERVATION OR EFFICIENCY MEASURE AND STORM WATER MANAGEMENT MEASURE. — Section 136(c) is amended —

(A) by striking "ENERGY CONSERVATION MEASURE" in the heading thereof and inserting "DEFINITIONS",

(B) by striking "IN GENERAL" in the heading of paragraph (1) and inserting "ENERGY CONSERVATION MEASURE", and

(C) by redesignating paragraph (2) as paragraph (5) and by inserting after paragraph (1) the following:

"(2) WATER CONSERVATION OR EFFICIENCY MEASURE. — For purposes of this section, the term 'water conservation or efficiency measure' means any evaluation of water use, or any installation or modification of property, the primary purpose of which is to reduce consumption of water or to improve the management of water demand with respect to one or more dwelling units.

"(3) STORM WATER MANAGEMENT MEASURE. — For purposes of this section, the term 'storm water management measure' means any installation or modification of property primarily designed to reduce or manage amounts of storm water with respect to one or more dwelling units.

"(4) WASTEWATER MANAGEMENT MEASURE. — For purposes of this section, the term 'wastewater management measure' means any installation or modification of property primarily designed to manage wastewater (including septic tanks and cesspools) with respect to one or more dwelling units.".

(2) DEFINITION OF PUBLIC UTILITY. — Section 136(c)(5) (as redesignated by paragraph (1)(C)) is amended by striking subparagraph (B) and inserting the following:

"(B) PUBLIC UTILITY. — The term 'public utility' means a person engaged in the sale of electricity, natural gas, or water to residential, commercial, or industrial customers for use by such customers.

"(C) STORM WATER MANAGEMENT PROVIDER. — The term 'storm water management provider' means a person engaged in the provision of storm water management measures to the public.

"(D) PERSON. — For purposes of subparagraphs (B) and (C), the term 'person' includes the Federal Government, a State or local government or any political subdivision thereof, or any instrumentality of any of the foregoing.".

(3) CLERICAL AMENDMENTS. —

(A) The heading for section 136 is amended —

(i) by inserting "AND WATER" after "ENERGY", and

(ii) by striking "PROVIDED BY PUBLIC UTILITIES".

(B) The item relating to section 136 in the table of sections of part III of subchapter B of chapter 1 is amended —

(i) by inserting "and water" after "energy", and

(ii) by striking "provided by public utilities".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to amounts received after December 31, 2018.

(d) NO INFERENCE. — Nothing in this Act or the amendments made by this Act shall be construed to create any inference with respect to the proper tax treatment of any subsidy received directly or indirectly from a public utility, a storm water management provider, or a State or local government for any water conservation measure or storm water management measure before January 1, 2019.

SEC. 136306. CREDIT FOR QUALIFIED WILDFIRE MITIGATION EXPENDITURES.

(a) IN GENERAL. — Subpart B of part IV of subchapter A of chapter 1 is amended by inserting after section 27 the following new section:

"SEC. 28. QUALIFIED WILDFIRE MITIGATION EXPENDITURES.

"(a) IN GENERAL. — There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 30 percent of the qualified wildfire mitigation expenditures paid or incurred by the taxpayer during such taxable year with respect to real property owned or leased by the taxpayer.

"(b) QUALIFIED WILDFIRE MITIGATION EXPENDITURES. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified wildfire mitigation expenditures' means any specified wildfire mitigation expenditure made pursuant to a qualified State wildfire mitigation program of a State which requires expenditures for wildfire mitigation to be paid both by the taxpayer and such State. Such term shall not include any item of expenditure unless the ratio of the State's expenditure for such item to the sum of the State's and taxpayer's expenditures for such item is not less than 25 percent.

"(2) SPECIFIED WILDFIRE MITIGATION EXPENDITURE. — The term 'specified wildfire mitigation expenditure' means, with respect to any real property owned or leased by the taxpayer, any amount paid or incurred to reduce the risk of wildfire by removing accumulations of vegetation (including establishing, expanding, or maintaining fuel breaks to serve as fire breaks) on such real property.

"(3) QUALIFIED STATE WILDFIRE MITIGATION PROGRAM. — The term 'qualified State wildfire mitigation program' means any program of a State the primary purpose of which is to mitigate the risk of wildfires in such State.

"(4) TREATMENT OF REIMBURSEMENTS. — Any amount originally paid or incurred by the taxpayer which is reimbursed by a State under a qualified wildfire mitigation program of such State shall be treated as paid by such State (and not by such taxpayer).

"(c) APPLICATION WITH OTHER CREDITS. —

"(1) BUSINESS CREDIT TREATED AS PART OF GENERAL BUSINESS CREDIT. — So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) that is attributable to expenditures made in the ordinary course of the taxpayer's trade or business (or, in the case of expenditures made by a State, would have been expenditures made in the ordinary course of the taxpayer's trade or business if made by the taxpayer) shall be treated as a credit listed in section 38(b) for taxable year (and not allowed under subsection (a)).

"(2) PERSONAL CREDIT. — For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.

"(d) REDUCTION OF CREDIT PERCENTAGE WHERE TAXPAYER EXPENDITURES LESS THAN 30 PERCENT. —

"(1) IN GENERAL. — If the expenditure percentage with respect to any item of qualified wildfire mitigation expenditure is less than 30 percent, subsection (a) shall be applied by substituting 'the expenditure percentage' for '30 percent' with respect to such item of expenditure.

"(2) EXPENDITURE PERCENTAGE. — For purposes of this section, the term 'expenditure percentage' means, with respect to any item of qualified wildfire mitigation expenditure any portion of which is paid or incurred by a State, the ratio (expressed as a percentage) of —

"(A) the taxpayer's expenditure for such item, divided by 

"(B) the sum of the taxpayer's and such State's expenditures for such item.

"(e) SPECIAL RULES. —

"(1) TREATMENT OF EXPENDITURES RELATED TO MARKETABLE TIMBER. — An expenditure shall not be taken into account for purposes of this section (whether made by the taxpayer or a State pursuant to a qualified State wildfire mitigation program of such State) if such expenditure is properly allocable to timber which is sold or exchanged by the taxpayer. The preceding sentence shall not apply to the extent that such amount exceeds the gain on such sale or exchange.

"(2) BASIS REDUCTION. — For purposes of this subtitle, if the basis of any property would (but for this paragraph) be determined by taking into account any qualified wildfire mitigation expenditure, the basis of such property shall be reduced by the amount of the credit allowed under subsection (a) with respect to such expenditure (determined without regard to subsection (c)).

"(3) DENIAL OF DOUBLE BENEFIT. — The amount of any deduction or other credit allowable under this chapter for any expenditure for which a credit is allowable under subsection (a) shall be reduced by the amount of credit allowed under such subsection for such expenditure (determined without regard to subsection (c)).".

(b) CONFORMING AMENDMENTS. —

(1) Section 38(b), as amended by the preceding provisions of this Act, is amended by striking "plus" at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting ", plus", and by adding at the end the following new paragraph:

"(37) the portion of the qualified wildfire mitigation expenditures credit to which section 28(c)(1) applies.".

(2) Section 1016(a) is amended by redesignating paragraphs (35) through (38) as paragraphs (36) through (39), respectively, and by inserting after paragraph (34) the following new paragraph:

"(35) to the extent provided in section 28(e)(2),".

(3) The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 27 the following new item:

"Sec. 28. Qualified wildfire mitigation expenditures.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to expenditures paid or incurred after the date of the enactment of this Act, in taxable years ending after such date.

PART 4 — GREENING THE FLEET AND ALTERNATIVE VEHICLES

SEC. 136401. REFUNDABLE NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE CREDIT FOR INDIVIDUALS.

(a) IN GENERAL. — Subpart C of part IV of subchapter A of chapter 1 is amended by inserting after section 36B the following new section:

"SEC. 36C. NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.

"(a) ALLOWANCE OF CREDIT. — In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the credit amount determined under subsection (b) with respect to a new qualified plug-in electric drive motor vehicle placed in service by the taxpayer during the taxable year.

"(b) CREDIT AMOUNT. —

"(1) IN GENERAL. — The amount determined under this subsection with respect to any new qualified plug-in electric drive motor vehicle is the sum of the amounts determined under paragraphs (2) through (5) with respect to such vehicle (not to exceed 50 percent of the purchase price of such vehicle).

"(2) BASE AMOUNT. — The amount determined under this paragraph is $4,000.

"(3) BATTERY CAPACITY. — In the case of a new qualified plug-in electric drive motor vehicle, the amount determined under this paragraph is $3,500 if —

"(A) in the case of a vehicle placed in service before January 1, 2027, such vehicle draws propulsion energy from a battery with not less than 40 kilowatt hours of capacity and has a gasoline tank capacity not greater than 2.5 gallons, and

"(B) in the case of a vehicle placed in service after December 31, 2026, such vehicle draws propulsion energy from a battery with not less than 50 kilowatt hours of capacity and has a gasoline tank capacity not greater than 2.5 gallons.

"(4) DOMESTIC ASSEMBLY. — In the case of a new qualified plug-in electric drive motor vehicle which satisfies the domestic assembly qualifications, the amount determined under this paragraph is $4,500.

"(5) DOMESTIC CONTENT. — In the case of a new qualified plug-in electric drive motor vehicle which satisfies domestic content qualifications, the amount determined under this paragraph is $500.

"(c) VEHICLE LIMITATION. — The number of new qualified plug-in electric drive motor vehicles taken in account under subsection (a) shall not exceed 1 per taxpayer per taxable year.

"(d) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME. —

"(1) IN GENERAL. — The amount of the credit allowable under subsection (a) for any taxable year shall be reduced (but not below zero) by $200 for each $1,000 (or fraction thereof) by which —

"(A) the lesser of —

"(i) the taxpayer's modified adjusted gross income for such taxable year, or

"(ii) the taxpayer's modified adjusted gross income for the preceding taxable year, exceeds

"(B) the threshold amount.

For purposes of the preceding sentence, 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) THRESHOLD AMOUNT. — For purposes of paragraph (1), the term 'threshold amount' means —

"(A) $500,000 in the case of a joint return or surviving spouse (half such amount in the case of a married individual filing a separate return),

"(B) $375,000 in the case of a head of household, and

"(C) $250,000 in any other case.

"(e) MANUFACTURER'S SUGGESTED RETAIL PRICE LIMITATION. —

"(1) IN GENERAL. — No credit shall be allowed under subsection (a) for a vehicle with a manufacturer's suggested retail price in excess of the applicable limitation.

"(2) APPLICABLE LIMITATION. — For purposes of paragraph (1), the applicable limitation for each vehicle classification is as follows:

"(A) VANS. — In the case of a van, $80,000.

"(B) SPORT UTILITY VEHICLES. — In the case of a sport utility vehicle, $80,000.

"(C) PICKUP TRUCKS. — In the case of a pickup truck, $80,000.

"(D) OTHER. — In the case of any other vehicle, $55,000.

"(3) REGULATIONS AND GUIDANCE. — For purposes of this subsection, the Secretary shall prescribe such regulations or other guidance as the Secretary determines necessary or appropriate for determining vehicle classifications using criteria similar to that employed by the Environmental Protection Agency and the Department of the Energy to determine size and class of vehicles."

"(f) NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE. — For purposes of this section —

"(1) IN GENERAL. — The term 'new qualified plug-in electric drive motor vehicle' means a motor vehicle —

"(A) the original use of which commences with the taxpayer,

"(B) which is acquired for use by the taxpayer and not for resale,

"(C) which is made by a qualified manufacturer,

"(D) which is treated as a motor vehicle for purposes of title II of the Clean Air Act,

"(E) which has a gross vehicle weight rating of less than 14,000 pounds,

"(F) which is propelled to a significant extent by an electric motor which draws electricity from a battery which —

"(i) has a capacity of not less than 10 kilowatt hours, and

"(ii) is capable of being recharged from an external source of electricity,

"(G) with respect to which, in the case of a vehicle placed in service after December 31, 2026, final assembly is within the United States,

"(H) is not of a character subject to an allowance for depreciation, and

"(I) for which the person who sells or leases any new qualified plug-in electric drive motor vehicle to the taxpayer furnishes a report to the taxpayer and to the Secretary, at such time and in such manner as the Secretary shall provide, containing —

"(i) the name and taxpayer identification number of the taxpayer,

"(ii) the vehicle identification number of the vehicle, unless, in accordance with any applicable rules promulgated by the Secretary of Transportation, the vehicle is not assigned such a number,

"(iii) the battery capacity of the vehicle,

"(iv) in the case of any new qualified plug-in electric drive motor vehicle, verification that original use of the vehicle commences with the taxpayer,

"(v) the maximum credit under this section allowable to the taxpayer with respect to the vehicle, and

"(vi) in the case of a taxpayer who makes an election under subsection (k)(1) —

"(I) the modified adjusted gross income of such taxpayer in the previous taxable year, as described in subsection (k)(6)(A), and

"(II) any amount described in subsection (k)(2)(C) which has been provided to such taxpayer.

"(2) MOTOR VEHICLE. — The term 'motor vehicle' means any vehicle which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails) and which has at least 4 wheels.

"(3) QUALIFIED MANUFACTURER. — The term 'qualified manufacturer' means any manufacturer (within the meaning of the 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. 7521 et seq.)) which enters into a written agreement with the Secretary under which such manufacturer agrees —

"(A) to ensure that each vehicle manufactured by such manufacturer after the later of the date on which such agreement takes effect or December 31, 2021, and that meets the requirements of subsection (d), subparagraphs (D), (E), and (F) of paragraph (1), and paragraph (6) of subsection (f) is labeled with a unique vehicle identification number, and

"(B) to make periodic written reports to the Secretary (at such times and in such manner as the Secretary may provide) providing such vehicle identification numbers and such other information related to such vehicle as the Secretary may require.

"(4) BATTERY CAPACITY. — The term 'capacity' means, with respect to any battery, the quantity of electricity which the battery is capable of storing, expressed in kilowatt hours, as measured from a 100 percent state of charge to a 0 percent state of charge.

"(g) SPECIAL RULES. —

"(1) BASIS REDUCTION. — For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed.

"(2) NO DOUBLE BENEFIT. — The amount of any deduction or other credit allowable under this chapter for a vehicle for which a credit is allowable under subsection (a) shall be reduced by the amount of credit allowed under such subsection for such vehicle.

"(3) PROPERTY USED OUTSIDE UNITED STATES NOT QUALIFIED. — No credit shall be allowable under subsection (a) with respect to any property referred to in section 50(b)(1).

"(4) RECAPTURE. — The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit.

"(5) ELECTION NOT TO TAKE CREDIT. — No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle.

"(6) INTERACTION WITH AIR QUALITY AND MOTOR VEHICLE SAFETY STANDARDS. — A vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with —

"(A) the applicable provisions of the Clean Air Act for the applicable make and model year of the vehicle (or applicable air quality provisions of State law in the case of a State which has adopted such provision under a waiver under section 209(b) of the Clean Air Act), and

"(B) the motor vehicle safety provisions of sections 30101 through 30169 of title 49, United States Code.

"(h) CREDIT ALLOWED FOR 2 AND 3-WHEELED PLUG-IN ELECTRIC VEHICLES. —

"(1) IN GENERAL. — In the case of a qualified 2 or 3-wheeled plug-in electric vehicle —

"(A) there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the sum of the applicable amount with respect to each such qualified 2 or 3-wheeled plug-in electric vehicle placed in service by the taxpayer during the taxable year, and

"(B) the amount of the credit allowed under subparagraph (A) shall be treated as a credit allowed under subsection (a).

"(2) APPLICABLE AMOUNT. — For purposes of paragraph (1), the applicable amount is an amount equal to the lesser of —

"(A) 30 percent of the cost of the qualified 2 or 3-wheeled plug-in electric vehicle, or

"(B) $7,500.

"(3) QUALIFIED 2 OR 3-WHEELED PLUG-IN ELECTRIC VEHICLE. — The term 'qualified 2 or 3wheeled plug-in electric vehicle' means any vehicle which —

"(A) has 2 or 3 wheels,

"(B) meets the requirements of —

"(i) subparagraphs (A), (B), (C), (E), (F), (G), and (I) of subsection (e)(1) (determined by substituting '2.5 kilowatt hours' for '10 kilowatt hours' in subparagraph (F)(i)),

"(ii) paragraphs (3) and (4) of subsection (e), and

"(iii) subsections (f), (h), (i), and (k),

"(C) is manufactured primarily for use on public streets, roads, and highways, and

"(D) is capable of achieving a speed of 45 miles per hour or greater.

"(i) VIN NUMBER REQUIREMENT. — No credit shall be allowed under this section with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year.

"(j) TREATMENT OF CERTAIN POSSESSIONS. —

"(1) PAYMENTS TO POSSESSIONS WITH MIRROR CODE TAX SYSTEMS. — The Secretary shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of the provisions of this section (determined without regard to this subsection). Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.

"(2) PAYMENTS TO OTHER POSSESSIONS. — The Secretary shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the provisions of this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan which has been approved by the Secretary under which such possession will promptly distribute such payments to its residents.

"(3) MIRROR CODE TAX SYSTEM; TREATMENT OF PAYMENTS. — Rules similar to the rules of paragraphs (3), (4), and (5) of section 21(h) shall apply for purposes of this section.

"(k) ASSEMBLY AND CONTENT QUALIFICATIONS. — For purposes of this section —

"(1) DOMESTIC ASSEMBLY QUALIFICATIONS. — The term 'domestic assembly qualifications' means, with respect to any new qualified plug-in electric vehicle, that the final assembly of such vehicle occurs at a plant, factory, or other place which is located in the United States and operating under a collective bargaining agreement negotiated by an employee organization (as defined in section 412(c)(4)), determined in a manner consistent with section 7701(a)(46).

"(2) DOMESTIC CONTENT QUALIFICATIONS. — The term 'domestic content qualifications' means, with respect to any model of a new qualified plugin electric vehicle, that vehicles of that model are powered by battery cells which are manufactured in the United States as certified by the manufacturer at such time and in such form and manner as the Secretary may prescribe.

"(3) FINAL ASSEMBLY. — The term 'final assembly' means the process by which a manufacturer produces a new qualified plug-in electric drive motor 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.

"(l) TERMINATION. — No credit shall be allowed under this section with respect to any vehicle acquired after December 31, 2031.".

(b) TRANSFER OF CREDIT. —

(1) IN GENERAL. — Section 36C, as added by subsection (a), is amended by redesignating subsection (k) as subsection (l) and by inserting after subsection (j) following new subsection:

"(k) TRANSFER OF CREDIT. —

"(1) IN GENERAL. — Subject to such regulations or other guidance as the Secretary determines necessary or appropriate, if the taxpayer who acquires a new plug-in electric drive motor vehicle elects the application of this subsection with respect to such vehicle, the credit which would (but for this subsection) be allowed to such taxpayer with respect to such vehicle shall be allowed to the eligible entity specified in such election (and not to such taxpayer).

"(2) ELIGIBLE ENTITY. — For purposes of this paragraph, the term 'eligible entity' means, with respect to the vehicle for which the credit is allowed under subsection (a), the dealer which sold such vehicle to the taxpayer and has —

"(A) subject to paragraph (4), registered with the Secretary for purposes of this paragraph, at such time, and in such form and manner, as the Secretary may prescribe,

"(B) prior to the election described in paragraph (1) and not later than at the time of such sale, disclosed to the taxpayer purchasing such vehicle —

"(i) the manufacturer's suggested retail price,

"(ii) the value of the credit allowed or other incentive available for the purchase of such vehicle,

"(iii) all fees associated with the purchase of such vehicle, and

"(iv) the amount provided by the dealer to such taxpayer as a condition of the election described in paragraph (1),

"(C) made payment to such taxpayer (whether in cash or in the form of a partial payment or down payment for the purchase of such vehicle) in an amount equal to the credit otherwise allowable to such taxpayer, and

"(D) with respect to any incentive otherwise available for the purchase of a vehicle for which a credit is allowed under this section, including any incentive in the form of a rebate or discount provided by the dealer or manufacturer, ensured that —

"(i) the availability or use of such incentive shall not limit the ability of a taxpayer to make an election described in paragraph (1), and

"(ii) such election shall not limit the value or use of such incentive.

"(3) TIMING. — An election described in paragraph (1) shall be made by the taxpayer not later than the date on which the vehicle for which the credit is allowed under subsection (a) is purchased.

"(4) REVOCATION OF REGISTRATION. — Upon determination by the Secretary that a dealer has failed to comply with the requirements described in paragraph (2), the Secretary may revoke the registration (as described in subparagraph (A) of such paragraph) of such dealer.

"(5) TAX TREATMENT OF PAYMENTS. — With respect to any payment described in paragraph (2)(C), such payment —

"(A) shall not be includible in the gross income of the taxpayer, and

"(B) with respect to the dealer, shall not be deductible under this title.

"(6) APPLICATION OF CERTAIN OTHER REQUIREMENTS. — In the case of any election under paragraph (1) with respect to any vehicle —

"(A) the amount of the reduction under subsection (c) shall be determined with respect to the modified adjusted gross income of the taxpayer for the taxable year preceding the taxable year in which such vehicle was acquired (and not with respect to such income for the taxable year in which such vehicle was acquired),

"(B) the requirements of paragraphs (1) and (2) of subsection (f) shall apply to the taxpayer who acquired the vehicle in the same manner as if the credit determined under this section with respect to such vehicle were allowed to such taxpayer,

"(C) subsection (f)(5) shall not apply, and

"(D) the requirement of subsection (h) shall be treated as satisfied if the eligible entity provides the vehicle identification number of such vehicle to the Secretary in such manner as the Secretary may provide.

"(7) ADVANCE PAYMENT TO REGISTERED DEALERS. —

"(A) IN GENERAL. — The Secretary shall establish a program to make advance payments to any eligible entity in an amount equal to the cumulative amount of the credits allowed under subsection (a) with respect to any vehicles sold by such entity for which an election described in paragraph (1) has been made.

"(B) EXCESSIVE PAYMENTS. — Rules similar to the rules of section 6417(c)(7) shall apply for purposes of this paragraph.

"(8) DEALER. — For purposes of this subsection, the term 'dealer' means a person licensed by a State, the District of Columbia, the Commonwealth of Puerto Rico, any other territory or possession of the United States, an Indian tribal government (as defined in section 48(e)(4)(F)(ii)), or any Alaska Native Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)) to engage in the sale of vehicles.".

(2) CONFORMING AMENDMENT. — Section 36C(g)(3)(iii), as added by subsection (a), is amended by striking ", and (k)" and inserting "(k), and (l)".

(c) REPEAL OF NONREFUNDABLE NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE CREDIT. —  Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30D (and by striking the item relating to such section in the table of sections of such subpart).

(d) CONFORMING AMENDMENTS. —

(1) Section 1016(a)(37) is amended by striking "section 30D(f)(1)" and inserting "section 36C(f)(1)".

(2) Section 6211(b)(4)(A) is amended by inserting "36C," after "36B,".

(3) Section 6213(g)(2), as amended by the preceding provisions of this Act, is amended —

(A) in subparagraph (R), by striking "and" at the end,

(B) in subparagraph (S), by striking the period at the end and inserting ", and", and

(C) by adding at the end the following:

"(T) an omission of a correct vehicle identification number required under section 36C(f) (relating to credit for new qualified plug-in electric drive motor vehicles) to be included on a return.".

(4) Section 6501(m) is amended by striking "30D(e)(4)" and inserting "36C(f)(5)".

(5) Section 166(b)(5)(A)(ii) of title 23, United States Code, is amended by striking "section 30D(d)(1)" and inserting "section 36C(e)(1)".

(6) Section 1324(b)(2) of title 31, United States Code, is amended by inserting "36C," after "36B,".

(7) 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. New qualified plug-in electric drive motor vehicles.".

(e) EFFECTIVE DATES. —

(1) The amendments made by subsections (a), (c), and (d) of this section shall apply to vehicles acquired after December 31, 2021.

(2) The amendments made by subsection (b) shall apply to vehicles acquired after December 31, 2022.

SEC. 136402. CREDIT FOR PREVIOUSLY-OWNED QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.

(a) IN GENERAL. — Subpart C of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is amended by inserting after section 36C the following new section:

"SEC. 36D. PREVIOUSLY-OWNED QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.

"(a) ALLOWANCE OF CREDIT. — In the case of a qualified buyer who during a taxable year places in service a previously-owned qualified plug-in electric drive motor vehicle, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the sum of —

"(1) $2,000, plus

"(2) the supplemental credit amount.

"(b) SUPPLEMENTAL CREDIT AMOUNT. — For purposes of subsection (a), the term 'supplemental credit amount' means —

"(1) $2,000, if —

"(A) in the case of a vehicle placed in service before January 1, 2027, such vehicle draws propulsion energy from a battery with not less than 40 kilowatt hours of capacity and has a gasoline tank capacity not greater than 2.5 gallons, and

"(B) in the case of a vehicle placed in service after December 31, 2026, such vehicle draws propulsion energy from a battery with not less than 50 kilowatt hours of capacity and has a gasoline tank capacity not greater than 2.5 gallons, and

"(2) $0 in any other case.

"(c) LIMITATIONS. —

"(1) SALE PRICE. — The credit allowed under subsection (a) with respect to sale of a vehicle shall not exceed 50 percent of the sale price.

"(2) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME. — The amount which would (but for this paragraph) be allowed as a credit under subsection (a) shall be reduced (but not below zero) by $200 for each $1,000 (or fraction thereof) by which the lesser of —

"(A) the taxpayer's modified adjusted gross income for such taxable year, or

"(B) the taxpayer's modified adjusted gross income for the preceding taxable year, exceeds —

"(i) $150,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)),

"(ii) $112,500 in the case of a head of household (as defined in section 2(b)), and

"(iii) $75,000 in the case of a taxpayer not described in paragraph (1) or (2).

"(d) DEFINITIONS. — For purposes of this section —

"(1) PREVIOUSLY-OWNED QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE. — The term 'previously-owned qualified plug-in electric drive motor vehicle' means, with respect to a taxpayer, a motor vehicle —

"(A) the model year of which is at least 2 years earlier than the calendar year in which the taxpayer acquires such vehicle,

"(B) the original use of which commences with a person other than the taxpayer,

"(C) which is acquired by the taxpayer in a qualified sale, and

"(D) which meets the requirements of subparagraphs (C), (D), (E), (F), (G), (H), and (I) of section 36C(e)(1) (determined by applying 'previously-owned qualified plug-in electric drive motor vehicle' for 'new qualified plug-in electric drive motor vehicle'), or which is a new qualified fuel cell motor vehicle (as defined in subparagraphs (A) and (B) of section 30B(b)(3)) which has a gross vehicle weight rating of less than 14,000 pounds.

"(2) QUALIFIED SALE. — The term 'qualified sale' means a sale of a motor vehicle —

"(A) by a seller who holds such vehicle in inventory (within the meaning of section 471) for sale or lease,

"(B) for a sale price not to exceed $25,000, and

"(C) which is the first transfer since the date of the enactment of this section to a person other than the person with whom the original use of such vehicle commenced.

"(3) QUALIFIED BUYER. — The term 'qualified buyer' means, with respect to a sale of a motor vehicle, a taxpayer —

"(A) who is an individual,

"(B) who purchases such vehicle for use and not for resale,

"(C) with respect to whom no deduction is allowable with respect to another taxpayer under section 151,

"(D) who has not been allowed a credit under this section for any sale during the 3year period ending on the date of the sale of such vehicle, and

"(E) who possesses a certificate issued by the seller that certifies —

"(i) that the vehicle is a previously-owned qualified plug-in electric drive motor vehicle,

"(ii) the vehicle identification number of such vehicle,

"(iii) the capacity of the battery at time of sale, and

"(iv) such other information as the Secretary may require.

"(4) MOTOR VEHICLE; CAPACITY. — The terms 'motor vehicle' and 'capacity' have the meaning given such terms in paragraphs (2) and (4) of section 36C(e), respectively.

"(e) VIN NUMBER REQUIREMENT. — No credit shall be allowed under subsection (a) with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year.

"(f) APPLICATION OF CERTAIN RULES. — For purposes of this section, rules similar to the rules of paragraphs (1), (2), (4), (5), and (6) of section 36C(f) shall apply for purposes of this section.

"(g) CERTIFICATE SUBMISSION REQUIREMENT. — The Secretary may require that the issuer of the certificate described in subsection (c)(3)(E) submit such certificate to the Secretary at the time and in the manner required by the Secretary.

"(h) TREATMENT OF CERTAIN POSSESSIONS. —

"(1) PAYMENTS TO POSSESSIONS WITH MIRROR CODE TAX SYSTEMS. — The Secretary shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of the provisions of this section. Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.

"(2) PAYMENTS TO OTHER POSSESSIONS. — The Secretary shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the provisions of this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan which has been approved by the Secretary under which such possession will promptly distribute such payments to its residents.

"(3) MIRROR CODE TAX SYSTEM; TREATMENT OF PAYMENTS. — Rules similar to the rules of paragraphs (3), (4), and (5) of section 21(h) shall apply for purposes of this section.

"(i) TRANSFER OF CREDIT. — Rules similar to the rules of section 36C(k) shall apply.

"(j) TERMINATION. — No credit shall be allowed under this section with respect to any vehicle acquired after December 31, 2031.".

(b) CONFORMING AMENDMENTS. —

(1) Section 6211(b)(4)(A), as amended by the preceding provisions of this Act, is amended by inserting "36D," after "36C,".

(2) Section 6213(g)(2), as amended by the preceding provisions of this Act, is amended —

(A) in subparagraph (S), by striking "and" at the end,

(B) in subparagraph (T), by striking the period at the end and inserting ", and", and

(C) by adding at the end the following:

"(U) an omission of a correct vehicle identification number required under section 36D(d) (relating to credit for previously-owned qualified plug-in electric drive motor vehicles) to be included on a return.".

(3) Paragraph (2) of section 1324(b) of title 31, United States Code, as amended by the preceding provisions of this Act, is amended by inserting "36D," after "36C,".

(c) CLERICAL AMENDMENT. — The table of sections for subpart C of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is amended by inserting after the item relating to section 36C the following new item:

"Sec. 36D. Previously-owned qualified plug-in electric drive motor vehicles.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to vehicles acquired after December 31, 2021.

SEC. 136403. QUALIFIED COMMERCIAL ELECTRIC VEHICLES.

(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. 45Y. CREDIT FOR QUALIFIED COMMERCIAL ELECTRIC VEHICLES.

"(a) IN GENERAL. — For purposes of section 38, the qualified commercial electric vehicle credit for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each qualified commercial electric vehicle placed in service by the taxpayer during the taxable year.

"(b) PER VEHICLE AMOUNT. —

"(1) IN GENERAL. — The amount determined under this subsection with respect to any qualified commercial electric vehicle shall be equal to the lesser of —

"(A) 15 percent of the basis of such vehicle (30 percent in the case of a vehicle not powered by a gasoline or diesel internal combustion engine), or

"(B) the incremental cost of such vehicle.

"(2) INCREMENTAL COST. — For purposes of paragraph (1)(B), the incremental cost of any qualified commercial electric vehicle is an amount equal to the excess of the purchase price for such vehicle over such price of a comparable vehicle.

"(3) COMPARABLE VEHICLE. — For purposes of this paragraph, the term 'comparable vehicle' means, with respect to any qualified commercial electric vehicle, any vehicle which is powered solely by a gasoline or diesel internal combustion engine and which is comparable in size and use to such vehicle.

"(4) VEHICLES FOR LEASE TO INDIVIDUALS. —

"(A) IN GENERAL. — In the case of a commercial electric vehicle which is acquired by the taxpayer for the purpose of leasing such vehicle to any individual, the amount determined under this subsection with respect to such vehicle shall, at the election of such taxpayer, be equal to the amount of the credit that would otherwise be allowed under section 36C(a) with respect to such vehicle, as determined as if such vehicle —

"(i) is a new qualified plug-in electric drive motor vehicle, and

"(ii) has been acquired and placed in service by an individual.

"(B) ELECTION REQUIREMENTS. —

"(i) IN GENERAL. — An election under subparagraph (A) shall be made at such time and in such manner as the Secretary prescribes by regulations or other guidance.

"(ii) DISCLOSURE REQUIREMENT. — For purposes of any regulations or other guidance prescribed under clause (i), the Secretary shall require that, as a condition of an election under subparagraph (A), the taxpayer making such election shall be required to disclose to the lessee of the commercial electric vehicle the value of the credit allowed under this section.

"(c) QUALIFIED COMMERCIAL ELECTRIC VEHICLE. — For purposes of this section, the term 'qualified commercial electric vehicle' means any vehicle which —

"(1) meets the requirements of subparagraphs (A) and (C) of section 36C(e)(1) without regard to any gross vehicle weight rating or the requirements of section 36C(d), and is acquired for use or lease by the taxpayer and not for resale,

"(2) either —

"(A) meets the requirements of subparagraph (D) of section 36C(e)(1) and is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), or

"(B) is mobile machinery, as defined in section 4053(8) (including vehicles that are not designed to perform a function of transporting a load over the public highways),

"(3) either —

"(A) is propelled to a significant extent by an electric motor which draws electricity from a battery which has a capacity of not less than 15 kilowatt hours and is capable of being recharged from an external source of electricity, or

"(B) is a new qualified fuel cell motor vehicle described in subparagraphs (A) and (B) of section 30B(b)(3), and

"(4) is of a character subject to the allowance for depreciation.

"(d) SPECIAL RULES. —

"(1) IN GENERAL. — Subject to paragraph (2), rules similar to the rules under subsection (f) of section 36C shall apply for purposes of this section.

"(2) RECAPTURE. — The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any credit allowed under subsection

(a) with respect to any property which ceases to be property eligible for such credit, including regulations or other guidance which, in the case of any commercial electric vehicle for which an election was made under subsection (b)(4) —

"(A) recaptures the credit allowed under subsection (a) if —

"(i) such vehicle was not leased to an individual, or

"(ii) the taxpayer failed to comply with the requirements described in subsection (b)(4)(B)(ii), and

"(B) in the case of a commercial electric vehicle which is leased by an individual whose modified adjusted gross income exceeds the threshold amount under section 36C(c)(2), recaptures so much of the credit allowed under subsection (a) as exceeds the amount of the credit which would have otherwise been allowable under such subsection if, for purposes of subsection (b)(4)(A), the amount of the credit that would otherwise be allowed under section 36C(a) with respect to such vehicle had been determined as if such vehicle was acquired and placed in service by such individual and subject to reduction under section 36C(c).

"(3) VEHICLES PLACED IN SERVICE BY TAX-EXEMPT ENTITIES. — Subsection (c)(4) shall not apply to any vehicle which is not subject to a lease and which is placed in service by a tax-exempt entity described in clause (i), (ii), or (iv) of section 168(h)(2)(A).

"(e) VIN NUMBER REQUIREMENT. — No credit shall be determined under subsection (a) with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year.

"(f) TERMINATION. — No credit shall be determined under this section with respect to any vehicle acquired after December 31, 2031.".

(b) ELECTIVE PAYMENT OF CREDIT IN CASE OF CERTAIN TAX-EXEMPT ENTITIES. — Section 6417(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(9) 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 45Y by reason of subsection (d)(2) thereof.".

(c) CONFORMING AMENDMENTS. —

(1) Section 38(b) is amended by striking paragraph (30) and inserting the following:

"(30) the qualified commercial electric vehicle credit determined under section 45Y,".

(2) Section 6213(g)(2), as amended by the preceding provisions of this Act, is amended —

(A) in subparagraph (T), by striking "and" at the end,

(B) in subparagraph (U), by striking the period at the end and inserting ", and", and

(C) by adding at the end the following:

"(V) an omission of a correct vehicle identification number required under section 45Y(e) (relating to commercial electric vehicle credit) to be included on a return.".

(3) 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. 45Y. Qualified commercial electric vehicle credit.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to vehicles acquired after December 31, 2021.

SEC. 136404. QUALIFIED FUEL CELL MOTOR VEHICLES.

(a) IN GENERAL. — Section 30B(k)(1) is amended by striking "December 31, 2021" and inserting "December 31, 2031".

(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE. — Section 30B(b) is amended by striking "and" at the end of subparagraph (D), by striking the period at the end of subparagraph (E) and inserting ", and", and by adding at the end the following new subparagraph:

"(F) which is not property of a character subject to an allowance for depreciation.".

(c) CONFORMING AMENDMENT. — Section 30B(g) is amended to read as follows:

"(g) PERSONAL CREDIT. — For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to property placed in service after December 31, 2021.

SEC. 136405. ALTERNATIVE FUEL REFUELING PROPERTY CREDIT.

(a) IN GENERAL. — Section 30C(g) is amended by striking "December 31, 2021" and inserting "December 31, 2031".

(b) ADDITIONAL CREDIT FOR CERTAIN ELECTRIC CHARGING PROPERTY. —

(1) IN GENERAL. — Section 30C(a) is amended —

(A) by striking "equal to 30 percent" and inserting the following: "equal to the sum of —

"(1) 30 percent (6 percent in the case of property of a character subject to depreciation)",

(B) by striking the period at the end and inserting ", plus", and

(C) by adding at the end the following new paragraph:

"(2) 4 percent of so much of such cost as exceeds the limitation under subsection (b)(1) that does not exceed the amount of cost attributable to qualified alternative fuel vehicle refueling property (determined without regard to subsection (c)(1) and as if only electricity, and fuel at least 85 percent of the volume of which consists of hydrogen, were treated as clean-burning fuels for purposes of section 179A(d)) which —

"(A) is intended for general public use with no associated fee or payment arrangement,

"(B) is intended for general public use and accepts payment via a credit card reader, including a credit card reader that uses contactless technology, or

"(C) is intended for use exclusively by commercial or governmental vehicles.".

(2) CONFORMING AMENDMENT. — Section 30C(b) is amended —

(A) by striking "The credit allowed under subsection (a)" and inserting "The amount of cost taken into account under subsection (a)(1)",

(B) by striking "$30,000" and inserting "$100,000", and

(C) by striking "$1,000" and inserting "$3,333.33".

(3) BIDIRECTIONAL CHARGING EQUIPMENT INCLUDED AS QUALIFIED ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY. — Section 30C(c) is amended to read as follows:

"(c) QUALIFIED ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified alternative fuel vehicle refueling property' has the same meaning as the term 'qualified clean-fuel vehicle refueling property' would have under section 179A if —

"(A) paragraph (1) of section 179A(d) did not apply to property installed on property which is used as the principal residence (within the meaning of section 121) of the taxpayer, and

"(B) only the following were treated as clean-burning fuels for purposes of section 179A(d):

"(i) Any fuel at least 85 percent of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquified natural gas, liquefied petroleum gas, or hydrogen.

"(ii) Any mixture —

"(I) which consists of two or more of the following: biodiesel (as defined in section 40A(d)(1)), diesel fuel (as defined in section 4083(a)(3)), or kerosene, and

"(II) at least 20 percent of the volume of which consists of biodiesel (as so defined) determined without regard to any kerosene in such mixture.

"(iii) Electricity.

"(2) BIDIRECTIONAL CHARGING EQUIPMENT. —  Property shall not fail to be treated as qualified alternative fuel vehicle refueling property solely because such property —

"(A) is capable of charging the battery of a motor vehicle propelled by electricity, and

"(B) allows discharging electricity from such battery to an electric load external to such motor vehicle.".

(c) CERTAIN ELECTRIC CHARGING STATIONS INCLUDED AS QUALIFIED ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY. — Section 30C is amended by redesignating subsections (f) and (g) as subsections (g) and (h), respectively, and by inserting after subsection (e) the following:

"(f) SPECIAL RULE FOR ELECTRIC CHARGING STATIONS FOR CERTAIN VEHICLES WITH 2 OR 3 WHEELS. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified alternative fuel vehicle refueling property' includes any property described in subsection (c) for the recharging of a motor vehicle described in paragraph (2) that is propelled by electricity, but only if the property —

"(A) meets the requirements of subsection (a)(2), and

"(B) is of a character subject to depreciation.

"(2) MOTOR VEHICLE. — A motor vehicle is described in this paragraph if the motor vehicle —

"(A) is manufactured primarily for use on public streets, roads, or highways (not including a vehicle operated exclusively on a rail or rails), and

"(B) has at least 2, but not more than 3, wheels.".

(d) WAGE AND APPRENTICESHIP REQUIREMENTS. — Section 30C, as amended by this section, is further amended by redesignating subsections (g) and (h) as subsections (h) and (i) and by inserting after subsection (f) the following new subsection:

"(g) WAGE AND APPRENTICESHIP REQUIREMENTS. —

"(1) INCREASED CREDIT AMOUNT. —

"(A) IN GENERAL. — In the case of any qualified alternative fuel vehicle refueling project which satisfies the requirements of subparagraph (C), the amount of the credit determined under subsection (a) for property of a character subject to an allowance for depreciation shall be equal to such amount multiplied by 5 (determined without regard to this sentence).

"(B) QUALIFIED ALTERNATIVE FUEL VEHICLE REFUELING PROJECT. — For purposes of this subsection, the term 'qualified alternative fuel vehicle refueling project' means a project consisting of multiple properties that are part of a single project. The requirements of this paragraph shall be applied to such project.

"(C) PROJECT REQUIREMENTS. — A project meets the requirements of this subparagraph if it is one of the following:

"(i) A project the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (2) and (3).

"(ii) A project which satisfies the requirements of paragraphs (2) and (3).

"(2) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this subparagraph with respect to any qualified alternative fuel vehicle refueling project are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in the construction of such property shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — Rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(3) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(4) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of establishing the requirements of this subsection.".

(e) EFFECTIVE DATE. — The amendment made by this section shall apply to property placed in service after December 31, 2021.

SEC. 136406. REINSTATEMENT AND EXPANSION OF EMPLOYER-PROVIDED FRINGE BENEFITS FOR BICYCLE COMMUTING.

(a) REPEAL OF SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE COMMUTING BENEFITS. — Section 132(f) is amended by striking paragraph (8).

(b) EXPANSION OF BICYCLE COMMUTING BENEFITS. — Section 132(f)(5)(F) is amended to read as follows:

"(F) DEFINITIONS RELATED TO BICYCLE COMMUTING BENEFITS. —

"(i) QUALIFIED BICYCLE COMMUTING BENEFIT. — The term 'qualified bicycle commuting benefit' means, with respect to any calendar year —

"(I) any employer reimbursement during the 15-month period beginning with the first day of such calendar year for reasonable expenses incurred by the employee during such calendar year for the purchase (including associated finance charges), lease, rental (including a bikeshare), improvement, repair, or storage of qualified commuting property, or

"(II) the direct or indirect provision by the employer to the employee during such calendar year of the use (including a bikeshare), improvement, repair, or storage of qualified commuting property, if the employee regularly uses such qualified commuting property for travel between the employee's residence, place of employment, a qualified parking facility, or a mass transit facility that connects the employee to their residence or place of employment.

"(ii) QUALIFIED COMMUTING PROPERTY. — The term 'qualified commuting property' means —

"(I) any bicycle (other than a bicycle equipped with any motor),

"(II) any electric bicycle which meets the requirements of section 36E(c)(5),

"(III) any 2 or 3-wheel scooter (other than a scooter equipped with any motor), and

"(IV) any 2 or 3-wheel scooter propelled by an electric motor if such motor does not provide assistance if the speed of such scooter exceeds 20 miler per hour (or if the speed of such scooter is not capable of exceeding 20 miles per hour) and the weight of such scooter does not exceed 100 pounds.

"(iii) BIKESHARE. — The term 'bikeshare' means a rental operation at which qualified commuting property is made available to customers to pick up and drop off for point-to-point use within a defined geographic area.".

(c) LIMITATION ON EXCLUSION. — Section 132(f)(2)(C) is amended to read as follows:

"(C) 30 percent of the dollar amount in effect under subparagraph (B) per month in the case of any qualified bicycle commuting benefit.".

(d) NO CONSTRUCTIVE RECEIPT. — Section 132(f)(4) is amended by striking "(other than a qualified bicycle commuting reimbursement)".

(e) CONFORMING AMENDMENTS. —

(1) Section 132(f)(1)(D) is amended by striking "reimbursement" and inserting "benefit".

(2) Section 274(l) is amended by striking paragraph (2).

(f) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 136407. CREDIT FOR CERTAIN NEW ELECTRIC BICYCLES.

(a) IN GENERAL. — Subpart C of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is amended by inserting after section 36D the following new section:

"SEC. 36E. ELECTRIC BICYCLES.

"(a) ALLOWANCE OF CREDIT. — There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 30 percent of the cost of each qualified electric bicycle placed in service by the taxpayer during such taxable year.

"(b) LIMITATIONS. —

"(1) LIMITATION ON COST PER ELECTRIC BICYCLE TAKEN INTO ACCOUNT. — The amount taken into account under subsection (a) as the cost of any qualified electric bicycle shall not exceed $3,000.

"(2) BICYCLE LIMITATION WITH RESPECT TO CREDIT. —

"(A) LIMITATION ON NUMBER OF PERSONAL-USE BICYCLES. — In the case of any taxpayer for any taxable year, the number of personal-use bicycles taken into account under subsection (a) shall not exceed the excess (if any) of —

"(i) 1 (2 in the case of a joint return), reduced by

"(ii) the aggregate number of bicycles taken into account by the taxpayer under subsection (a) for the 2 preceding taxable years.

"(B) PHASEOUT BASED ON MODIFIED ADJUSTED GROSS INCOME. — The credit allowed under subsection (a) shall be reduced by $200 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income exceeds —

"(i) $150,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)),

"(ii) $112,500 in the case of a head of household (as defined in section 2(b)), and

"(iii) $75,000 in the case of a taxpayer not described in clause (i) or (ii).

"(C) MODIFIED ADJUSTED GROSS INCOME. — For purposes of subparagraph (B), the term 'modified adjusted gross income' means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.

"(D) SPECIAL RULE FOR MODIFIED ADJUSTED GROSS INCOME TAKEN INTO ACCOUNT. — The modified adjusted gross income of the taxpayer that is taken into account for purposes of this paragraph shall be the lesser of —

"(i) the modified adjusted gross income for the taxable year in which the credit is claimed, or

"(ii) the modified adjusted gross income for the immediately preceding taxable year.

"(c) QUALIFIED ELECTRIC BICYCLE. — For purposes of this section, the term 'qualified electric bicycle' means a bicycle —

"(1) the original use of which commences with the taxpayer,

"(2) which is acquired for use by the taxpayer and not for resale,

"(3) which is made by a qualified manufacturer and is labeled with the qualified vehicle identification number assigned to such bicycle by such manufacturer,

"(4) with respect to which the aggregate amount paid for such acquisition does not exceed $4,000, and

"(5) which is equipped with —

"(A) fully operable pedals,

"(B) a saddle or seat for the rider, and

"(C) an electric motor of less than 750 watts which is designed to provided assistance in propelling the bicycle and —

"(i) does not provide such assistance if the bicycle is moving in excess of 20 miler per hour, or

"(ii) if such motor only provides such assistance when the rider is pedaling, does not provide such assistance if the bicycle is moving in excess of 28 miles per hour.

"(d) VIN NUMBER REQUIREMENT. —

"(1) IN GENERAL. — No credit shall be allowed under subsection (a) with respect to any qualified electric bicycle unless the taxpayer includes the qualified vehicle identification number of such bicycle on the return of tax for the taxable year.

"(2) QUALIFIED VEHICLE IDENTIFICATION NUMBER. — For purposes of this section, the term 'qualified vehicle identification number' means, with respect to any bicycle, the vehicle identification number assigned to such bicycle by a qualified manufacturer pursuant to the methodology referred to in paragraph (3).

"(3) QUALIFIED MANUFACTURER. — For purposes of this section, the term 'qualified manufacturer' means any manufacturer of qualified electric bicycles which enters into an agreement with the Secretary which provides that such manufacturer will —

"(A) assign a vehicle identification number to each qualified electric bicycle produced by such manufacturer utilizing a methodology that will ensure that such number (including any alphanumeric) is unique to such bicycle (by utilizing numbers or letters which are unique to such manufacturer or by such other method as the Secretary may provide),

"(B) label such bicycle with such number in such manner as the Secretary may provide, and

"(C) make periodic written reports to the Secretary (at such times and in such manner as the Secretary may provide) of the vehicle identification numbers so assigned and including such information as the Secretary may require with respect to the qualified electric bicycle to which such number was so assigned.

"(e) SPECIAL RULES. —

"(1) BASIS REDUCTION. — For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed.

"(2) NO DOUBLE BENEFIT. — The amount of any deduction or other credit allowable under this chapter for a qualified electric bicycle for which a credit is allowable under subsection (a) shall be reduced by the amount of credit allowed under such subsection for such bicycle.

"(3) PROPERTY USED OUTSIDE UNITED STATES NOT QUALIFIED. — No credit shall be allowable under subsection (a) with respect to any property referred to in section 50(b)(1).

"(4) RECAPTURE. — The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit.

"(5) ELECTION NOT TO TAKE CREDIT. — No credit shall be allowed under subsection (a) for any bicycle if the taxpayer elects to not have this section apply to such bicycle.

"(f) TREATMENT OF CERTAIN POSSESSIONS. —

"(1) PAYMENTS TO POSSESSIONS WITH MIRROR CODE TAX SYSTEMS. — The Secretary shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of the provisions of this section (determined without regard to this subsection). Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.

"(2) PAYMENTS TO OTHER POSSESSIONS. — The Secretary shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the provisions of this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan which has been approved by the Secretary under which such possession will promptly distribute such payments to its residents.

"(3) MIRROR CODE TAX SYSTEM; TREATMENT OF PAYMENTS. — Rules similar to the rules of paragraphs (3), (4), and (5) of section 21(h) shall apply for purposes of this section.

"(g) TRANSFER OF CREDIT. —

"(1) IN GENERAL. — Subject to such regulations or other guidance as the Secretary determines necessary or appropriate, if the taxpayer who acquires a qualified electric bicycle after December 31, 2022 elects the application of this subsection with respect to such qualified electric bicycle, the credit which would (but for this subsection) be allowed to such taxpayer with respect to such qualified electric bicycle shall be allowed to the eligible entity specified in such election (and not to such taxpayer).

"(2) ELIGIBLE ENTITY. — For purposes of this paragraph, the term 'eligible entity' means, with respect to the qualified electric bicycle for which the credit is allowed under subsection (a), the retailer which sold such qualified electric bicycle to the taxpayer and has —

"(A) subject to paragraph (4), registered with the Secretary for purposes of this paragraph, at such time, and in such form and manner, as the Secretary may prescribe,

"(B) prior to the election described in paragraph (1) and no later than at the time of such sale, disclosed to the taxpayer purchasing such qualified electric bicycle —

"(i) the retail price,

"(ii) the value of the credit allowed or other incentive available for the purchase of such qualified electric bicycle,

"(iii) all fees associated with the purchase of such qualified electric bicycle, and

"(iv) the amount provided by the retailer to such taxpayer as a condition of the election described in paragraph (1),

"(C) made payment to such taxpayer (whether in cash or in the form of a partial payment or down payment for the purchase of such qualified electric bicycle) in an amount equal to the credit otherwise allowable to such taxpayer, and

"(D) with respect to any incentive otherwise available for the purchase of a qualified electric bicycle for which a credit is allowed under this section, including any incentive in the form of a rebate or discount provided by the retailer or manufacturer, ensured that —

"(i) the availability or use of such incentive shall not limit the ability of a taxpayer to make an election described in paragraph (1), and 

"(ii) such election shall not limit the value or use of such incentive.

"(3) TIMING. — An election described in paragraph (1) shall be made by the taxpayer not later than the date on which the qualified electric bicycle for which the credit is allowed under subsection (a) is purchased.

"(4) REVOCATION OF REGISTRATION. — Upon determination by the Secretary that a retailer has failed to comply with the requirements described in paragraph (2), the Secretary may revoke the registration (as described in subparagraph (A) of such paragraph) of such retailer.

"(5) TAX TREATMENT OF PAYMENTS. — With respect to any payment described in paragraph (2)(C), such payment —

"(A) shall not be includible in the gross income of the taxpayer, and

"(B) with respect to the retailer, shall not be deductible under this title.

"(6) APPLICATION OF CERTAIN OTHER REQUIREMENTS. — In the case of any election under paragraph (1) with respect to any qualified electric bicycle —

"(A) the amount of the reduction under subsection (b) shall be determined with respect to the modified adjusted gross income of the taxpayer for the taxable year preceding the taxable year in which such qualified electric bicycle was acquired (and not with respect to such income for the taxable year in which such qualified electric bicycle was acquired),

"(B) the requirements of paragraphs (1) and (2) of subsection (e) shall apply to the taxpayer who acquired the qualified electric bicycle in the same manner as if the credit determined under this section with respect to such qualified electric bicycle were allowed to such taxpayer, and

"(C) subsection (e)(5) shall not apply.

"(7) ADVANCE PAYMENT TO REGISTERED RETAILERS. —

"(A) IN GENERAL. — The Secretary shall establish a program to make advance payments to any eligible entity in an amount equal to the cumulative amount of the credits allowed under subsection (a) with respect to any qualified electric bicycles sold by such entity for which an election described in paragraph (1) has been made.

"(B) EXCESSIVE PAYMENTS. — Rules similar to the rules of section 6417(c)(7) shall apply for purposes of this paragraph.

"(8) RETAILER. — For purposes of this subsection, the term 'retailer' means a person engaged in the trade or business of selling qualified electric bicycles in a State, the District of Columbia, the Commonwealth of Puerto Rico, any other territory or possession of the United States, an Indian tribal government (as defined in section 48(e)(4)(F)(ii)), or any Alaska Native Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)).

"(h) TERMINATION. — This section shall not apply to bicycles placed in service after December 31, 2025.".

(b) CONFORMING AMENDMENTS. —

(1) Section 1016(a) is amended by striking "and" at the end of paragraph (38), by striking the period at the end of paragraph (39) and inserting ", and", and by adding at the end the following new paragraph:

"(40) to the extent provided in section 36E(f)(1).".

(2) Section 6211(b)(4)(A) of such Code is amended by inserting "36E by reason of subsection (c)(2) thereof," before "32,".

(3) Section 6213(g)(2), as amended by the preceding provisions of this Act, is amended —

(A) in subparagraph (U), by striking "and" at the end,

(B) in subparagraph (V), by striking the period at the end and inserting ", and", and

(C) by adding at the end the following:

"(W) an omission of a correct vehicle identification number required under section 36E(d) (relating to electric bicycles credit) to be included on a return.".

(4) Section 6501(m) is amended by inserting "36E(f)(4)," after "35(g)(11),".

(5) Section 1324(b)(2) of title 31, United States Code, is amended by inserting "36E," after "36D,".

(c) CLERICAL AMENDMENT. — The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

"Sec. 36E. Electric bicycles.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to property placed in service after December 31, 2021, in taxable years ending after such date.

PART 5 — INVESTMENT IN THE GREEN WORKFORCE AND MANUFACTURING

SEC. 136501. EXTENSION OF THE ADVANCED ENERGY PROJECT CREDIT.

(a) EXTENSION OF CREDIT. — Section 48C is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection:

"(e) ADDITIONAL ALLOCATIONS. —

"(1) IN GENERAL. — Not later than 270 days after the date of enactment of this subsection, the Secretary shall establish a program to consider and award certifications for qualified investments eligible for credits under this section to qualifying advanced energy project sponsors.

"(2) ANNUAL LIMITATION. —

"(A) IN GENERAL. — The amount of credits that may be allocated under this subsection during any calendar year shall not exceed the annual credit limitation with respect to such year.

"(B) ANNUAL CREDIT LIMITATION. —

"(i) IN GENERAL. — For purposes of this subsection, the term 'annual credit limitation' means $5,000,000,000 for each of calendar years 2022 through 2023, $1,875,000,000 for each of calendar years 2024 through 2031, and zero thereafter.

"(ii) AMOUNT SET ASIDE FOR AUTOMOTIVE COMMUNITIES. —

"(I) IN GENERAL. — For purposes of clause (i), $800,000,000 of the annual credit limitation for each of calendar years 2022 through 2023 and $300,000,000 for each of calendar years 2024 through 2031 shall be allocated to qualified investments located within automotive communities.

"(II) AUTOMOTIVE COMMUNITIES. — For purposes of this clause, the term 'automotive communities' means a census tract and any directly adjoining census tract, including a nopopulation census tract, that has experienced major job losses in the automotive manufacturing sector since January 1, 1994, as determined by the Secretary.

"(iii) AMOUNT SET ASIDE FOR ENERGY COMMUNITIES. — For purposes of clause (i), $800,000,000 of the annual credit limitation for each of calendar years 2022 through 2023 and $300,000,000 for each of calendar years 2024 through 2031 shall be allocated to qualified investments located within energy communities (as defined in section 45(b)(11)(B)).

"(C) CARRYOVER OF UNUSED LIMITATION. — If the annual credit limitation for any calendar year exceeds the aggregate amount designated for such year under this subsection, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2036.

"(3) CERTIFICATIONS. —

"(A) APPLICATION REQUIREMENT. — Each applicant for certification under this subsection shall submit an application at such time and containing such information as the Secretary may require.

"(B) TIME TO MEET CRITERIA FOR CERTIFICATION. — Each applicant for certification shall have 2 years from the date of acceptance by the Secretary of the application during which to provide to the Secretary evidence that the requirements of the certification have been met.

"(C) PERIOD OF ISSUANCE. — An applicant which receives a certification shall have 2 years from the date of issuance of the certification in order to place the project in service and to notify the Secretary that such project has been so placed in service, and if such project is not placed in service (and the Secretary so notified) by that time period, then the certification shall no longer be valid. If any certification is revoked under this subparagraph, the amount of the annual credit limitation under paragraph

(2) for the calendar year in which such certification is revoked shall be increased by the amount of the credit with respect to such revoked certification.

"(4) SELECTION CRITERIA. — Selection criteria similar to those in subsection (d)(3) shall apply, except that in determining designations under this subsection, the Secretary shall —

"(A) in addition to the factors described in subsection (d)(3)(B), take into consideration which projects —

"(i) will provide the greatest net impact in avoiding or reducing anthropogenic emissions of greenhouse gases, as determined by the Secretary,

"(ii) will provide the greatest domestic job creation (both direct and indirect) during the credit period,

"(iii) will provide the greatest job creation within the vicinity of the project, particularly with respect to —

"(I) low-income communities (as described in section 45D(e)), and

"(II) dislocated workers who were previously employed in manufacturing, coal power plants, or coal mining, and

"(iv) will provide the greatest job creation in areas with a population that is at risk of experiencing higher or more adverse human health or environmental effects and a significant portion of such population is comprised of communities of color, low-income communities, Tribal and Indigenous communities, or individuals formerly employed in the fossil fuel industry, and

"(B) give the highest priority to projects which —

"(i) manufacture (other than primarily assembly of components) property described in a subclause of subsection (c)(1)(A)(i) (or components thereof), and

"(ii) have the greatest potential for commercial deployment of new applications.

"(5) DISCLOSURE OF ALLOCATIONS. — The Secretary shall, upon allocating a credit under this subsection, publicly disclose the identity of the applicant, the amount of the credit with respect to such applicant, and the project location for which such credit was allocated.

"(6) CREDIT CONDITIONED UPON WAGE AND APPRENTICESHIP REQUIREMENTS. —

"(A) BASE RATE. — For purposes of allocations under this subsection, the amount of the credit determined under subsection (a) shall be determined by substituting '6 percent' for '30 percent'.

"(B) ALTERNATIVE RATE. — In the case of any project which satisfies the requirements of paragraphs (7) and (8), the amount of the credit determined under subsection (a) (after application of subparagraph (A)) shall be equal to such amount multiplied by 5.

"(7) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this paragraph with respect to a project are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in the re-equipping, expansion, or establishment of a manufacturing facility shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — In the case of any taxpayer which fails to satisfy the requirement under subparagraph (A) with respect to any project —

"(i) rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply, and

"(ii) if the failure to satisfy the requirement under subparagraph (A) is not corrected pursuant to the rules described in clause (i), the certification with respect to the re-equipping, expansion, or establishment of a manufacturing facility shall no longer be valid.

"(8) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.".

(b) MODIFICATION OF QUALIFYING ADVANCED ENERGY PROJECTS. —

(1) INCLUSION OF WATER AS A RENEWABLE RESOURCE. — Section 48C(c)(1)(A)(i)(I) is amended by inserting "water," after "sun,".

(2) ENERGY STORAGE SYSTEMS. — Section 48C(c)(1)(A)(i)(II) is amended by striking "an energy storage system for use with electric or hybrid-electric motor vehicles" and inserting "energy storage systems and components".

(3) MODIFICATION OF QUALIFYING ELECTRIC GRID PROPERTY. — Section 48C(c)(1)(A)(i)(III) is amended to read as follows:

"(III) electric grid modernization equipment or components,".

(4) USE OF CAPTURED CARBON. — Section 48C(c)(1)(A)(i)(IV) is amended by striking "sequester" and insert "use or sequester".

(5) ELECTRIC VEHICLES AND BICYCLES. — Section 48C(c)(1)(A)(i)(VI) is amended —

(A) by striking "new qualified plug-in electric drive motor vehicles (as defined by section 30D)" and inserting "vehicles described in sections 36C and 45Y, and bicycles described in section 36E", and

(B) and striking "and power control units" and inserting "power control units, and equipment used for charging or refueling".

(6) PROPERTY FOR PRODUCTION OF HYDROGEN. — Section 48C(c)(1)(A)(i) is amended by striking "or" at the end of subclause (VI), by redesignating subclause (VII) as subclause (VIII), an by inserting after subclause (VI) the following new subclause:

"(VII) property designed to be used to produce qualified clean hydrogen (as defined in section 45X), or".

(7) RECYCLING OF ADVANCED ENERGY PROPERTY. — Section 48C(c)(1) is amended by adding at the end the following new subparagraph:

"(C) SPECIAL RULE FOR CERTAIN RECYCLING FACILITIES. — A facility which recycles batteries or similar energy storage property described in subparagraph (A)(i) shall be treated as part of a manufacturing facility described in such subparagraph.".

(c) DENIAL OF DOUBLE BENEFIT. — 48C(f), as redesignated by this section, is amended by striking "or 48B" and inserting "48B, 48F, 45Q, or 45X".

(d) EFFECTIVE DATE. — The amendments made by this section shall take effect on January 1, 2022.

SEC. 136502. LABOR COSTS OF INSTALLING MECHANICAL INSULATION PROPERTY.

(a) IN GENERAL. — Subpart D of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is further amended by adding at the end the following new section:

"SEC. 45Z. LABOR COSTS OF INSTALLING MECHANICAL INSULATION PROPERTY.

"(a) IN GENERAL. — For purposes of section 38, the mechanical insulation labor costs credit determined under this section for any taxable year is an amount equal to 2 percent of the mechanical insulation labor costs paid or incurred by the taxpayer during such taxable year.

"(b) MECHANICAL INSULATION LABOR COSTS. — For purposes of this section —

"(1) IN GENERAL. — The term 'mechanical insulation labor costs' means the labor cost of installing mechanical insulation property with respect to a mechanical system referred to in paragraph (2)(A) which was originally placed in service not less than 1 year before the date on which such mechanical insulation property is installed.

"(2) MECHANICAL INSULATION PROPERTY. — The term 'mechanical insulation property' means insulation materials, and facings and accessory products installed in connection to such insulation materials —

"(A) placed in service in connection with a mechanical system which —

"(i) is located in the United States,

"(ii) is of a character subject to an allowance for depreciation, and

"(iii) meets the requirements of section 434.403 of title 10, Code of Federal Regulations (as in effect on the date of enactment of this section), and

"(B) which result in a reduction in energy loss from the mechanical system which is greater than the expected reduction from the installation of insulation materials which meet the minimum requirements of Reference Standard 90.1 (as defined in section 179D(c)(2)).

"(c) WAGE AND APPRENTICESHIP REQUIREMENTS. —

"(1) IN GENERAL. — In the case of any project which meets the prevailing wage and apprenticeship requirements of this subsection, the amount of credit determined under subsection (a) shall be multiplied by 5.

"(2) WAGE REQUIREMENTS. — Rules similar to the rules of section 45(b)(7)(A) and clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(3) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(d) TERMINATION. — This section shall not apply to mechanical insulation labor costs paid or incurred after December 31, 2025.".

(b) CREDIT ALLOWED AS PART OF GENERAL BUSINESS CREDIT. — Section 38(b), as amended by the preceding provisions of this Act, is further amended by striking "plus" at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting ", plus", and by adding at the end the following new paragraph:

"(38) the mechanical insulation labor costs credit determined under section 45Z(a).".

(c) CONFORMING AMENDMENTS. —

(1) Section 280C is amended by adding at the end the following new subsection:

"(i) MECHANICAL INSULATION LABOR COSTS CREDIT. —

"(1) IN GENERAL. — No deduction shall be allowed for that portion of the mechanical insulation labor costs (as defined in section 45Z(b)) otherwise allowable as deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45Z(a).

"(2) SIMILAR RULE WHERE TAXPAYER CAPITALIZES RATHER THAN DEDUCTS EXPENSES. — If —

"(A) the amount of the credit determined for the taxable year under section 45Z(a), exceeds "(B) the amount of allowable as a deduction for such taxable year for mechanical insulation labor costs (determined without regard to paragraph (1)), the amount chargeable to capital account for the taxable year for such costs shall be reduced by the amount of such excess.".

(2) The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is further amended by adding at the end the following new item:

"Sec. 45Z. Labor costs of installing mechanical insulation property.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to amounts paid or incurred after December 31, 2021, in taxable years ending after such date.

SEC. 136503. ADVANCED MANUFACTURING INVESTMENT CREDIT.

(a) IN GENERAL. — Subpart E of part IV of subchapter A of chapter 1 is amended by inserting after section 48D the following new section:

"SEC. 48E. ADVANCED MANUFACTURING INVESTMENT CREDIT.

"(a) ESTABLISHMENT OF CREDIT. —

"(1) IN GENERAL. — For purposes of section 46, the advanced manufacturing investment credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to any advanced manufacturing facility.

"(2) APPLICABLE PERCENTAGE. —

"(A) BASE AMOUNT. — In the case of any advanced manufacturing facility which does not satisfy the requirements described in clauses (i) and (ii) of subparagraph (B), the applicable percentage shall be 5 percent.

"(B) ALTERNATIVE AMOUNT. — In the case of any advanced manufacturing facility which —

"(i) subject to subparagraph (B) of subsection (c)(2), satisfies the requirements under subparagraph (A) of such subsection, and

"(ii) with respect to the construction of such facility, satisfies the apprenticeship requirements under subsection (c)(3), the applicable percentage shall be 25 percent.

"(b) QUALIFIED INVESTMENT. —

"(1) IN GENERAL. — For purposes of subsection (a)(1), the qualified investment with respect to any advanced manufacturing facility for any taxable year is the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of an advanced manufacturing facility.

"(2) QUALIFIED PROPERTY. —

"(A) IN GENERAL. — For purposes of this subsection, the term 'qualified property' means property —

"(i) which is tangible property,

"(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,

"(iii) which is —

"(I) constructed, reconstructed, or erected by the taxpayer, or

"(II) acquired by the taxpayer if the original use of such property commences with the taxpayer, and

"(iv) which is integral to the operation of the advanced manufacturing facility.

"(B) BUILDINGS AND STRUCTURAL COMPONENTS. —

"(i) IN GENERAL. — The term 'qualified property' includes any building or its structural components which otherwise satisfy the requirements under subparagraph (A).

"(ii) EXCEPTION. — Clause (i) shall not apply with respect to a building or portion of a building used for offices, administrative services or other functions unrelated to manufacturing.

"(3) ADVANCED MANUFACTURING FACILITY. — For purposes of this subpart, the term 'advanced manufacturing facility' means a facility for which the primary purpose is the manufacturing of semiconductors or semiconductor tooling equipment.

"(4) COORDINATION WITH REHABILITATION CREDIT. — The qualified investment with respect to any advanced manufacturing facility for any taxable year shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)).

"(c) SPECIAL RULES. —

"(1) CERTAIN PROGRESS EXPENDITURE RULES MADE APPLICABLE. — Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).

"(2) WAGE REQUIREMENTS. —

"(A) IN GENERAL. — The requirements described in this subparagraph with respect to any facility are that the taxpayer shall ensure that any laborers and mechanics employed by contractors and subcontractors in —

"(i) the construction of such facility, and

"(ii) for any year during the 5-year period beginning on the date the facility is originally placed in service, the alteration or repair of such facility,

shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code.

"(B) CORRECTION AND PENALTY RELATED TO FAILURE TO SATISFY WAGE REQUIREMENTS. — Rules similar to the rules of clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(C) RECAPTURE. — The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under paragraph (2)(B) of subsection (a), with respect to any project which does not satisfy the requirements under subparagraph (A) (after application of subparagraph (B)) for the period described in clause (ii) of subparagraph (A) (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a).

"(3) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(4) REGULATIONS AND GUIDANCE. — The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of establishing the requirements of this section.

"(d) TERMINATION OF CREDIT. — The credit allowed under this section shall not apply to facilities or property the construction of which begins after December 31, 2025.".

(b) ELECTIVE PAYMENT OF CREDIT. — Section 6417(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(10) The advanced manufacturing investment credit determined under section 48E.".

(c) CONFORMING AMENDMENTS. —

(1) Section 46 is amended —

(A) by striking "and" at the end of paragraph (6),

(B) by striking the period at the end of paragraph (7) and inserting ", and", and

(C) by adding at the end the following new paragraph:

"(8) the advanced manufacturing investment credit.".

(2) Section 49(a)(1)(C) is amended —

(A) by striking "and" at the end of clause (vi),

(B) by striking the period at the end of clause (vii) and inserting ", and", and

(C) by adding at the end the following new clause:

"(viii) the basis of any qualified property (as defined in section 48E(b)(2)) which is part of an advanced manufacturing facility.".

(3) Section 50(a)(2)(E) is amended by striking "or 48D(e)" and inserting "48D(e), or 48E(c)(1)".

(4) The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48D the following new item:

"48E. Advanced manufacturing investment credit.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to property placed in service after December 31, 2021 and, for any property the construction of which begins prior to January 1, 2022, only to the extent of the basis thereof attributable to the construction, reconstruction, or erection after December 31, 2021.

SEC. 136504. ADVANCED MANUFACTURING PRODUCTION CREDIT.

(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. 45AA. ADVANCED MANUFACTURING PRODUCTION CREDIT.

"(a) IN GENERAL. —

"(1) ALLOWANCE OF CREDIT. — For purposes of section 38, the advanced manufacturing production credit for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each eligible component which is —

"(A) produced by such taxpayer, and

"(B) during the taxable year, sold by the taxpayer to an unrelated person.

"(2) PRODUCTION AND SALE MUST BE IN TRADE OR BUSINESS. — Any eligible component produced and sold by the taxpayer shall be taken into account only if the production and sale described in paragraph (1) is in a trade or business of the taxpayer.

"(3) UNRELATED PERSON. — For purposes of this subsection, a taxpayer shall be treated as selling components to an unrelated person if such component is sold to such person by a person related to the taxpayer.

"(b) CREDIT AMOUNT. —

"(1) IN GENERAL. — Subject to paragraph (3), the amount determined under this subsection with respect to any eligible component, including any eligible component it incorporates, shall be equal to —

"(A) in the case of a thin photovoltaic cell or a crystalline photovoltaic cell, an amount equal to the product of —

"(i) 4 cents, multiplied by

"(ii) the capacity of such cell (expressed on a per direct current watt basis),

"(B) in the case of a photovoltaic wafer, $12 per square meter,

"(C) in the case of solar grade polysilicon, $3 per kilogram,

"(D) in the case of a solar module, an amount equal to the product of —

"(i) 7 cents, multiplied by

"(ii) the capacity of such module (expressed on a per direct current watt basis), and

"(E) in the case of a wind energy component, an amount equal to the product of —

"(i) the applicable amount with respect to such component, multiplied by

"(ii) the total rated capacity (expressed on a per watt basis) of the completed wind turbine for which such component is designed.

"(2) APPLICABLE AMOUNT. — For purposes of paragraph (1)(E), the applicable amount with respect to any wind energy component shall be —

"(A) in the case of a blade, 2 cents,

"(B) in the case of a nacelle, 5 cents,

"(C) in the case of a tower, 3 cents, and

"(D) in the case of an offshore wind foundation —

"(i) which uses a fixed platform, 2 cents, or

"(ii) which uses a floating platform, 4 cents.

"(3) PHASE OUT. —

"(A) IN GENERAL. — In the case of any eligible component sold after December 31, 2026, the amount determined under this subsection with respect to such component shall be equal to the product of —

"(i) the amount determined under paragraph (1) with respect to such component, as determined without regard to this paragraph, multiplied by

"(ii) the phase out percentage under subparagraph (B).

"(B) PHASE OUT PERCENTAGE. — The phase out percentage under this subparagraph is equal to —

"(i) in the case of an eligible component sold during calendar year 2027, 75 percent,

"(ii) in the case of an eligible component sold during calendar year 2028, 50 percent,

"(iii) in the case of an eligible component sold during calendar year 2029, 25 percent,

"(iv) in the case of an eligible component sold after December 31, 2029, 0 percent.

"(c) DEFINITIONS. — For purposes of this section —

"(1) ELIGIBLE COMPONENT. —

"(A) IN GENERAL. — The term 'eligible component' means —

"(i) any solar energy component, and

"(ii) any wind energy component.

"(B) APPLICATION WITH OTHER CREDITS. — The term 'eligible component' shall not include any property which is produced at a facility if the basis of any property which is part of such facility is taken into account for purposes of the credit allowed under section 48C or 48E after the date of the enactment of this section.

"(2) SOLAR ENERGY COMPONENT. —

"(A) IN GENERAL. — The term 'solar energy component' means any of the following:

"(i) Solar modules.

"(ii) Photovoltaic cells.

"(iii) Photovoltaic wafers.

"(iv) Solar grade polysilicon.

"(B) ASSOCIATED DEFINITIONS. —

"(i) PHOTOVOLTAIC CELL. — The term 'photo-voltaic cell' means the smallest semiconductor element of a solar module which performs the immediate conversion of light into electricity.

"(ii) PHOTOVOLTAIC WAFER. — The term 'photovoltaic wafer' means a thin slice, sheet, or layer of semiconductor material of at least 240 square centimeters produced by a single manufacturer —

"(I) either —

"(aa) directly from molten or evaporated solar grade polysilicon or deposition of solar grade thin film semiconductor photon absorber layer, or

"(bb) through formation of an ingot from molten polysilicon and subsequent slicing, and

"(II) which comprises the substrate or absorber layer of one or more photovoltaic cells.

"(iii) SOLAR GRADE POLYSILICON. —

The term 'solar grade polysilicon' means silicon which is —

"(I) suitable for use in photovoltaic manufacturing, and

"(II) purified to a minimum purity of 99.999999 percent silicon by mass.

"(iv) SOLAR MODULE. — The term 'solar module' means the connection and lamination of photovoltaic cells into an environmentally protected final assembly which is —

"(I) suitable to generate electricity when exposed to sunlight, and

"(II) ready for installation without an additional manufacturing process.

"(3) WIND ENERGY COMPONENT. —

"(A) IN GENERAL. — The term 'wind energy component' means any of the following:

"(i) Blades.

"(ii) Nacelles.

"(iii) Towers.

"(iv) Offshore wind foundations.

"(B) ASSOCIATED DEFINITIONS. —

"(i) BLADE. — The term 'blade' means an airfoil-shaped blade which is responsible for converting wind energy to low-speed rotational energy.

"(ii) OFFSHORE WIND FOUNDATION. — The term 'offshore wind foundation' means the component which secures an offshore wind tower and any above-water turbine components to the seafloor using —

"(I) fixed platforms, such as offshore wind monopiles, jackets, or gravity-based foundations, or

"(II) floating platforms and associated mooring systems.

"(iii) NACELLE. — The term 'nacelle' means the assembly of the drivetrain and other tower-top components of a wind turbine (with the exception of the blades and the hub) within their cover housing.

"(iv) TOWER. — The term 'tower' means a tubular or lattice structure which supports the nacelle and rotor of a wind turbine.

"(d) SPECIAL RULES. — In this section —

"(1) RELATED PERSONS. — 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).

"(2) ONLY PRODUCTION IN THE UNITED STATES TAKEN INTO ACCOUNT. — Sales shall be taken into account under this section only with respect to eligible components the production of which is within —

"(A) the United States (within the meaning of section 638(1)), or

"(B) a possession of the United States (within the meaning of section 638(2)).

"(3) PASS-THRU IN THE CASE OF ESTATES AND TRUSTS. — Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.

"(4) CREDIT EQUAL TO 10 PERCENT OF THE CREDIT AMOUNT FOR UNION FACILITIES. — In the case of a facility operating under a collective bargaining agreement negotiated by an employee organization (as defined in section 412(c)(4)), determined in a manner consistent with section 7701(a)(46), for purposes of determining the amount of the credit under subsection (a) with respect to eligible components produced by such facility, the applicable amount under subsection (b) of such subsection shall be increased by an amount equal to 10 percent of the amount otherwise in effect under such subsection.

"(5) SALE OF INTEGRATED COMPONENTS. — For purposes of this section, a person shall be treated as having sold an eligible component if such component is integrated, incorporated, or assembled into another eligible component which is sold to an unrelated person.".

(b) ELECTIVE PAYMENT OF CREDIT. — Section 6417(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(11) The credit for advanced manufacturing production under section 45AA.".

(c) CONFORMING AMENDMENTS. —

(1) Section 38(b) of the Internal Revenue Code of 1986 is amended —

(A) in paragraph (37), by striking "plus" at the end,

(B) in paragraph (38), by striking the period at the end and inserting ", plus", and

(C) by adding at the end the following new paragraph:

"(39) the advanced manufacturing production credit determined under section 45AA(a).".

(2) 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. 45AA. Advanced manufacturing production credit.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to components produced and sold after December 31, 2021.

PART 6 — ENVIRONMENTAL JUSTICE

SEC. 136601. QUALIFIED ENVIRONMENTAL JUSTICE PROGRAM CREDIT.

(a) IN GENERAL. — Subpart C of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is amended by inserting after section 36F the following new section:

"SEC. 36G. QUALIFIED ENVIRONMENTAL JUSTICE PROGRAMS.

"(a) ALLOWANCE OF CREDIT. — In the case of an eligible educational institution, there shall be allowed as a credit against the tax imposed by this subtitle for any taxable year an amount equal to the applicable percentage of the amounts paid or incurred by such taxpayer during such taxable year which are necessary for a qualified environmental justice program.

"(b) QUALIFIED ENVIRONMENTAL JUSTICE PROGRAM. — For purposes of this section —

"(1) IN GENERAL. — The term 'qualified environmental justice program' means a program conducted by one or more eligible educational institutions that is designed to address, or improve data about, qualified environmental stressors for the primary purpose of improving, or facilitating the improvement of, health and economic outcomes of individuals residing in low-income areas or areas that experience, or are at risk of experiencing, multiple exposures to qualified environmental stressors.

"(2) QUALIFIED ENVIRONMENTAL STRESSOR. — The term 'qualified environmental stressor' means, with respect to an area, a contamination of the air, water, soil, or food with respect to such area or a change relative to historical norms of the weather conditions of such area, including —

"(A) toxic pollutants (such as lead, pesticides, or fine particulate matter) in air, soil, food, or water,

"(B) high rates of asthma prevalence and incidence, and

"(C) such other adverse human health or environmental effects as are identified by the Secretary.

"(c) ELIGIBLE EDUCATIONAL INSTITUTION. — For purposes of this section, the term 'eligible educational institution' means an institution of higher education (as such term is defined in section 101 or 102(c) of the Higher Education Act of 1965) that is eligible to participate in a program under title IV of such Act.

"(d) APPLICABLE PERCENTAGE. — For purposes of this section, the term 'applicable percentage' means —

"(1) in the case of a program involving material participation of faculty and students of an institution described in section 371(a) of the Higher Education Act of 1965, 30 percent, and

"(2) in all other cases, 20 percent.

"(e) CREDIT ALLOCATION. —

"(1) ALLOCATION. —

"(A) IN GENERAL. — The Secretary shall allocate credit dollar amounts under this section to eligible educational institutions, for qualified environmental justice programs, that —

"(i) submit applications at such time and in such manner as the Secretary may provide, and

"(ii) are selected by the Secretary under subparagraph (B).

"(B) SELECTION CRITERIA. — The Secretary shall select applications on the basis of the following criteria:

"(i) The extent of participation of faculty and students of an institution described in section 371(a) of the Higher Education Act of 1965.

"(ii) The extent of the expected effect on the health or economic outcomes of individuals residing in areas within the United States that are low-income areas or areas that experience, or are at risk of experiencing, multiple exposures to qualified environmental stressors.

"(iii) The creation or significant expansion of qualified environmental justice programs.

"(2) LIMITATIONS. —

"(A) IN GENERAL. — The amount of the credit determined under this section for any taxable year to any eligible educational institution for any qualified environmental justice program shall not exceed the excess of —

"(i) the credit dollar amount allocated to such institution for such program under this subsection, over

"(ii) the credits previously claimed by such institution for such program under this section.

"(B) FIVE-YEAR LIMITATION. — No amounts paid or incurred after the 5-year period beginning on the date a credit dollar amount is allocated to an eligible educational institution for a qualified environmental justice program shall be taken into account under subsection (a) with respect to such institution for such program.

"(C) ALLOCATION LIMITATION. — The total amount of credits that may be allocated under the program shall not exceed —

"(i) $1,000,000,000 for each of taxable years 2022 through 2031, and

"(ii) $0 for each subsequent year.

"(D) CARRYOVER OF UNUSED LIMITATION. — If the annual credit limitation for any calendar year exceeds the aggregate amount designated for such year under this subsection, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2036.

"(f) REQUIREMENTS. —

"(1) IN GENERAL. — An eligible educational institution that has been allocated credit dollar amounts under this section for a qualified environmental justice project for a taxable year shall —

"(A) make publicly available the application submitted to the Secretary under subsection (e) with respect to such project, and

"(B) submit an annual report to the Secretary that describes the amounts paid or incurred for, and expected impact of, such project.

"(2) FAILURE TO COMPLY. — In the case of an eligible educations institution that has failed to comply with the requirements of this subsection, the credit dollar amount allocated to such institution under this section is deemed to be $0.

"(g) PUBLIC DISCLOSURE. — The Secretary, upon making an allocation of credit dollar amounts under this section, shall publicly disclose —

"(1) the identity of the eligible educational institution receiving the allocation, and

"(2) the amount of such allocation.".

(b) GROSS-UP OF PAYMENTS IN CASE OF SEQUESTRATION. — In the case of any payment made as a refund due to an overpayment as a result of section 36G of the Internal Revenue Code of 1986 made after the date of the enactment of this Act to which sequestration applies, the amount of such payment shall be increased to an amount equal to —

(1) such payment (determined before such sequestration), multiplied by

(2) the quotient obtained by dividing 1 by the amount by which 1 exceeds the percentage reduction in such payment pursuant to such sequestration.

For purposes of this subsection, the term "sequestration" means any reduction in direct spending ordered in accordance with a sequestration report prepared by the Director of the Office and Management and Budget pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985 or the Statutory Pay-As-You-Go Act of 2010.

(c) CONFORMING AMENDMENTS. —

(1) Section 6211(b)(4)(A), as amended by the preceding provisions of this Act, is amended by inserting "36G," after "36F,".

(2) Paragraph (2) of section 1324(b) of title 31, United States Code, as amended by the preceding provisions of this Act, is amended by inserting "36G," after "36F,".

(d) CLERICAL AMENDMENT. — The table of sections for subpart C of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is amended by inserting after the item relating to section 36F the following new item:

"Sec. 36G. Qualified environmental justice programs.".

(e) EFFECTIVE DATE. — The amendments made by this section shall take effect on January 1, 2022.

PART 7 — SUPERFUND

SEC. 136701. REINSTATEMENT OF SUPERFUND.

(a) HAZARDOUS SUBSTANCE SUPERFUND FINANCING RATE. —

(1) EXTENSION. — Section 4611(e) is amended to read as follows:

"(e) APPLICATION OF HAZARDOUS SUBSTANCE SUPERFUND FINANCING RATE. — The Hazardous Substance Superfund financing rate under this section shall apply after June 30, 2022.".

(2) ADJUSTMENT FOR INFLATION. —

(A) Section 4611(c)(2)(A) is amended by striking "9.7 cents" and inserting "16.4 cents".

(B) Section 4611(c) is amended by adding at the end the following:

"(3) ADJUSTMENT FOR INFLATION. —

"(A) IN GENERAL. — In the case of a year beginning after 2022, the amount in paragraph (2)(A) shall be increased by an amount equal to —

"(i) such amount, multiplied by

"(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting 'calendar year 2021' for 'calendar year 2016' in subparagraph (A)(ii) thereof.

"(B) ROUNDING. — If any amount as adjusted under subparagraph (A) is not a multiple of $0.01, such amount shall be rounded to the next lowest multiple of $0.01.".

(b) AUTHORITY FOR ADVANCES. — Section 9507(d)(3)(B) is amended by striking "December 31, 1995" and inserting "December 31, 2031".

(c) EFFECTIVE DATE. — The amendments made by this section shall take effect on July 1, 2022.

PART 8 — INCENTIVES FOR CLEAN ELECTRICITY AND CLEAN TRANSPORTATION

SEC. 136801. CLEAN ELECTRICITY PRODUCTION CREDIT.

(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. CLEAN ELECTRICITY PRODUCTION CREDIT.

"(a) AMOUNT OF CREDIT. —

"(1) IN GENERAL. — For purposes of section 38, the clean electricity production credit for any taxable year is an amount equal to the product of —

"(A) the kilowatt hours of electricity —

"(i) produced by the taxpayer at a qualified facility, and

"(ii)(I) sold by the taxpayer to an unrelated person during the taxable year, or

"(II) in the case of a qualified facility which is equipped with a metering device which is owned and operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year, multiplied by

"(B) the applicable amount with respect to such qualified facility.

"(2) APPLICABLE AMOUNT. —

"(A) BASE AMOUNT. — Subject to subsection (g)(7), in the case of any qualified facility which is not described in clause (i) of subparagraph (B) and does not satisfy the requirements described in clause (ii) of such subparagraph, the applicable amount shall be 0.3 cents.

"(B) ALTERNATIVE AMOUNT. — Subject to subsection (g)(7), in the case of any qualified facility —

"(i) with a maximum net output of less than 1 megawatt, or

"(ii) which —

"(I) satisfies the requirements under paragraph (9) of subsection (g), and

"(II) with respect to the construction of such facility, satisfies the requirements under paragraph (10) of subsection (g), the applicable amount shall be 1.5 cents.

"(b) QUALIFIED FACILITY. —

"(1) IN GENERAL. —

"(A) DEFINITION. — Subject to subparagraphs (B), (C), and (D), the term 'qualified facility' means a facility owned by the taxpayer —

"(i) which is used for the generation of electricity,

"(ii) the construction of which begins after December 31, 2026, and

"(iii) for which the greenhouse gas emissions rate (as determined under paragraph (2)) is not greater than zero.

"(B) 10-YEAR PRODUCTION CREDIT. — For purposes of this section, a facility shall only be treated as a qualified facility during the 10-year period beginning on the date the facility was originally placed in service.

"(C) EXPANSION OF FACILITY; INCREMENTAL PRODUCTION. — The term 'qualified facility' shall include either of the following in connection with a facility described in subparagraph (A) (without regard to clause (ii) of such subparagraph) the construction of which begins before January 1, 2027, but only to the extent of the increased amount of electricity produced at the facility by reason of the following:

"(i) A new unit the construction of which begins after December 31, 2026.

"(ii) Any additions of capacity the construction of which begins after December 31, 2026.

"(D) COORDINATION WITH OTHER CREDITS. — The term 'qualified facility' shall not include any facility for which a credit determined under section 45, 45J, 45Q, 48, 48A, or 48F is allowed under section 38 for the taxable year or any prior taxable year.

"(2) GREENHOUSE GAS EMISSIONS RATE. —

"(A) IN GENERAL. — For purposes of this section, the term '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 CO2e per KWh.

"(B) FUEL COMBUSTION AND GASIFICATION. — 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 (42 U.S.C. 7545(o)(1)(H))) in the production of electricity, expressed as grams of CO2e per KWh.

"(C) ESTABLISHMENT OF EMISSIONS RATES FOR FACILITIES. —

"(i) PUBLISHING EMISSIONS RATES. — The Secretary shall annually publish a table that sets forth the greenhouse gas emissions rates for types or categories of facilities, which a taxpayer shall use for purposes of this section.

"(ii) PROVISIONAL EMISSIONS RATE. — In the case of any facility for which an emissions rate has not been established by the Secretary, a taxpayer which owns such facility may file a petition with the Secretary for determination of the emissions rate with respect to such facility.

"(D) CARBON CAPTURE AND SEQUESTRATION EQUIPMENT. — For purposes of this subsection, the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity shall not include any qualified carbon dioxide that is captured by the taxpayer and —

"(i) pursuant to any regulations established under paragraph (2) of section 45Q(f), disposed of by the taxpayer in secure geological storage, or

"(ii) utilized by the taxpayer in a manner described in paragraph (5) of such section.

"(c) INFLATION ADJUSTMENT. —

"(1) IN GENERAL. — In the case of a calendar year beginning after 2021, the 0.3 cent amount in paragraph (2)(A) of subsection (a) and the 1.5 cent amount in paragraph (2)(B) of such subsection shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale or use of the electricity occurs. If the 0.3 cent amount as increased under this paragraph is not a multiple of 0.05 cent, such amount shall be rounded to the nearest multiple of 0.05 cent. If the 1.5 cent amount as increased under this paragraph is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

"(2) ANNUAL COMPUTATION. — The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor for such calendar year in accordance with this subsection.

"(3) INFLATION ADJUSTMENT FACTOR. — The term 'inflation adjustment factor' means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 1992. The term 'GDP implicit price deflator' means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year.

"(d) CREDIT PHASE-OUT. —

"(1) IN GENERAL. — The amount of the clean electricity production credit under subsection (a) for any qualified facility the construction of which begins during a calendar year described in paragraph (2) 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 a facility the construction of which begins during the first calendar year following the applicable year, 100 percent,

"(B) for a facility the construction of which begins during the second calendar year following the applicable year, 75 percent,

"(C) for a facility the construction of which begins during the third calendar year following the applicable year, 50 percent, and

"(D) for a facility the construction of which begins during any calendar year subsequent to the calendar year described in subparagraph (C), 0 percent.

"(3) APPLICABLE YEAR. — For purposes of this subsection, the term 'applicable year' means the later of —

"(A) the calendar year in which the Secretary determines that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2021, or

"(B) 2031.

"(e) DEFINITIONS. — For purposes of this section:

"(1) CO2e PER KWh. — The term '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.

"(2) GREENHOUSE GAS. — The term 'greenhouse gas' has the same meaning given such term under section 211(o)(1)(G) of the Clean Air Act (42 U.S.C. 7545(o)(1)(G)), as in effect on the date of the enactment of this section.

"(3) QUALIFIED CARBON DIOXIDE. — The term 'qualified carbon dioxide' means carbon dioxide captured from an industrial source which —

"(A) would otherwise be released into the atmosphere as industrial emission of greenhouse gas,

"(B) is measured at the source of capture and verified at the point of disposal or utilization, and

"(C) is captured and disposed or utilized within the United States (within the meaning of section 638(1)) or a possession of the United States (within the meaning of section 638(2)).

"(f) GUIDANCE. — Not later than January 1, 2027, the Secretary shall issue guidance regarding implementation of this section, including calculation of greenhouse gas emission rates for qualified facilities and determination of clean electricity production credits under this section.

"(g) SPECIAL RULES. —

"(1) ONLY PRODUCTION IN THE UNITED STATES TAKEN INTO ACCOUNT. — Consumption or sales shall be taken into account under this section only with respect to electricity the production of which is within —

"(A) the United States (within the meaning of section 638(1)), or

"(B) a possession of the United States (within the meaning of section 638(2)).

"(2) COMBINED HEAT AND POWER SYSTEM PROPERTY. —

"(A) IN GENERAL. — For purposes of subsection (a) —

"(i) the kilowatt hours of electricity produced by a taxpayer at a qualified facility shall include any production in the form of useful thermal energy by any combined heat and power system property within such facility, and

"(ii) the amount of greenhouse gases emitted into the atmosphere by such facility in the production of such useful thermal energy shall be included for purposes of determining the greenhouse gas emissions rate for such facility.

"(B) COMBINED HEAT AND POWER SYSTEM PROPERTY. — For purposes of this paragraph, the term 'combined heat and power system property' has the same meaning given such term by section 48(c)(3) (without regard to subparagraphs (A)(iv), (B), and (D) thereof).

"(C) CONVERSION FROM BTU TO KWH. —

"(i) IN GENERAL. — For purposes of subparagraph (A)(i), the amount of kilowatt hours of electricity produced in the form of useful thermal energy shall be equal to the quotient of —

"(I) the total useful thermal energy produced by the combined heat and power system property within the qualified facility, divided by

"(II) the heat rate for such facility.

"(ii) HEAT RATE. — For purposes of this subparagraph, the term 'heat rate' means the amount of energy used by the qualified facility to generate 1 kilowatt hour of electricity, expressed as British thermal units per net kilowatt hour generated.

"(3) PRODUCTION ATTRIBUTABLE TO THE TAXPAYER. — In the case of a qualified facility in which more than 1 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.

"(4) RELATED PERSONS. — 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 electricity to an unrelated person if such electricity is sold to such a person by another member of such group.

"(5) PASS-THRU IN THE CASE OF ESTATES AND TRUSTS. — Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.

"(6) ALLOCATION OF CREDIT TO PATRONS OF AGRICULTURAL COOPERATIVE. —

"(A) ELECTION TO ALLOCATE. —

"(i) IN GENERAL. — In the case of an eligible cooperative organization, any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons of the organization on the basis of the amount of business done by the patrons during the taxable year.

"(ii) FORM AND EFFECT OF ELECTION. — An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).

"(B) TREATMENT OF ORGANIZATIONS AND PATRONS. — The amount of the credit apportioned to any patrons under subparagraph (A) —

"(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and

"(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.

"(C) SPECIAL RULES FOR DECREASE IN CREDITS FOR TAXABLE YEAR. — If the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of —

"(i) such reduction, over

"(ii) the amount not apportioned to such patrons under subparagraph (A) for the taxable year, shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.

"(D) ELIGIBLE COOPERATIVE DEFINED. — For purposes of this section, the term 'eligible cooperative' means a cooperative organization described in section 1381(a) which is owned more than 50 percent by agricultural producers or by entities owned by agricultural producers. For this purpose an entity owned by an agricultural producer is one that is more than 50 percent owned by agricultural producers.

"(7) INCREASE IN CREDIT IN CERTAIN CASES. —

"(A) ENERGY COMMUNITIES. — In the case of any qualified facility which is located in an energy community (as defined in section 45(b)(11)(B)), for purposes of determining the amount of the credit under subsection (a) with respect to any electricity produced by the taxpayer at such facility during the taxable year, the applicable amount under paragraph (2) of such subsection shall be increased by an amount equal to 10 percent of the amount otherwise in effect under such paragraph (without application of subparagraph (B)).

"(B) DOMESTIC CONTENT. — Rules similar to the rules of section 45(b)(9) shall apply.

"(8) CREDIT REDUCED FOR TAX-EXEMPT BONDS. — Rules similar to the rules of section 45(b)(3) shall apply.

"(9) WAGE REQUIREMENTS. — Rules similar to the rules of section 45(b)(7)(A) and clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(10) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(11) DOMESTIC CONTENT REQUIREMENT FOR ELECTIVE PAYMENT. — Rules similar to the rules of section 45(b)(10) shall apply.".

(b) ELECTIVE PAYMENT OF CREDIT. — Section 6417(b), as amended by preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(12) The clean electricity production credit determined under section 45BB(a).".

(c) ELECTION. — Section 6417(c)(3), as amended by the preceding provisions of this Act, is amended by adding at the end the following new subparagraph:

"(D) CLEAN ELECTRICITY PRODUCTION CREDIT. — In the case of the credit described in subsection (b)(10), any election under this subsection shall —

"(i) apply separately with respect to each qualified facility,

"(ii) be made for the taxable year in which the facility is placed in service, and

"(iii) shall apply to such taxable year and all subsequent taxable years with respect to such facility.".

(d) CONFORMING AMENDMENTS. —

(1) Section 38(b) is amended —

(A) in paragraph (38), by striking "plus" at the end,

(B) in paragraph (39), by striking the period at the end and inserting ", plus", and

(C) by adding at the end the following new paragraph:

"(40) the clean electricity production credit determined under section 45BB(a).".

(2) 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. Clean electricity production credit.".

(e) EFFECTIVE DATE. — The amendments made by this section shall apply to facilities placed in service after December 31, 2022.

SEC. 136802. CLEAN ELECTRICITY INVESTMENT CREDIT.

(a) IN GENERAL. — Subpart E of part IV of subchapter A of chapter 1 is amended by inserting after section 48E the following new section:

"SEC. 48F. CLEAN ELECTRICITY INVESTMENT CREDIT.

"(a) INVESTMENT CREDIT FOR QUALIFIED PROPERTY. —

"(1) IN GENERAL. — For purposes of section 46, the clean electricity investment credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to —

"(A) any qualified facility, and

"(B) any grid improvement property.

"(2) APPLICABLE PERCENTAGE. —

"(A) QUALIFIED FACILITIES. — Subject to paragraph (3) —

"(i) BASE RATE. — In the case of any qualified facility which is not described in subclause (I) of clause (ii) and does not satisfy the requirements described in subclause (II) of such clause, the applicable percentage shall be 6 percent.

"(ii) ALTERNATIVE RATE. — In the case of any qualified facility —

"(I) with a maximum net output of less than 1 megawatt, or

"(II) which —

"(aa) satisfies the requirements of subsection (d)(3), and

"(bb) with respect to the construction of such facility, satisfies the requirements of subsection (d)(4), the applicable percentage shall be 30 percent.

"(B) GRID IMPROVEMENT PROPERTY. — Subject to paragraph (3) —

"(i) BASE RATE. — In the case of any grid improvement property which is not described in subclause (I) of clause (ii) and does not satisfy the requirements described in subclause (II) of such clause, the applicable percentage shall be 6 percent.

"(ii) ALTERNATIVE RATE. — In the case of any grid improvement property —

"(I) which is energy storage property with a capacity of less than 1 megawatt, or

"(II) which —

"(aa) satisfies the requirements of subsection (d)(3), and

"(bb) with respect to the construction of such property, satisfies rules similar to the rules of section 45(b)(8), the applicable percentage shall be 30 percent.

"(3) INCREASE IN CREDIT RATE IN CERTAIN CASES. —

"(A) ENERGY COMMUNITIES. —

"(i) IN GENERAL. — In the case of any qualified investment with respect to a qualified facility or with respect to grid improvement property which is placed in service within an energy community (as defined in section 45(b)(11)(B)), for purposes applying paragraph (2) with respect to such property or investment, the applicable percentage shall be increased by the applicable credit rate increase.

"(ii) APPLICABLE CREDIT RATE INCREASE. — For purposes of clause (i), the applicable credit rate increase shall be an amount equal to —

"(I) in the case of any qualified investment with respect to a qualified facility described in paragraph (2)(A)(i) or with respect to grid improvement property described in paragraph (2)(B)(i), 2 percentage points, and

"(II) in the case of any qualified investment with respect to a qualified facility described in paragraph (2)(A)(ii) or with respect to grid improvement property described in paragraph (2)(B)(ii), 10 percentage points.

"(B) DOMESTIC CONTENT. — Rules similar to the rules of section 48(a)(12) shall apply.

"(b) QUALIFIED INVESTMENT WITH RESPECT TO A QUALIFIED FACILITY. —

"(1) IN GENERAL. — For purposes of subsection (a), the qualified investment with respect to any qualified facility for any taxable year is the sum of —

"(A) the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of a qualified facility, plus

"(B) the amount of any expenditures which are —

"(i) paid or incurred by the taxpayer for qualified interconnection property —

"(I) in connection with a qualified facility which has a maximum net output of not greater than 5 megawatts, and

"(II) placed in service during the taxable year of the taxpayer, and

"(ii) properly chargeable to capital account of the taxpayer.

"(2) QUALIFIED PROPERTY. — The term 'qualified property' means property —

"(A) which is —

"(i) tangible personal property, or

"(ii) other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified facility,

"(B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and

"(C)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

"(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer.

"(3) QUALIFIED FACILITY. —

"(A) IN GENERAL. — For purposes of this section, the term 'qualified facility' means a facility —

"(i) which is used for the generation of electricity,

"(ii) the construction of which begins after December 31, 2026, and

"(iii) for which the anticipated greenhouse gas emissions rate (as determined under subparagraph (B)(ii)) is not greater than zero.

"(B) ADDITIONAL RULES. —

"(i) EXPANSION OF FACILITY; INCREMENTAL PRODUCTION. — Rules similar to the rules of section 45BB(b)(1)(C) shall apply for purposes of this paragraph.

"(ii) GREENHOUSE GAS EMISSIONS RATE. — Rules similar to the rules of section 45BB(b)(2) shall apply for purposes of this paragraph.

"(C) EXCLUSION. — The term 'qualified facility' shall not include any facility for which —

"(i) a renewable electricity production credit determined under section 45,

"(ii) an advanced nuclear power facility production credit determined under section 45J,

"(iii) a carbon oxide sequestration credit determined under section 45Q,

"(iv) a clean electricity production credit determined under section 45BB,

"(v) an energy credit determined under section 48,

"(vi) a qualifying advanced coal project credit under section 48A, or

"(vii) a qualifying electric transmission property credit under section 48D, is allowed under section 38 for the taxable year or any prior taxable year.

"(4) QUALIFIED INTERCONNECTION PROPERTY. — For purposes of this paragraph, the term 'qualified interconnection property' has the meaning given such term in section 48(a)(8)(B).

"(5) COORDINATION WITH REHABILITATION CREDIT. — The qualified investment with respect to any qualified facility for any taxable year shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)).

"(6) DEFINITIONS. — For purposes of this subsection, the terms 'CO2e per KWh' and 'greenhouse gas emissions rate' have the same meaning given such terms under section 45BB(b).

"(c) QUALIFIED INVESTMENT WITH RESPECT TO GRID IMPROVEMENT PROPERTY. —

"(1) IN GENERAL. —

"(A) QUALIFIED INVESTMENT. — For purposes of subsection (a), the qualified investment with respect to grid improvement property for any taxable year is the basis of any grid improvement property placed in service by the taxpayer during such taxable year.

"(B) GRID IMPROVEMENT PROPERTY. — For purposes of this section, the term 'grid improvement property' means any energy storage property.

"(2) ENERGY STORAGE PROPERTY. — For purposes of this section, the term 'energy storage property' has the meaning given such term in section 48(c)(6).

"(d) SPECIAL RULES. —

"(1) CERTAIN PROGRESS EXPENDITURE RULES MADE APPLICABLE. — Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).

"(2) SPECIAL RULE FOR PROPERTY FINANCED BY SUBSIDIZED ENERGY FINANCING OR PRIVATE ACTIVITY BONDS. — Rules similar to the rules of section 45(b)(3) shall apply.

"(3) PREVAILING WAGE REQUIREMENTS. —  Rules similar to the rules of section 48(a)(10) shall apply.

"(4) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.

"(5) DOMESTIC CONTENT REQUIREMENT FOR ELECTIVE PAYMENT. — Rules similar to the rules of section 45(b)(10) shall apply.

"(e) CREDIT PHASE-OUT. —

"(1) IN GENERAL. — The amount of the clean electricity investment credit under subsection (a) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during a calendar year described in paragraph (2) 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 qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during the first calendar year following the applicable year, 100 percent,

"(B) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during the second calendar year following the applicable year, 75 percent,

"(C) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during the third calendar year following the applicable year, 50 percent, and

"(D) for any qualified investment with respect to any qualified facility or grid improvement property the construction of which begins during any calendar year subsequent to the calendar year described in subparagraph (C), 0 percent.

"(3) APPLICABLE YEAR. — For purposes of this subsection, the term 'applicable year' has the same meaning given such term in section 45BB(d)(3).

"(f) GREENHOUSE GAS. — In this section, the term 'greenhouse gas' has the same meaning given such term under section 45BB(e)(2).

"(g) RECAPTURE OF CREDIT. — For purposes of section 50, 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 shall cease to be investment credit property in the taxable year in which the determination is made.

"(h) GUIDANCE. — Not later than January 1, 2027, the Secretary shall issue guidance regarding implementation of this section.".

(b) ELECTIVE PAYMENT OF CREDIT. — Section 6417(b), as amended by preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(13) The clean electricity investment credit determined under section 48F.".

(c) CONFORMING AMENDMENTS. —

(1) Section 46 is amended —

(A) by striking "and" at the end of paragraph (5),

(B) by striking the period at the end of paragraph (6) and inserting ", and", and

(C) by adding at the end the following new paragraph:

"(7) the clean electricity investment credit.".

(2) Section 49(a)(1)(C) is amended —

(A) by striking "and" at the end of clause (iv),

(B) by striking the period at the end of clause (v) and inserting a comma, and

(C) by adding at the end the following new clauses:

"(vi) the basis of any qualified property which is part of a qualified facility under section 48F, and

"(vii) the basis of any energy storage property under section 48F.".

(3) Section 50(a)(2)(E) is amended by striking "or 48E(c)(1)" and inserting "48E(c)(1), or 48F(e)".

(4) Section 50(c)(3) is amended by inserting "or clean electricity investment credit" after "In the case of any energy credit".

(5) The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 48E the following new item:

"48F. Clean electricity investment credit.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to property placed in service after December 31, 2026, and, for any property the construction of which begins prior to January 1, 2027, only to the extent of the basis thereof attributable to the construction, reconstruction, or erection after December 31, 2026.

SEC. 136803. INCREASE IN CLEAN ELECTRICITY INVESTMENT CREDIT FOR FACILITIES PLACED IN SERVICE IN CONNECTION WITH LOW-INCOME COMMUNITIES.

(a) IN GENERAL. — Section 48F, as added by this Act, is amended by adding at the end the following new subsection:

"(i) SPECIAL RULES FOR CERTAIN FACILITIES PLACED IN SERVICE IN CONNECTION WITH LOW-INCOME COMMUNITIES. —

"(1) IN GENERAL. — In the case of any qualified facility with respect to which the Secretary makes an allocation of environmental justice capacity limitation under paragraph (4) —

"(A) the applicable percentage otherwise determined under subsection (a)(2) with respect to any eligible property which is part of such facility shall be increased by —

"(i) in the case of a facility described in subclause (I) of paragraph (2)(A)(iii) and not described in subclause (II) of such paragraph, 10 percentage points, and

"(ii) in the case of a facility described in subclause (II) of paragraph (2)(A)(iii), 20 percentage points, and

"(B) the increase in the credit determined under subsection (a) by reason of this subsection for any taxable year with respect to all property which is part of such facility shall not exceed the amount which bears the same ratio to the amount of such increase (determined without regard to this subparagraph) as —

"(i) the environmental justice capacity limitation allocated to such facility, bears to

"(ii) the total megawatt nameplate capacity of such facility, as measured in direct current.

"(2) QUALIFIED FACILITY. — For purposes of this subsection —

"(A) IN GENERAL. — The term 'qualified facility' means any facility —

"(i) which is described in subsection (b)(3)(A) and not described in section 45BB(b)(2)(B),

"(ii) which has a maximum net output of less than 5 megawatts, and

"(iii) which —

"(I) is 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. 3501(2))), or 

"(II) is part of a qualified low-income residential building project or a qualified low-income economic benefit project.

"(B) QUALIFIED LOW-INCOME RESIDENTIAL BUILDING PROJECT. — A facility shall be treated as part of a qualified low-income residential building project if —

"(i) such facility is installed on a residential rental building 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 Development Fund Corporation cooperative under Article XI of the New York State Private Housing Finance Law, 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

"(ii) the financial benefits of the electricity produced by such facility are allocated equitably among the occupants of the dwelling units of such building.

"(C) QUALIFIED LOW-INCOME ECONOMIC BENEFIT PROJECT. — A facility shall be 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 —

"(i) less than 200 percent of the poverty line applicable to a family of the size involved, or

"(ii) less than 80 percent of area median gross income (as determined under section 142(d)(2)(B)).

"(D) FINANCIAL BENEFIT. — For purposes of subparagraphs (B) and (C), electricity acquired at a below-market rate shall not fail to be taken into account as a financial benefit.

"(3) ELIGIBLE PROPERTY. — For purposes of this section, the term 'eligible property' means a qualified investment with respect to any qualified facility which is described in subsection (b).

"(4) ALLOCATIONS. —

"(A) IN GENERAL. — Not later than January 1, 2027, the Secretary shall establish a program to allocate amounts of environmental justice capacity limitation to qualified facilities.

"(B) LIMITATION. — The amount of environmental justice capacity limitation allocated by the Secretary under subparagraph (A) during any calendar year shall not exceed the annual capacity limitation with respect to such year.

"(C) ANNUAL CAPACITY LIMITATION. — For purposes of this paragraph, the term 'annual capacity limitation' means 1.8 gigawatts of direct current capacity for each of calendar years 2027 through 2031, and zero thereafter.

"(D) CARRYOVER OF UNUSED LIMITATION. —

"(i) IN GENERAL. — If the annual capacity limitation for any calendar year exceeds the aggregate amount allocated for such year under this paragraph, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2033.

"(ii) CARRYOVER FROM SECTION 48 FOR CALENDAR YEAR 2027. — If the annual capacity limitation for calendar year 2026 under section 48(e)(4)(D) exceeds the aggregate amount allocated for such year under section 48(e)(4)(D), such excess amount may be carried over and applied to the annual capacity limitation under this subsection for calendar year 2027. Such limitation shall be increased by the amount of such excess.

"(E) PLACED IN SERVICE DEADLINE. —

"(i) IN GENERAL. — Paragraph (1) shall not apply with respect to any property which is placed in service 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.

"(ii) APPLICATION OF CARRYOVER. — Any amount of environmental justice capacity limitation which expires under clause (i) during any calendar year shall be taken into account as an excess described in subparagraph (D) (or as an increase in such excess) for such calendar year, subject to the limitation imposed by the last sentence of such subparagraph.

"(F) SELECTION CRITERIA. — In determining to which qualified facilities to allocate environmental justice capacity limitation under this paragraph, the Secretary shall take into consideration which facilities will result in —

"(i) the greatest health and economic benefits, including the ability to withstand extreme weather events, for individuals described in section 45D(e)(2),

"(ii) the greatest employment and wages for such individuals, and

"(iii) the greatest engagement with, outreach to, or ownership by, such individuals, including through partnerships with local governments, community-based organizations, an Indian tribal government (as defined in section 48(e)(4)(F)(ii)), or any Alaska Native Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)).

"(G) DISCLOSURE OF ALLOCATIONS. — The Secretary shall, upon making an allocation of environmental justice capacity limitation under this paragraph, publicly disclose the identity of the applicant, the amount of the environmental justice capacity limitation allocated to such applicant, and the location of the facility for which such allocation is made.

"(5) RECAPTURE. — The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under subsection (a) by reason of this subsection with respect to any property which ceases to be property eligible for such increase (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a). To the extent provided by the Secretary, such recapture may not apply with respect to any property if, within 12 months after the date the taxpayer becomes aware (or reasonably should have become aware) of such property ceasing to be property eligible for such increase, the eligibility of such property for such increase is restored. The preceding sentence shall not apply more than once with respect to any facility.".

(b) EFFECTIVE DATE. — The amendments made by this section shall take effect on January 1, 2027.

SEC. 136804. COST RECOVERY FOR QUALIFIED FACILITIES, QUALIFIED PROPERTY, AND GRID IMPROVEMENT PROPERTY.

(a) IN GENERAL. — Section 168(e)(3)(B) is amended —

(1) in clause (vi)(III), by striking "and" at the end,

(2) in clause (vii), by striking the period at the end and inserting ", and", and

(3) by inserting after clause (vii) the following:

"(viii) any qualified facility (as defined in section 45BB(b)(1)(A)), any qualified property (as defined in subsection (b)(2) of section 48F) which is a qualified investment (as defined in subsection (b)(1) of such section), or any grid improvement property (as defined in subsection (c)(1)(B) of such section).".

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to facilities and property placed in service after December 31, 2026.

SEC. 136805. CLEAN FUEL PRODUCTION CREDIT.

(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. 45CC. CLEAN FUEL PRODUCTION CREDIT.

"(a) AMOUNT OF CREDIT. —

"(1) IN GENERAL. — For purposes of section 38, the clean fuel production credit for any taxable year is an amount equal to the product of —

"(A) the applicable amount per gallon (or gallon equivalent) with respect to any transportation fuel which is —

"(i) produced by the taxpayer at a qualified facility, and

"(ii) sold by the taxpayer in a manner described in paragraph (4) during the taxable year, and

"(B) the emissions factor for such fuel (as determined under subsection (b)).

"(2) APPLICABLE AMOUNT. —

"(A) BASE AMOUNT. — In the case of any transportation fuel produced at a qualified facility which does not satisfy the requirements described in subparagraph (B), the applicable amount shall be 20 cents.

"(B) ALTERNATIVE AMOUNT. — In the case of any transportation fuel produced at a qualified facility which satisfies the requirements under paragraphs (6) and (7) of subsection (g), the applicable amount shall be $1.00.

"(3) SPECIAL RATE FOR SUSTAINABLE AVIATION FUEL. —

"(A) IN GENERAL. — In the case of a transportation fuel which is sustainable aviation fuel, paragraph (2) shall be applied —

"(i) in the case of a transportation fuel produced at a qualified facility described in paragraph (2)(A), by substituting '35 cents' for '20 cents', and

"(ii) in the case of a transportation fuel produced at a qualified facility described in paragraph (2)(B), by substituting '$1.75' for '$1.00'.

"(B) SUSTAINABLE AVIATION FUEL. — For purposes of this subparagraph (A), the term 'sustainable aviation fuel' means liquid fuel which is sold for use in an aircraft and which —

"(i) meets the requirements of —

"(I) ASTM International Standard D7566, or

"(II) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1, and

"(ii) is not derived from palm fatty acid distillates or petroleum.

"(4) SALE. — For purposes of paragraph (1), the transportation fuel is sold in a manner described in this paragraph if such fuel is sold by the taxpayer to an unrelated person —

"(A) for use by such person in the production of a fuel mixture,

"(B) for use by such person in a trade or business, or

"(C) who sells such fuel at retail to another person and places such fuel in the fuel tank of such other person.

"(5) ROUNDING. — If any amount determined under paragraph (1) is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.

"(b) EMISSIONS FACTORS. —

"(1) EMISSIONS FACTOR. —

"(A) CALCULATION. —

"(i) IN GENERAL. — The emissions factor of a transportation fuel shall be an amount equal to the quotient of —

"(I) an amount equal to —

"(aa) 50 kilograms of CO2e per mmBTU, minus

"(bb) the emissions rate for such fuel, divided by

"(II) 50 kilograms of CO2e per mmBTU.

"(B) ESTABLISHMENT OF EMISSIONS RATE. —

"(i) IN GENERAL. — Subject to clauses (ii) and (iii), the Secretary shall annually publish a table which sets forth the emissions 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 the enactment of this section) for such fuels, expressed as kilograms of CO2e per mmBTU, which a taxpayer shall use for purposes of this section.

"(ii) NON-AVIATION FUEL. — In the case of any transportation fuel which is not a 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 developed by Argonne National Laboratory, or a successor model (as determined by the Secretary).

"(iii) AVIATION FUEL. — In the case of any transportation fuel which is a sustainable aviation fuel, the lifecycle greenhouse gas emissions of such fuel shall be determined in accordance with —

"(I) the most recent Carbon Offsetting and Reduction Scheme for International Aviation which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or

"(II) 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)).

"(C) ROUNDING OF EMISSIONS RATE. — The Secretary may round the emissions rates under subparagraph (B) to the nearest multiple of 5 kilograms of CO2e per mmBTU, except that, in the case of an emissions rate that is less than 2.5 kilograms of CO2e per mmBTU, the Secretary may round such rate to zero.

"(D) PROVISIONAL EMISSIONS RATE. — In the case of any transportation fuel for which an emissions rate has not been established under subparagraph (B), a taxpayer producing such fuel may file a petition with the Secretary for determination of the emissions rate with respect to such fuel.

"(2) ROUNDING. — If any amount determined under paragraph (1)(A) is not a multiple of 0.1, such amount shall be rounded to the nearest multiple of 0.1.

"(c) INFLATION ADJUSTMENT. —

"(1) IN GENERAL. — In the case of calendar years beginning after 2026, the 20 cent amount in subsection (a)(2)(A), the $1.00 amount in subsection (a)(2)(B), the 35 cent amount in subsection (a)(3)(A)(i), and the $1.75 amount in subsection (a)(3)(A)(ii) shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale of the transportation fuel occurs. If any amount as increased under the preceding sentence is not a multiple of 1 cent, such amount shall be rounded to the nearest multiple of 1 cent.

"(2) INFLATION ADJUSTMENT FACTOR. — For purposes of paragraph (1), the inflation adjustment factor shall be the inflation adjustment factor determined and published by the Secretary pursuant to section 45BB(c), determined by substituting 'calendar year 2021' for 'calendar year 1992' in paragraph (3) thereof.

"(d) CREDIT PHASE-OUT. —

"(1) IN GENERAL. — The amount of the clean fuel production credit under subsection (a) for any transportation fuel sold during a taxable year described in paragraph (2) 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 the first calendar year following the applicable year, 100 percent,

"(B) for any taxable year beginning in the second calendar year following the applicable year, 75 percent,

"(C) for any taxable year beginning in the third calendar year following the applicable year, 50 percent, and

"(D) for any taxable year beginning in any calendar year subsequent to the calendar year described in subparagraph (C), 0 percent.

"(3) APPLICABLE YEAR. — For purposes of this subsection, the term 'applicable year' means the later of —

"(A) the calendar year in which the Secretary determines that the greenhouse gas emissions from the transportation of persons and goods annually in the United States are equal to or less than 25 percent of the greenhouse gas emissions from the transportation of persons and goods in the United States during calendar year 2021, or

"(B) 2031.

"(e) DEFINITIONS. — In this section:

"(1) mmBTU. — The term 'mmBTU' means 1,000,000 British thermal units.

"(2) CO2e. — The term 'CO2e' means, with respect to any greenhouse gas, the equivalent carbon dioxide (as determined based on relative global warming potential).

"(3) GREENHOUSE GAS. — The term 'greenhouse gas' has the same meaning given that term under section 211(o)(1)(G) of the Clean Air Act (42 U.S.C. 7545(o)(1)(G)), as in effect on the date of the enactment of this section.

"(4) QUALIFIED FACILITY. — The term 'qualified facility' —

"(A) means a facility used for the production of transportation fuels, and

"(B) does not include any facility for which one of the following credits is allowed under section 38 for the taxable year:

"(i) The credit for production of clean hydrogen under section 45X.

"(ii) The credit for clean hydrogen production facilities under section 48(a)(16).

"(iii) The credit for carbon oxide sequestration under section 45Q.

"(5) TRANSPORTATION FUEL. — The term 'transportation fuel' means a fuel which —

"(A) is suitable for use as a fuel in a highway vehicle or aircraft,

"(B) has an emissions rate which is not greater than —

"(i) in the case of a fuel which is not a sustainable aviation fuel —

"(I) for any such fuel sold during calendar years 2027 through 2030, 50 kilograms of CO2e per mmBTU, and

"(II) for any such fuel sold during any calendar year beginning after December 31, 2030, 25 kilograms of CO2e per mmBTU, or

"(ii) in the case of a fuel which is a sustainable aviation fuel —

"(I) for any such fuel sold during any period before January 1, 2031, 35 kilograms of CO2e per mmBTU, and

"(II) for any such fuel sold during any period after December 31, 2030, 25 kilograms of CO2e per mmBTU,

"(C) is not hydrogen fuel, and

"(D) in the case of fuel which is not aviation fuel, is not derived from coprocessing biomass with a feedstock which is not biomass. For purposes of this paragraph, the term 'biomass' has the meaning given such term in section 45K(c)(3).

"(f) GUIDANCE. — Not later than January 1, 2027, the Secretary shall issue guidance regarding implementation of this section, including calculation of emissions factors for transportation fuel, the table described in subsection (b)(1)(B)(i), and the determination of clean fuel production credits under this section.

"(g) SPECIAL RULES. —

"(1) ONLY REGISTERED PRODUCTION IN THE UNITED STATES TAKEN INTO ACCOUNT. —

"(A) IN GENERAL. — No clean fuel production credit shall be determined under subsection

(a) with respect to any transportation fuel unless —

"(i) the taxpayer is registered as a producer of clean fuel under section 4101 at the time of production, and

"(ii) such fuel is produced in the United States.

"(B) UNITED STATES. — For purposes of this paragraph, the term 'United States' includes any possession of the United States.

"(2) PRODUCTION ATTRIBUTABLE TO THE TAXPAYER. — In the case of a facility in which more than 1 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.

"(3) RELATED PERSONS. — 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.

"(4) PASS-THRU IN THE CASE OF ESTATES AND TRUSTS. — Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.

"(5) ALLOCATION OF CREDIT TO PATRONS OF AGRICULTURAL COOPERATIVE. —

"(A) ELECTION TO ALLOCATE. —

"(i) IN GENERAL. — In the case of an eligible cooperative organization, any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons of the organization on the basis of the amount of business done by the patrons during the taxable year.

"(ii) FORM AND EFFECT OF ELECTION. — An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).

"(B) TREATMENT OF ORGANIZATIONS AND PATRONS. — The amount of the credit apportioned to any patrons under subparagraph (A) —

"(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and

"(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.

"(C) SPECIAL RULES FOR DECREASE IN CREDITS FOR TAXABLE YEAR. — If the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of —

"(i) such reduction, over

"(ii) the amount not apportioned to such patrons under subparagraph (A) for the taxable year, shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.

"(D) ELIGIBLE COOPERATIVE DEFINED. — For purposes of this section the term 'eligible cooperative' means a cooperative organization described in section 1381(a) which is owned more than 50 percent by agricultural producers or by entities owned by agricultural producers. For this purpose an entity owned by an agricultural producer is one that is more than 50 percent owned by agricultural producers.

"(6) PREVAILING WAGE REQUIREMENTS. —

"(A) IN GENERAL. — Subject to subparagraph (B), rules similar to the rules of section 45(b)(7)(A) and clauses (i) through (iv) of section 45(b)(7)(B) shall apply.

"(B) SPECIAL RULE FOR FACILITIES PLACED IN SERVICE BEFORE JANUARY 1, 2027. — In the case of any qualified facility placed in service before January 1, 2027 —

"(i) the rules of clause (i) of section 45(b)(7)(A) shall not apply, and

"(ii) clause (ii) of such section shall be applied by substituting 'for any period of the taxable year beginning after December 31, 2026 for which the credit is claimed under this section with respect to production of transportation fuel, the alteration or repair of such facility' for 'for the period of the taxable year which is within the 10-year period beginning on the date the facility was originally placed in service, the alteration or repair of such facility'.

"(7) APPRENTICESHIP REQUIREMENTS. — Rules similar to the rules of section 45(b)(8) shall apply.".

(b) ELECTIVE PAYMENT OF CREDIT. — Section 6417(b), as amended by preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(14) The clean fuel production credit determined under section 45CC(a).".

(c) CONFORMING AMENDMENTS. —

(1) Section 38(b), as amended by section 101, is amended —

(A) in paragraph (39), by striking "plus" at the end,

(B) in paragraph (40), by striking the period at the end and inserting ", plus", and

(C) by adding at the end the following new paragraph:

"(41) the clean fuel production credit determined under section 45CC(a).".

(2) The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by section 101, is amended by adding at the end the following new item:

"Sec. 45CC. Clean fuel production credit.".

(3) Section 4101(a)(1) is amended by inserting "every person producing a fuel eligible for the clean fuel production credit (pursuant to section 45CC)," after "section 6426(b)(4)(A)),".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to transportation fuel produced after December 31, 2026.

PART 9 — APPROPRIATIONS

SEC. 136901. APPROPRIATIONS.

Immediately upon the enactment of this Act, in addition to amounts otherwise available, there are appropriated for fiscal year 2022, out of any money in the Treasury not otherwise appropriated, $4,073,433,000 to remain available until September 30, 2031, for necessary expenses for the Internal Revenue Service to carry out this subtitle (and the amendments made by this subtitle), which shall supplement and not supplant any other appropriations that may be available for this purpose.

Subtitle G — Social Safety Net

SEC. 137001. AMENDMENT OF 1986 CODE.

Except as otherwise expressly provided, whenever in this subtitle 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.

PART 1 — CHILD TAX CREDIT

SEC. 137101. MODIFICATIONS APPLICABLE BEGINNING IN 2021.

(a) SAFE HARBOR EXCEPTION FOR FRAUD AND INTENTIONAL DISREGARD OF RULES AND REGULATIONS. —  Section 24(j)(2)(B) is amended —

(1) by striking "qualified" each place it appears in clause (iv)(II) and inserting "qualifying", and

(2) by adding at the end the following new clause:

"(v) EXCEPTION FOR FRAUD AND INTENTIONAL DISREGARD OF RULES AND REGULATIONS. —

"(I) IN GENERAL. — For purposes of determining the safe harbor amount under clause (iv) with respect to any taxpayer, an individual shall not be treated as taken into account in determining the annual advance amount of such taxpayer if the Secretary determines that such individual was so taken into account due to fraud by the taxpayer or intentional disregard of rules and regulations by the taxpayer.

"(II) ARRANGEMENTS TO TAKE INDIVIDUAL INTO ACCOUNT MORE THAN ONCE. — For purposes of subclause (I), a taxpayer shall not fail to be treated as intentionally disregarding rules and regulations with respect to any individual taken into account in determining the annual advance amount of such taxpayer if such taxpayer entered into a plan or other arrangement with, or expected, another taxpayer to take such individual into account in determining the credit allowed under this section for the taxable year.".

(b) RULES RELATING TO RECONCILIATION OF CREDIT AND ADVANCE CREDIT. — Section 24(j) is amended by adding at the end the following new paragraphs:

"(3) JOINT RETURNS. — Except as otherwise provided by the Secretary, in the case of an advance payment made under section 7527A with respect to a joint return, half of such payment shall be treated as having been made to each individual filing such return.

"(4) COORDINATION WITH POSSESSIONS OF THE UNITED STATES. — For purposes of this subsection, payments made under section 7527A include payments made by any jurisdiction other than the United States under section 7527A of the income tax law of such jurisdiction, and advance payments made by American Samoa pursuant to a plan described in subsection (k)(3)(B). In carrying out this section, the Secretary shall coordinate with each possession of the United States to prevent any application of this paragraph that is inconsistent with the purposes of this subsection.".

(c) ANNUAL ADVANCE AMOUNT. — Section 7527A(b) is amended —

(1) in paragraph (1) —

(A) in subparagraph (A), by inserting "or based on any other information known to the Secretary" after "reference taxable year",

(B) in subparagraph (C), by inserting "unless determined by the Secretary based on any information known to the Secretary," before "the only children", and

(C) in subparagraph (D), by inserting "unless determined by the Secretary based on any information known to the Secretary," before "the ages of", and

(2) in paragraph (3)(A)(ii), by striking " provided by the taxpayer" and inserting "provided, or known,".

(d) DISCLOSURE OF INFORMATION RELATING TO JOINT FILERS AND ADVANCE PAYMENT OF CHILD TAX CREDIT. — Section 6103(e) is amended by adding at the end the following new paragraph:

"(12) DISCLOSURE OF INFORMATION RELATING TO JOINT FILERS AND ADVANCE PAYMENT OF CHILD TAX CREDIT. — In the case of an individual to whom the Secretary makes payments under section 7527A, if the reference taxable year (as defined in section 7527A(b)(2)) that the Secretary uses to calculate such payments is a year for which the individual filed an income tax return jointly with another individual, the Secretary may disclose to such individual any return information of such other individual which is relevant in determining the payment under section 7527A and the individual's eligibility for such payment, including information regarding any of the following:

"(A) The number of specified children, including by reason of the birth of a child.

"(B) The name and TIN of specified children.

"(C) Marital status.

"(D) Modified adjusted gross income.

"(E) Principal place of abode.

"(F) Any other factor which the Secretary may provide pursuant to section 7527A(c).".

(e) EFFECTIVE DATE. —

(1) IN GENERAL. — Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning, and payments made, after December 31, 2020.

(2) DISCLOSURE OF INFORMATION RELATING TO JOINT FILERS AND ADVANCE PAYMENT OF CHILD TAX CREDIT. — The amendment made by subsection (d) shall take effect on the date of the enactment of this Act.

SEC. 137102. EXTENSIONS AND MODIFICATIONS APPLICABLE BEGINNING IN 2022.

(a) EXTENSIONS. —

(1) EXTENSION OF CHILD TAX CREDIT. — Section 24(i) is amended —

(A) by striking "January 1, 2022" in the matter preceding paragraph (1) and inserting "January 1, 2023", and

(B) by inserting "AND 2022" after "2021" in the heading thereof.

(2) EXTENSION OF PROVISIONS RELATED TO POSSESSIONS OF THE UNITED STATES. —

(A) Section 24(k)(2)(B) is amended —

(i) by striking "December 31, 2021" in the matter preceding clause (i) and inserting "December 31, 2022", and

(ii) by striking "AFTER 2021" in the heading thereof and inserting "AFTER 2022".

(B) Section 24(k)(3)(C)(ii) is amended —

(i) in subclause (I), by inserting "or 2022" after "2021", and

(ii) in subclause (II), by striking "December 31, 2021" and inserting "December 31, 2022".

(C) The heading of section 24(k)(2)(A) is amended by inserting "AND 2022" after "2021".

(b) EXTENSION AND MODIFICATION OF ADVANCE PAYMENT. —

(1) IN GENERAL. — Section 7527A is amended —

(A) in subsection (b)(1), by striking "50 percent of",

(B) in clauses (i) and (ii) of subsection (e)(4)(C), by inserting "or 2022" after "in 2021", and

(C) in subsection (f), by striking "December 31, 2021" and inserting "December 31, 2022".

(2) MONTHLY PAYMENTS. —

(A) IN GENERAL. — Section 7527A(a) is amended to read as follows:

"(a) IN GENERAL. — The Secretary shall establish a program for making monthly payments to taxpayers in amounts equal to 1/12 of the annual advance amount with respect to such taxpayer.".

(B) MODIFICATIONS DURING CALENDAR YEAR. — Section 7527A(b)(3), as amended by the preceding provisions of this Act, is amended —

(i) by amending subparagraph (A)(ii) to read as follows:

"(ii) any other information provided, or known, to the Secretary which allows the Secretary to more accurately estimate the amount treated as allowed under subpart C of part IV of subchapter A of chapter 1 by reason of section 24(i)(1) with respect to the taxpayer for the reference taxable year.", and

(ii) in subparagraph (B), by striking "periodic payment" both places it appears and inserting "monthly payment".

(C) CONFORMING AMENDMENT. — Section 7527A(c)(2) is amended by striking "subsection (b)(3)(B)" and inserting "subsection (b)(3)".

(3) ELIGIBILITY FOR ADVANCE PAYMENTS LIMITED BASED ON MODIFIED ADJUSTED GROSS INCOME. — Section 7527A(b) is amended by adding at the end the following new paragraph:

"(6) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME. —

"(A) IN GENERAL. — If the modified adjusted gross income of the taxpayer for the reference taxable year exceeds the applicable threshold amount with respect to such taxpayer (as defined in section 24(i)(4)(B)), the annual advance amount with respect to such taxpayer shall be zero.

"(B) EXCEPTION FOR MODIFICATIONS MADE DURING THE CALENDAR YEAR. — Subparagraph (A) shall not apply to a reference taxable year taken into account by reason of paragraph (3)(A)(i) or subsection (c) if the taxpayer received one or more payments under subsection (a) for months in the calendar year which precede the month for which such reference taxable year will be taken into account.".

(4) ADVANCE PAYMENTS TO PUERTO RICO RESIDENTS FOR 2022. — Section 7527A(e)(4) is amended —

(A) in subparagraph (A), by striking "The advance" and inserting "Except as provided in subparagraph (D), the advance", and

(B) by adding at the end the following new subparagraph:

"(D) ADVANCE PAYMENTS TO PUERTO RICO RESIDENTS FOR 2022. — For the period beginning on July 1, 2022, and ending on December 31, 2022, the Secretary may apply this section without regard to subparagraph (A)(i).".

(c) ELECTION TO APPLY INCOME PHASEOUT ON BASIS OF INCOME FROM THE PRECEDING TAXABLE YEAR. — Section 24(i) is amended by adding at the end the following new paragraph:

"(5) ELECTION TO APPLY INCOME PHASEOUT ON BASIS OF INCOME FROM THE PRECEDING TAXABLE YEAR. — In the case of a taxpayer who elects (at such time and in such manner as the Secretary may provide) the application of this paragraph for any taxable year, paragraph (4) and subsection (b)(1) shall both be applied with respect to the modified adjusted gross income (as defined in subsection (b)) for the taxpayer's preceding taxable year.".

(d) MODIFICATION OF RECAPTURE SAFE HARBOR FOR 2022. — Section 24(j)(2)(B)(iv), as amended by the preceding provisions of this Act, is amended to read as follows:

"(iv) SAFE HARBOR AMOUNT. — For purposes of this subparagraph, the term 'safe harbor amount' means, with respect to any taxpayer for any taxable year, the sum of —

"(I) an amount equal to the product of $3,600 multiplied by the excess (if any) of the number of qualifying children who have not attained age 6 as of the close of the calendar year in which the taxable year of the taxpayer begins, and who are taken into account in determining the annual advance amount with respect to the taxpayer under section 7527A with respect to months beginning in such taxable year, over the number of such qualifying children taken into account in determining the credit allowed under this section for such taxable year, plus

"(II) an amount equal to the product of $3,000 multiplied by the excess (if any) of the number of qualifying children not described in clause (I), and who are taken into account in determining the annual advance amount with respect to the taxpayer under section 7527A with respect to months beginning in such taxable year, over the number of such qualifying children taken into account in determining the credit allowed under this section for such taxable year.".

(e) REPEAL OF SOCIAL SECURITY NUMBER REQUIREMENT. —

(1) IN GENERAL. — Section 24(h) is amended by striking paragraph (7).

(2) CONFORMING AMENDMENTS. —

(A) Section 24(h)(1) is amended by striking "paragraphs (2) through (7)" and inserting "paragraphs (2) through (6)".

(B) Section 24(h)(4) is amended by striking subparagraph (C).

(f) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning, and payments made, after December 31, 2021.

SEC. 137103. REFUNDABLE CHILD TAX CREDIT AFTER 2022.

(a) IN GENERAL. — Section 24 is amended by adding at the end the following new subsection:

"(l) REFUNDABLE CREDIT AFTER 2022. — In the case of any taxable year beginning after December 31, 2022, if the taxpayer (in the case of a joint return, either spouse) has a principal place of abode in the United States (determined as provided in section 32) for more than one-half of the taxable year or is a bona fide resident of Puerto Rico (within the meaning of section 937(a)) for such taxable year —

"(1) subsection (d) shall not apply, and

"(2) so much of the credit determined under subsection (a) (after application of paragraph (1)) as does not exceed the amount of such credit which would be so determined without regard to subsection (h)(4) shall be allowed under subpart C (and not allowed under this subpart)".

(b) CONFORMING AMENDMENTS RELATED TO POSSESSIONS OF THE UNITED STATES. —

(1) PUERTO RICO. — Section 24(k)(2)(B), as amended by the preceding provisions of this Act, is amended to read as follows:

"(B) APPLICATION TO TAXABLE YEARS AFTER 2022. — For application of refundable credit to residents of Puerto Rico for taxable years after 2022, see subsection (l).".

(2) AMERICAN SAMOA. — Section 24(k)(3)(C)(ii)(II), as amended by the preceding provisions of this Act, is amended to read as follows:

"(II) if such taxable year begins after December 31, 2022, subsection

(l) shall be applied by substituting 'Puerto Rico or American Samoa' for 'Puerto Rico'.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

SEC. 137104. APPROPRIATIONS.

Immediately upon the enactment of this Act, in addition to amounts otherwise available, there are appropriated out of any money in the Treasury not otherwise appropriated:

(1) $3,963,300,000 to remain available until September 30, 2026, for necessary expenses for the Internal Revenue Service to administer the Child Tax Credit, and advance payments of the Child Tax Credit, including the costs of disbursing such payments, which shall supplement and not supplant any other appropriations that may be available for this purpose, and

(2) $1,000,000,000 is appropriated to the Department of the Treasury, to remain available until September 30, 2026, to support efforts to increase enrollment of eligible families in the Child Tax Credit, for advance payments of the Child Tax Credit, and for other tax benefits, including but not limited to program outreach, costs of data sharing arrangements, systems changes, forms changes, and related efforts, and efforts to support the cross-enrollment of beneficiaries of other programs in the Child Tax Credit, and for advance payments of the Child Tax Credit, including by establishing intergovernmental cooperative agreements with states and local governments, tribal governments, and possessions of the United States: Provided, that such amount shall be available in addition to any amounts otherwise available: Provided further, that these funds may be awarded by federal agencies to state and local governments, tribal governments, and possessions of the United States, and private entities, including organizations dedicated to free tax return preparation and low income taxpayer clinics funded under section 7526 of the Internal Revenue Code of 1986.

PART 2 — EARNED INCOME TAX CREDIT

SEC. 137201. CERTAIN IMPROVEMENTS TO THE EARNED INCOME TAX CREDIT EXTENDED THROUGH 2022.

(a) IN GENERAL. — Section 32(n) is amended by striking "January 1, 2022" and inserting "January 1, 2023".

(b) INFLATION ADJUSTMENT. — Section 32(n)(4)(B) is amended to read as follows:

"(B) INFLATION ADJUSTMENT. — In the case of any taxable year beginning after 2021, the $9,820 and $11,610 dollar amounts in subparagraph (A) shall be increased by an amount equal to —

"(i) such dollar amount, multiplied by

"(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2020' for 'calendar year 2016' in subparagraph (A)(ii) thereof.".

(c) ELECTION TO DETERMINE EARNED INCOME BASED ON PRIOR TAXABLE YEAR. — Section 32, as amended by subsection (f), is amended by adding at the end the following new subsection:

"(o) ELECTION TO DETERMINE EARNED INCOME BASED ON PRIOR TAXABLE YEAR. —

"(1) IN GENERAL. — In the case of a taxpayer whose earned income for any taxable year beginning after December 31, 2021, and before January 1, 2023, is less than the earned income of such taxpayer for the preceding taxable year, if such taxpayer elects (at such time and in such manner as the Secretary may provide) the application of this subsection for such taxable year, the earned income of such taxpayer for such taxable year shall be treated for purposes of this section as being equal to the earned income of such taxpayer for such preceding taxable year.

"(2) JOINT RETURNS. — For purposes of this subsection, in the case of a joint return, the earned income of the taxpayer for the preceding taxable year shall be the sum of the earned income of each spouse for the preceding taxable year.

"(3) TREATMENT AS MATHEMATICAL OR CLERICAL ERROR. — In the case of a taxpayer described in paragraph (1) who makes the election described in such paragraph, the use on the return for purposes of this section of an amount of earned income for the preceding taxable year which differs from the amount of such earned income as shown in the electronic files of the Internal Revenue Service shall be treated as a mathematical or clerical error for purposes of section 6213.

"(4) TREATMENT OF REFERENCES. — Any provision of this title which defines or determines earned income by reference to this section shall be applied without regard to this subsection unless such provision specifically provides otherwise.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 137202. FUNDS FOR ADMINISTRATION OF EARNED INCOME TAX CREDITS IN THE TERRITORIES.

(a) PUERTO RICO. — Section 7530(a)(1) is amended by striking "plus" at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ", plus", and by adding at the end the following new subparagraph:

"(C) reasonable administrative costs associated with the provision of the earned income tax credit not in excess of $4,000,000.".

(b) POSSESSIONS WITH MIRROR CODE TAX SYSTEMS. — Section 7530(b)(1) is amended by striking "plus" at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ", plus", and by adding at the end the following new subparagraph:

"(C) reasonable administrative costs associated with the provision of the earned income tax credit not in excess of $200,000.".

(c) AMERICAN SAMOA. — Section 7530(c)(1) is amended by striking "plus" at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ", plus", and by adding at the end the following new subparagraph:

"(C) reasonable administrative costs associated with the provision of the earned income tax credit not in excess of $200,000.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to payments made for calendar years beginning after December 31, 2021.

PART 3 — EXPANDING ACCESS TO HEALTH COVERAGE AND LOWERING COSTS

SEC. 137301. IMPROVE AFFORDABILITY AND REDUCE PREMIUM COSTS OF HEALTH INSURANCE FOR CONSUMERS.

(a) IN GENERAL. — Section 36B(b)(3)(A)(iii) is amended —

(1) by striking all that precedes the table contained therein and inserting the following:

"(iii) DETERMINING PERCENTAGES FOR 2021 THROUGH 2026. —

"(I) IN GENERAL. — In the case of a taxable year beginning after December 31, 2020, and before January 1, 2026, the following table shall be applied in lieu of the table contained in clause (i):", and

(2) by adding at the end the following new subclause:

"(II) INDEXING. — In the case of a taxable year beginning after December 31, 2020, and before January 1, 2027, clause (ii) shall not apply for purposes of adjusting premium percentages under this subparagraph.".

(b) EXTENSION THROUGH 2025 OF RULE TO ALLOW CREDIT TO TAXPAYERS WHOSE HOUSEHOLD INCOME EXCEEDS 400 PERCENT OF THE POVERTY LINE. — Section 36B(c)(1)(E) is amended —

(1) by striking "in 2021 or 2022" and inserting "after December 31, 2020, and before January 1, 2026", and

(2) by striking "AND 2022" in the heading thereof and inserting "THROUGH 2025".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 137302. MODIFICATION OF EMPLOYER-SPONSORED COVERAGE AFFORDABILITY TEST IN HEALTH INSURANCE PREMIUM TAX CREDIT.

(a) IN GENERAL. — Section 36B(c)(2)(C)(i)(II) is amended by inserting "(8.5 percent in the case of any taxable year beginning after December 31, 2021, and before January 1, 2026)" after "9.5 percent".

(b) QUALIFIED SMALL EMPLOYER HEALTH REIMBURSEMENT ARRANGEMENTS. — Section 36B(c)(4)(C)(ii) is amended by inserting "(8.5 percent in the case of any taxable year beginning after December 31, 2021, and before January 1, 2026)" after "9.5 percent".

(c) PERCENTAGES TEMPORARILY DETERMINED WITHOUT REGARD TO ADJUSTMENTS. —

(1) Section 36B(c)(2)(C)(iv) is amended by adding at the end the following: "The preceding sentence shall not apply in the case of any plan year beginning after December 31, 2021, and before January 1, 2027.".

(2) Section 36B(c)(4)(F) is amended by adding at the end the following: "The preceding sentence shall not apply in the case of any plan year beginning after December 31, 2021, and before January 1, 2027.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 137303. TREATMENT OF LUMP-SUM SOCIAL SECURITY BENEFITS IN DETERMINING HOUSEHOLD INCOME.

(a) IN GENERAL. — Section 36B(d)(2) is amended by adding at the end the following new subparagraph:

"(C) EXCLUSION OF PORTION OF LUMPSUM SOCIAL SECURITY BENEFITS. —

"(i) IN GENERAL. — The term 'modified adjusted gross income' shall not include so much of any lump-sum social security benefit payment as is attributable to months ending before the beginning of the taxable year.

"(ii) LUMP-SUM SOCIAL SECURITY BENEFIT PAYMENT. — For purposes of this subparagraph, the term 'lump-sum social security benefit payment' means any payment of social security benefits (as defined in section 86(d)(1)) which constitutes more than 1 month of such benefits.

"(iii) ELECTION TO INCLUDE EXCLUDABLE AMOUNT. — With respect to any taxable year beginning after December 31, 2025, a taxpayer may elect (at such time and in such manner as the Secretary may provide) to have this subparagraph not apply for such taxable year.".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 137304. TEMPORARY EXPANSION OF HEALTH INSURANCE PREMIUM TAX CREDITS FOR CERTAIN LOW-INCOME POPULATIONS.

(a) IN GENERAL. — Section 36B is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection:

"(h) CERTAIN TEMPORARY RULES BEGINNING IN 2022. — With respect to any taxable year beginning after December 31, 2021, and before January 1, 2026 —

"(1) ELIGIBILITY FOR CREDIT NOT LIMITED BASED ON INCOME. — Section 36B(c)(1)(A) shall be disregarded in determining whether a taxpayer is an applicable taxpayer.

"(2) CREDIT ALLOWED TO CERTAIN LOW-INCOME EMPLOYEES OFFERED EMPLOYER-PROVIDED COVERAGE. — Subclause (II) of subsection (c)(2)(C)(i) shall not apply if the taxpayer's household income does not exceed 138 percent of the poverty line for a family of the size involved. Subclause (II) of subsection (c)(2)(C)(i) shall also not apply to an individual described in the last sentence of such subsection if the taxpayer's household income does not exceed 138 percent of the poverty line for a family of the size involved.

"(3) CREDIT ALLOWED TO CERTAIN LOW-INCOME EMPLOYEES OFFERED QUALIFIED SMALL EMPLOYER HEALTH REIMBURSEMENT ARRANGEMENTS. — A qualified small employer health reimbursement arrangement shall not be treated as constituting affordable coverage for an employee (or any spouse or dependent of such employee) for any months of a taxable year if the employee's household income for such taxable year does not exceed 138 percent of the poverty line for a family of the size involved.

"(4) LIMITATIONS ON RECAPTURE. —

"(A) IN GENERAL. — In the case of a taxpayer whose household income is less than 200 percent of the poverty line for the size of the family involved for the taxable year, the amount of the increase under subsection (f)(2)(A) shall in no event exceed $300 (one-half of such amount in the case of a taxpayer whose tax is determined under section 1(c) for the taxable year).

"(B) LIMITATION ON INCREASE FOR CERTAIN NON-FILERS. — In the case of any taxpayer who would not be required to file a return of tax for the taxable year but for any requirement to reconcile advance credit payments under subsection (f), if an Exchange established under title I of the Patient Protection and Affordable Care Act has determined that —

"(i) such taxpayer is eligible for advance payments under section 1412 of such Act for any portion of such taxable year, and

"(ii) such taxpayer's household income for such taxable year is projected to not exceed 138 percent of the poverty line for a family of the size involved, subsection (f)(2)(A) shall not apply to such taxpayer for such taxable year and such taxpayer shall not be required to file such return of tax.

"(C) INFORMATION PROVIDED BY EXCHANGE. — The information required to be provided by an Exchange to the Secretary and to the taxpayer under subsection (f)(3) shall include such information as is necessary to determine whether such Exchange has made the determinations described in clauses (i) and (ii) of subparagraph (B) with respect to such taxpayer.".

(b) EMPLOYER SHARED RESPONSIBILITY PROVISION NOT APPLICABLE WITH RESPECT TO CERTAIN LOW-INCOME TAXPAYERS RECEIVING PREMIUM ASSISTANCE. — Section 4980H(c)(3) is amended to read as follows:

"(3) APPLICABLE PREMIUM TAX CREDIT AND COST-SHARING REDUCTION. —

"(A) IN GENERAL. — The term 'applicable premium tax credit and cost-sharing reduction' means —

"(i) any premium tax credit allowed under section 36B,

"(ii) any cost-sharing reduction under section 1402 of the Patient Protection and Affordable Care Act, and

"(iii) any advance payment of such credit or reduction under section 1412 of such Act.

"(B) EXCEPTION WITH RESPECT TO CERTAIN LOW-INCOME TAXPAYERS. — Such term shall not include any premium tax credit, cost-sharing reduction, or advance payment otherwise described in subparagraph (A) if such credit, reduction, or payment is allowed or paid for a taxable year of an employee (beginning after December 31, 2021, and before January 1, 2026) with respect to which —

"(i) an Exchange established under title I of the Patient Protection and Affordable Care Act has determined that such employee's household income for such taxable year is projected to not exceed 138 percent of the poverty line for a family of the size involved, or

"(ii) such employee's household income for such taxable year does not exceed 138 percent of the poverty line for a family of the size involved.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 137305. SPECIAL RULE FOR INDIVIDUALS RECEIVING UNEMPLOYMENT COMPENSATION.

(a) EXTENSION. — Section 36B(g)(1) is amended by striking "during 2021," and inserting "after December 31, 2020, and before January 1, 2023,".

(b) MODIFICATION OF INCOME NOT TAKEN INTO ACCOUNT. — Section 36B(g)(1)(B) is amended by striking "133 percent" and inserting "150 percent (133 percent in the case of any week beginning during 2021)".

(c) CONFORMING AMENDMENT. — Section 36B(g) by inserting "THROUGH 2022" after "2021" in the heading thereof.

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 137306. PERMANENT CREDIT FOR HEALTH INSURANCE COSTS.

(a) IN GENERAL. — Subparagraph (B) of section 35(b)(1) of the Internal Revenue Code of 1986 is amended by striking ", and before January 1, 2022" and inserting a period.

(b) INCREASE IN CREDIT PERCENTAGE. — Subsection (a) of section 35 of the Internal Revenue Code of 1986 is amended by striking "72.5 percent" and inserting "80 percent".

(c) CONFORMING AMENDMENTS. — Subsections (b) and (e)(1) of section 7527 of the Internal Revenue Code of 1986 are each amended by striking "72.5 percent" and inserting "80 percent".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to coverage months beginning after December 31, 2021.

SEC. 137307. EXCLUSION OF CERTAIN DEPENDENT INCOME FOR PURPOSES OF PREMIUM TAX CREDIT.

(a) IN GENERAL. — Paragraph (2) of section 36B(d) of the Internal Revenue Code of 1986, as amended by this Act, is further amended by adding at the end the following new subparagraph:

"(D) EXCEPTION FOR CERTAIN DEPENDENT INCOME. —

"(i) IN GENERAL. — Solely for purposes of determining the credit under this section and eligibility for cost sharing reductions under section 1402 of the Patient Protection and Affordable Care Act, and not for any other purpose (including any determination of income for purposes of the programs established under titles XIX and XXI of the Social Security Act and section 1331 of the Patient Protection and Affordable Care Act), there shall not be taken into account under subparagraph (A)(ii) the modified adjusted gross income of any dependent of the taxpayer who has not attained age 24 as of the last day of the calendar year in which the taxable year of the taxpayer begins.

"(ii) LIMITATION. — Clause (i) shall not apply to so much of the aggregate of the modified adjusted gross income of all dependents of the taxpayer who have not attained the age described in such clause as exceeds $3,500.

"(iii) ELECTION TO HAVE SUBPARAGRAPH NOT APPLY. — In the case of any taxable year beginning after December 31, 2025, a taxpayer may elect (at such time and in such manner as the Secretary may provide) to have this subparagraph not apply with respect to the income of any dependent of the taxpayer for such taxable year.

"(iv) ADJUSTMENT FOR INFLATION. — In the case of any taxable year beginning after December 31, 2023, the $3,500 amount in clause (ii) shall be increased by an amount equal to —

"(I) such amount, multiplied by

"(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2022' for 'calendar year 2016' in subparagraph (A)(ii) thereof.

If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.

"(v) TERMINATION. — This subparagraph shall not apply to taxable years beginning after December 31, 2026.".

(b) CONFORMING AMENDMENTS. —

(1) Clause (ii) of section 36B(d)(2)(A) of the Internal Revenue Code of 1986 is amended by inserting ", except as provided in subparagraph (D)," after "individuals".

(2) Paragraph (3) of section 1411(b) of the Patient Protection and Affordable Care Act (42 U.S.C. 18081) is amended by adding at the end the following new subparagraph:

"(D) INFORMATION REGARDING CERTAIN DEPENDENTS. — In the case of taxable years beginning before January 1, 2027, information regarding whether section 36B(d)(2)(D) will apply to any individuals taken into account as members of the household of the enrollee, and the amount of income of each such individual for the taxable year described in subparagraph (A).".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

SEC. 137308. REQUIREMENTS WITH RESPECT TO COSTSHARING FOR CERTAIN INSULIN PRODUCTS.

(a) IN GENERAL. — Subchapter B of chapter 100 is amended by adding at the end the following new section:

"SEC. 9826. REQUIREMENTS WITH RESPECT TO COST-SHARING FOR CERTAIN INSULIN PRODUCTS.

"(a) IN GENERAL. — For plan years beginning on or after January 1, 2023, a group health plan shall provide coverage of selected insulin products, and with respect to such products, shall not —

"(1) apply any deductible; or

"(2) impose any cost-sharing in excess of the lesser of, per 30-day supply —

"(A) $35; or

"(B) the amount equal to 25 percent of the negotiated price of the selected insulin product net of all price concessions received by or on behalf of the plan, including price concessions received by or on behalf of third-party entities providing services to the plan, such as pharmacy benefit management services.

"(b) DEFINITIONS. — In this section:

"(1) SELECTED INSULIN PRODUCTS. — The term 'selected insulin products' means at least one of each dosage form (such as vial, pump, or inhaler dosage forms) of each different type (such as rapid-acting, short-acting, intermediate-acting, long-acting, ultra long-acting, and premixed) of insulin (as defined below), when available, as selected by the group health plan.

"(2) INSULIN DEFINED. — The term 'insulin' means insulin that is licensed under subsection (a) or (k) of section 351 of the Public Health Service Act (42 U.S.C. 262) and continues to be marketed under such section, including any insulin product that has been deemed to be licensed under section 351(a) of such Act pursuant to section 7002(e)(4) of the Biologics Price Competition and Innovation Act of 2009 (Public Law 111–148) and continues to be marketed pursuant to such licensure.

"(c) OUT-OF-NETWORK PROVIDERS. — Nothing in this section requires a plan that has a network of providers to provide benefits for selected insulin products described in this section that are delivered by an out-of-network provider, or precludes a plan that has a network of providers from imposing higher cost-sharing than the levels specified in subsection (a) for selected insulin products described in this section that are delivered by an out-of-network provider.

"(d) RULE OF CONSTRUCTION. — Subsection (a) shall not be construed to require coverage of, or prevent a group health plan from imposing cost-sharing other than the levels specified in subsection (a) on, insulin products that are not selected insulin products, to the extent that such coverage is not otherwise required and such cost-sharing is otherwise permitted under Federal and applicable State law.

"(e) APPLICATION OF COST-SHARING TOWARDS DEDUCTIBLES AND OUT-OF-POCKET MAXIMUMS. — Any cost-sharing payments made pursuant to subsection (a)(2) shall be counted toward any deductible or out-of-pocket maximum that applies under the plan.".

(b) CLERICAL AMENDMENT. — The table of sections for subchapter B of chapter 100 is amended by adding at the end the following new item:

"Sec. 9826. Requirements with respect to cost-sharing for certain insulin products.".

SEC. 137309. OVERSIGHT OF PHARMACY BENEFIT MANAGER SERVICES.

(a) IN GENERAL. — Subchapter B of chapter 100 of the Internal Revenue Code of 1986, as amended by the preceding provisions of this Act, is further amended by adding at the end the following:

"SEC. 9827. OVERSIGHT OF PHARMACY BENEFIT MANAGER SERVICES.

"(a) IN GENERAL. — For plan years beginning on or after January 1, 2023, a group health plan or an entity or subsidiary providing pharmacy benefits management services on behalf of such a plan shall not enter into a contract with a drug manufacturer, distributor, wholesaler, subcontractor, rebate aggregator, or any associated third party that limits the disclosure of information to plan sponsors in such a manner that prevents the plan, or an entity or subsidiary providing pharmacy benefits management services on behalf of a plan, from making the reports described in subsection (b).

"(b) REPORTS. —

"(1) IN GENERAL. — For plan years beginning on or after January 1, 2023, not less frequently than once every 6 months, an entity providing pharmacy benefits management services on behalf of a group health plan shall submit to the plan sponsor (as defined in section 3(16)(B) of the Employee Retirement Income Security Act of 1974) of such group health plan a report in accordance with this subsection and make such report available to the plan sponsor in a machine-readable format. Each such report shall include, with respect to the applicable group health plan —

"(A) as applicable, information collected from drug manufacturers by such entity on the total amount of copayment assistance dollars paid, or copayment cards applied, that were funded by the drug manufacturer with respect to the participants and beneficiaries in such plan;

"(B) a list of each drug covered by such plan or entity providing pharmacy benefit management services that was dispensed during the reporting period, including, with respect to each such drug during the reporting period —

"(i) the brand name, chemical entity, and National Drug Code;

"(ii) the number of participants and beneficiaries for whom the drug was filled during the plan year, the total number of prescription fills for the drug (including original prescriptions and refills), and the total number of dosage units of the drug dispensed across the plan year, including whether the dispensing channel was by retail, mail order, or specialty pharmacy;

"(iii) the wholesale acquisition cost, listed as cost per days supply and cost per pill, or in the case of a drug in another form, per dose;

"(iv) the total out-of-pocket spending by participants and beneficiaries on such drug, including participant and beneficiary spending through copayments, coinsurance, and deductibles; and

"(v) for any drug for which gross spending of the group health plan exceeded $10,000 during the reporting period —

"(I) a list of all other drugs in the same therapeutic category or class, including brand name drugs and biological products and generic drugs or biosimilar biological products that are in the same therapeutic category or class as such drug; and

"(II) the rationale for preferred formulary placement of such drug in that therapeutic category or class;

"(C) a list of each therapeutic category or class of drugs that were dispensed under the health plan during the reporting period, and, with respect to each such therapeutic category or class of drugs, during the reporting period —

"(i) total gross spending by the plan, before manufacturer rebates, fees, or other manufacturer remuneration;

"(ii) the number of participants and beneficiaries who filled a prescription for a drug in that category or class;

"(iii) if applicable to that category or class, a description of the formulary tiers and utilization mechanisms (such as prior authorization or step therapy) employed for drugs in that category or class;

"(iv) the total out-of-pocket spending by participants and beneficiaries, including participant and beneficiary spending through copayments, coinsurance, and deductibles; and

"(v) for each therapeutic category or class under which 3 or more drugs are included on the formulary of such plan —

"(I) the amount received, or expected to be received, from drug manufacturers in rebates, fees, alternative discounts, or other remuneration —

"(aa) to be paid by drug manufacturers for claims incurred during the reporting period; or

"(bb) that is related to utilization of drugs, in such therapeutic category or class;

"(II) the total net spending, after deducting rebates, price concessions, alternative discounts or other remuneration from drug manufacturers, by the health plan on that category or class of drugs; and

"(III) the net price per course of treatment or single fill, such as a 30day supply or 90-day supply, incurred by the health plan and its participants and beneficiaries, after manufacturer rebates, fees, and other remuneration for drugs dispensed within such therapeutic category or class during the reporting period;

"(D) total gross spending on prescription drugs by the plan during the reporting period, before rebates and other manufacturer fees or remuneration;

"(E) total amount received, or expected to be received, by the health plan in drug manufacturer rebates, fees, alternative discounts, and all other remuneration received from the manufacturer or any third party, other than the plan sponsor, related to utilization of drug or drug spending under that health plan during the reporting period;

"(F) the total net spending on prescription drugs by the health plan during the reporting period; and

"(G) amounts paid directly or indirectly in rebates, fees, or any other type of remuneration to brokers, consultants, advisors, or any other individual or firm who referred the group health plan's business to the pharmacy benefit manager.

"(2) PRIVACY REQUIREMENTS. — Entities providing pharmacy benefits management services on behalf of a group health plan shall provide information under paragraph (1) in a manner consistent with the privacy, security, and breach notification regulations promulgated under section 264(c) of the Health Insurance Portability and Accountability Act of 1996, and shall restrict the use and disclosure of such information according to such privacy regulations.

"(3) DISCLOSURE AND REDISCLOSURE. —

"(A) LIMITATION TO BUSINESS ASSOCIATES. — A group health plan receiving a report under paragraph (1) may disclose such information only to business associates of such plan as defined in section 160.103 of title 45, Code of Federal Regulations (or successor regulations).

"(B) CLARIFICATION REGARDING PUBLIC DISCLOSURE OF INFORMATION. — Nothing in this section prevents an entity providing pharmacy benefits management services on behalf of a group health plan from placing reasonable restrictions on the public disclosure of the information contained in a report described in paragraph (1), except that such entity may not restrict disclosure of such report to the Department of Health and Human Services, the Department of Labor, or the Department of the Treasury.

"(C) LIMITED FORM OF REPORT. — The Secretary shall define through rulemaking a limited form of the report under paragraph (1) required of plan sponsors who are drug manufacturers, drug wholesalers, or other direct participants in the drug supply chain, in order to prevent anti-competitive behavior.

"(4) REPORT TO GAO. — An entity providing pharmacy benefits management services on behalf of a group health plan shall submit to the Comptroller General of the United States each of the first 4 reports submitted to a plan sponsor under paragraph (1) with respect to such plan, and other such reports as requested, in accordance with the privacy requirements under paragraph (2) and the disclosure and redisclosure standards under paragraph (3), and such other information that the Comptroller General determines necessary to carry out the study under section 30606(b) of an Act to provide for reconciliation pursuant to title II of S. Con. Res. 14.

"(c) ENFORCEMENT. —

"(1) IN GENERAL. — The Secretary, in consultation with the Secretary of Labor and the Secretary of Health and Human Services, shall enforce this section.

"(2) FAILURE TO PROVIDE TIMELY INFORMATION. — An entity providing pharmacy benefit management services that violates subsection (a) or fails to provide information required under subsection (b), or a drug manufacturer that fails to provide information under subsection (b)(1)(A) in a timely manner, shall be subject to a civil monetary penalty in the amount of $10,000 for each day during which such violation continues or such information is not disclosed or reported.

"(3) FALSE INFORMATION. — An entity providing pharmacy benefit management services, or drug manufacturer that knowingly provides false information under this section shall be subject to a civil money penalty in an amount not to exceed $100,000 for each item of false information. Such civil money penalty shall be in addition to other penalties as may be prescribed by law.

"(4) PROCEDURE. — The provisions of section 1128A of the Social Security Act, other than subsection (a) and (b) and the first sentence of subsection (c)(1) of such section shall apply to civil monetary penalties under this subsection in the same manner as such provisions apply to a penalty or proceeding under section 1128A of the Social Security Act.

"(5) WAIVERS. — The Secretary may waive penalties under paragraph (2), or extend the period of time for compliance with a requirement of this section, for an entity in violation of this section that has made a good-faith effort to comply with this section.

"(d) RULE OF CONSTRUCTION. — Nothing in this section shall be construed to permit a group health plan or other entity to restrict disclosure to, or otherwise limit the access of, the Department of the Treasury to a report described in subsection (b)(1) or information related to compliance with subsection (a) by such plan or entity.

"(e) DEFINITION. — In this section, the term 'wholesale acquisition cost' has the meaning given such term in section 1847A(c)(6)(B) of the Social Security Act.".

(b) CLERICAL AMENDMENT. — The table of sections for subchapter B of chapter 100 of the Internal Revenue Code of 1986, as amended by the preceding provisions of this Act, is further amended by adding at the end the following new item:

"Sec. 9827. Oversight of pharmacy benefit manager services.".

PART 4 — PATHWAY TO PRACTICE TRAINING PROGRAMS

SEC. 137401. ADMINISTRATIVE FUNDING OF THE RURAL AND UNDERSERVED PATHWAY TO PRACTICE TRAINING PROGRAMS FOR POST-BACCALAUREATE STUDENTS, MEDICAL STUDENTS, AND MEDICAL RESIDENTS.

In addition to amounts otherwise available, there is appropriated to the Secretary for fiscal year 2022, out of any money in the Treasury not otherwise appropriated, $6,000,000 to remain available until September 30, 2031, in addition to amounts otherwise available, to carry out the administration of the Rural and Underserved Pathway to Practice Training Program for Post-Baccalaureate and Medical Students under section 1899C of such Act (42 U.S.C. 1395mmm) and the Rural and Underserved Pathway to Practice Training Programs for Medical Residents under section 1886(h)(4)(H)(vii) of such Act (42 U.S.C. 1395ww(h)(4)(H)(vii)). Amounts transferred under the preceding sentence shall remain available until expended.

SEC. 137402. ESTABLISHING RURAL AND UNDERSERVED PATHWAY TO PRACTICE TRAINING PROGRAMS FOR POST-BACCALAUREATE STUDENTS AND MEDICAL STUDENTS.

(a) PROGRAM. —

(1) IN GENERAL. — 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. RURAL AND UNDERSERVED PATHWAY TO PRACTICE TRAINING PROGRAM FOR POSTBACCALAUREATE AND MEDICAL STUDENTS.

"(a) IN GENERAL. — Not later than October 1, 2023, the Secretary shall, subject to the succeeding provisions of this section, carry out the 'Rural and Underserved Pathway to Practice Training Program for Post-Baccalaureate and Medical Students' (in this section, referred to as the 'Program') under which the Secretary awards Pathway to Practice medical scholarship vouchers to qualifying students described in subsection (b) for the purpose of increasing the number of physicians practicing in rural and underserved communities.

"(b) QUALIFYING STUDENT DESCRIBED. — For purposes of this section, a qualifying student described in this subsection is an individual who —

"(1) attests he or she —

"(A) is or will be a first-generation student of a 4-year college, graduate school, or professional school;

"(B) was a Pell Grant recipient; or

"(C) lived in a medically underserved area, rural area, or health professional shortage area for a period of 4 or more years prior to attending an undergraduate program;

"(2) has accepted enrollment in —

"(A) a post-baccalaureate program that is not more than 2 years and intends to enroll in a qualifying medical school within 2 years after completion of such program; or

"(B) a qualifying medical school;

"(3) will practice medicine in a health professional shortage area, medically underserved area, public hospital, rural area, or as required under subsection (d)(5); and

"(4) submits an application and a signed copy of the agreement described under subsection (c).

"(c) APPLICATIONS. —

"(1) IN GENERAL. — To be eligible to receive a Pathway to Practice medical scholarship voucher under this section, a qualifying student described in subsection (b) shall submit to the Secretary an application at such time, in such manner, and containing such information as the Secretary may require.

"(2) INFORMATION TO BE INCLUDED. — As a part of the application described in paragraph (1), the Secretary shall include a notice of the items which are required to be agreed to under subsection (d)(5) for the purpose of notifying the qualifying student of the terms of the Rural and Underserved Pathway to Practice Training Program for Post-Baccalaureate and Medical Students.

"(d) PATHWAY TO PRACTICE MEDICAL SCHOLARSHIP VOUCHER DETAILS. —

"(1) NUMBER. — On an annual basis, the Secretary shall award a Pathway to Practice medical scholarship voucher under the Program to 1,000 qualifying students described in subsection (b).

"(2) PRIORITIZATION CRITERIA. — In determining whether to award a Pathway to Practice medical scholarship voucher under the Program to qualifying students described in subsection (b), the Secretary shall prioritize applications from any such student who attests that he or she —

"(A) was a participant in the Health Resources and Services Administration Health Careers Opportunity Program, Centers of Excellence Program, or an Area Health Education Center program;

"(B) is a disadvantaged student (as defined by the National Health Service Corps of the Health Resources & Services Administration of the Department of Health and Human Services); or

"(C) attended a historically black college or other minority serving institution (as defined in section 1067q of title 20, United States Code).

"(3) DURATION. — Each Pathway to Practice medical scholarship voucher awarded to a qualifying student pursuant to paragraph (1) shall be so awarded to such a student on an annual basis for each year of enrollment in a post-baccalaureate program and a qualifying medical school (as appropriate).

"(4) AMOUNT. — Subject to paragraph (5), each Pathway to Practice medical scholarship voucher awarded under the Program shall include amounts for —

"(A) tuition;

"(B) academic fees (as determined by the qualifying medical school);

"(C) required textbooks and equipment;

"(D) a monthly stipend equal to the amount provided for individuals under the health professions scholarship and financial assistance program for active service stipend monthly rate; and

"(E) any other educational expenses normally incurred by students at the post-baccalaureate program or qualifying medical school (as appropriate).

"(5) REQUIRED AGREEMENT. — No amounts under paragraph (4) may be provided to a qualifying student awarded a Pathway to Practice medical scholarship voucher under the Program unless the qualifying student submits to the Secretary an agreement to —

"(A) complete a post-baccalaureate program that is not more than 2 years (if applicable pursuant to the option under subsection (b)(2)(A));

"(B) graduate from a qualifying medical school;

"(C) complete a residency program in an approved residency training program (as defined in section 1886(h)(5)(A));

"(D) complete an initial residency period or the period of board eligibility;

"(E) practice medicine for at least the number of years of the Pathway to Practice medical scholarship voucher awarded under paragraph (2) after a residency program in a health professional shortage area, a medically underserved area, a public hospital, or a rural area, and during such period annually submit documentation with respect to whether the qualifying student practices medicine in such an area and where;

"(F) for the purpose of determining compliance with subparagraph (E), not later than 180 days after the date on which qualifying student completes a residency program, provide to the Secretary information with respect to where the qualifying student is practicing medicine following the period described in such subparagraph;

"(G) except in the case of a waiver for hardship pursuant to section 1892(f)(3), be liable to the United States pursuant to section 1892 for any amounts received under this Program that is determined a past-due obligation under subsection (b)(3) of such section in the case qualifying student fails to complete all of the requirements of this agreement under this subsection; and

"(H) for the purpose of determining the amount of Pathway to Practice medical scholarship vouchers paid or incurred by a qualifying medical school or any provider of a post-baccalaureate program referred to in subsection (b)(2)(A) for the costs of each item specified under paragraph (4), consent to any personally identifying information being shared with the Secretary of the Treasury.

"(6) RESPONSIBILITIES OF PARTICIPATING EDUCATIONAL INSTITUTIONS. — Each annual award of an amount of Pathway to Practice medical scholarship voucher under paragraph (2) shall be made with respect to a specific qualifying medical school or to a post-baccalaureate program that is not more than 2 years and such school or program shall (as a condition of, and prior to, such award being made with respect to such school or program) —

"(A) submit to the Secretary such information as the Secretary may require to determine the amount of such award on the basis of the costs of the items specified under paragraph (4) (except for subparagraph (D)) with respect to such school or program, and

"(B) enter into an agreement with the Secretary under which such school or program will verify (in such manner as the Secretary may provide) that amounts paid by such school or program to the qualifying student are used for such costs.

"(e) DEFINITIONS. — In this section:

"(1) HEALTH PROFESSIONAL SHORTAGE AREA. — The team 'health professional shortage area' has the meaning given such term in subparagraphs (A) or (B) of section 332(a)(1) of the Public Health Service Act.

"(2) INITIAL RESIDENCY PERIOD. — The term 'initial residency period' has the meaning given such term in section 1886(h)(5)(F).

"(3) MEDICALLY UNDERSERVED AREA. — The term 'medically underserved area' means an area designated pursuant to section 330(b)(3)(A) of the Public Health Service Act.

"(4) PELL GRANT RECIPIENT. — The term 'Pell Grant recipient' has the meaning given such term in section 322(3) of the Higher Education Act of 1965.

"(5) PERIOD OF BOARD ELIGIBILITY. — The term 'period of board eligibility' has the meaning given such term in section 1886(h)(5)(G).

"(6) QUALIFYING MEDICAL SCHOOL. — The term 'qualifying medical school' means a school of medicine accredited by the Liaison Committee on Medical Education of the American Medical Association and the Association of American Medical Colleges (or approved by such Committee as meeting the standards necessary for such accreditation) or a school of osteopathy accredited by the American Osteopathic Association, or approved by such Association as meeting the standards necessary for such accreditation which —

"(A) for each academic year, enrolls at least 10 qualifying students who are in enrolled in such a school;

"(B) requires qualifying students to enroll in didactic coursework and clinical experience applicable to practicing medicine in health professional shortage areas, medically underserved areas, or rural areas, including —

"(i) clinical rotations in such areas in applicable specialties (as applicable and as available);

"(ii) coursework or training experiences focused on medical issues prevalent in such areas and cultural or structural competency; and

"(C) is located in a State (as defined in section 210(h)).

"(7) RURAL AREA. — The term 'rural area' has the meaning given such term in section 1886(d)(2)(D).

"(f) PENALTY FOR FALSE INFORMATION. — Any person who knowingly and willfully obtains by fraud, false statement, or forgery, or fails to refund any funds, assets, or property provided under this section or attempts to so obtain by fraud, false statement or forgery, or fail to refund any funds, assets, or property, received pursuant to this section shall be fined not more than $20,000 or imprisoned for not more than 5 years, or both.".

(2) AGREEMENTS. — Section 1892 of the Social Security Act (42 U.S.C. 1395ccc) is amended —

(A) in subsection (a)(1)(A) —

(i) by striking ", or the" and inserting ", the"; and

(ii) by inserting "or the Rural and Underserved Pathway to Practice Training Program for Post-Baccalaureate and Medical Students under section 1899C" before ", owes a past-due obligation";

(B) in subsection (b) —

(i) in paragraph (1), by striking at the end "or";

(ii) in paragraph (2), by striking the period at the end and inserting "; or"; and

(iii) by adding the end the following new paragraph:

"(3) subject to subsection (f), owed by an individual to the United States by breach of an agreement under section 1899C(c) and which payment has not been paid by the individual for any amounts received under the Rural and Underserved Pathway to Practice Training Program for Post-Baccalaureate and Medical Students (and accrued interest determined in accordance with subsection (f)(4)) in the case such individual fails to complete the requirements of such agreement."; and

(C) by adding at the end the following new subsection:

"(f) AUTHORITIES WITH RESPECT TO THE COLLECTION UNDER THE PATHWAY TO PRACTICE TRAINING PROGRAM. — The Secretary —

"(1) shall require payment to the United States for any amount of damages that the United States is entitled to recover under subsection (b)(3), within the 5-year period beginning on the date an eligible individual fails to complete the requirements of such agreement under section 1899C(d)(5) (or such longer period beginning on such date as specified by the Secretary), and any such amounts not paid within such period shall be subject to collection through deductions in Medicare payments pursuant to subsection (e);

"(2) shall allow payments described in paragraph (1) to be paid in installments over such 5-year period, which shall accrue interest in an amount determined pursuant to paragraph (5);

"(3) shall waive the requirement for an individual to pay a past-due obligation under subsection (b)(3) in the case of hardship (as determined by the Secretary);

"(4) shall not disclose any past-due obligation under subsection (b)(3) that is owed to the United States to any credit reporting agency that the United States entitled to be recovered the United States under this section; and

"(5) shall make a final determination of whether the amount of payment under section 1899C made to a qualifying student (as described in subsection (b) of such section) was in excess of or less than the amount of payment that is due, and payment of such excess or deficit is not made (or effected by offset) within 90 days of the date of the determination, and interest shall accrue on the balance of such excess or deficit not paid or offset (to the extent that the balance is owed by or owing to the provider) at a rate determined in accordance with the regulations of the Secretary of the Treasury applicable to charges for late payments.".

SEC. 137403. FUNDING FOR THE RURAL AND UNDERSERVED PATHWAY TO PRACTICE TRAINING PROGRAMS FOR POST-BACCALAUREATE STUDENTS AND MEDICAL STUDENTS.

(a) IN GENERAL. — Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by the preceding provisions of this Act, is amended by inserting after section 36F the following new section:

"SEC. 36G. PATHWAY TO PRACTICE MEDICAL SCHOLARSHIP VOUCHER CREDIT.

"(a) IN GENERAL. — In the case of a qualified educational institution, 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 paid or incurred by such institution during such taxable year pursuant to any Pathway to Practice medical scholarship voucher awarded to a qualifying student with respect to such institution.

"(b) DETERMINATION OF AMOUNTS PAID PURSUANT TO QUALIFIED SCHOLARSHIP VOUCHERS, ETC. — For purposes of this section —

"(1) an amount shall be treated as paid or incurred pursuant to an annual award of a Pathway to Practice medical scholarship voucher only if such amount is paid or incurred in reimbursement, or anticipation of, an expense described in subparagraphs (A) through (E) of paragraph (4) of section 1899C(d) of the Social Security Act and is subject to verification in such manner as the Secretary of Health and Human Services may provide under paragraph (6) of such section, and

"(2) in the case of any amount credited by a qualified educational institution against a liability owed by the qualifying student to such institution, such amount shall be treated as paid by such institution to such student as of the date that such liability would otherwise be due.

"(c) DEFINITIONS. — For purposes of this section —

"(1) QUALIFIED EDUCATIONAL INSTITUTION. — The term 'qualified educational institution' means, with respect to any annual award of a Pathway to Practice medical scholarship voucher —

"(A) any qualifying medical school (as defined in subsection (e)(6) of section 1899C of the Social Security Act), and

"(B) any provider of a post-baccalaureate program referred to in subsection (b)(2)(A) of such section, which meets the requirements of subsection (d)(6) of such section.

"(2) QUALIFYING STUDENT. — The term 'qualifying student' means any student to whom the Secretary of Health and Human Services has made an annual award of a Pathway to Practice medical scholarship voucher under section 1899C of the Social Security Act.

"(3) ANNUAL AWARD OF A PATHWAY TO PRACTICE MEDICAL SCHOLARSHIP VOUCHER. — The term 'annual award of a Pathway to Practice medical scholarship voucher' means the annual award of a Pathway to Practice medical scholarship voucher referred to in section 1899C(d)(3) of the Social Security Act.

"(d) COORDINATION OF ACADEMIC AND TAXABLE YEARS. — The credit allowed under subsection (a) with respect to any Pathway to Practice medical scholarship voucher shall not exceed the amount of such voucher which is for expenses described in subparagraphs (A) through (E) of section 1899C(d)(4) of the Social Security Act, reduced by any amount of such voucher with respect to which credit was allowed under this section for any prior taxable year.

"(e) REGULATIONS. — The Secretary shall issue such regulations or other guidance as are necessary or appropriate to carry out the purposes of this section.".

(b) CONFORMING AMENDMENTS. —

(1) Section 6211(b)(4)(A), as amended by the preceding provisions of this Act, is amended by inserting "36G," after "36F,".

(2) Paragraph (2) of section 1324(b) of title 31, United States Code, as amended by the preceding provisions of this Act, is amended by inserting "36G," after "36F,".

(3) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, and amended by the preceding provisions of this Act, is amended by inserting after the item relating to section 36F the following new item:

"Sec. 36G. Pathway to Practice medical scholarship voucher credit.".

(c) INFORMATION SHARING. — The Secretary of Health and Human Services shall annually provide the Secretary of the Treasury such information regarding the program under section 1899C of the Social Security Act as the Secretary of the Treasury may require to administer the tax credits determined under section 36G of the Internal Revenue Code of 1986, including information to identify qualifying students and the qualified educational institutions at which such students are enrolled and the amount of the annual award of the Pathway to Practice medical scholarship voucher awarded to each such student with respect to such institution. Terms used in this subparagraph shall have the same meaning as when used in such section 36G.

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 137404. ESTABLISHING RURAL AND UNDERSERVED PATHWAY TO PRACTICE PROGRAM FOR MEDICAL RESIDENTS.

Section 1886 of the Social Security Act (42 U.S.C. 1395ww) is amended —

(1) in subsection (d)(5)(B)(v), by inserting "(h)(4)(H)(vii)," after "The provisions of subsections (h)(4)(H)(vi),"; and

(2) in subsection (h)(4)(H), by adding at the end the following new clause:

"(vii) EXCLUSION FROM FULL-TIME EQUIVALENT LIMITATION FOR HOSPITALS IMPLEMENTING RURAL AND UNDERSERVED PATHWAY TO PRACTICE PROGRAM. —

"(I) IN GENERAL. — For cost reporting periods beginning on or after October 1, 2026, during which a qualifying resident (as defined in subclause (II)) trains in an applicable hospital (as defined in subclause (III)), the Secretary shall, for such cost reporting period by the number of full-time equivalent residents so trained within the applicable hospital during such period, exclude from the limitation under subparagraph (F).

"(II) QUALIFYING RESIDENT. — For purposes of this clause, the term 'qualifying resident' means a full-time equivalent resident who —

"(aa) was a qualifying student awarded a Pathway to Practice medical scholarship voucher under section 1899C; and

"(bb) graduated from a qualifying medical school.

"(III) APPLICABLE HOSPITAL. —

"(aa) IN GENERAL. — For purposes of this clause, the term 'applicable hospital' means any hospital that —

"(AA) meets the requirements of item (bb);

"(BB) agrees to provide data to the Secretary with respect to where qualifying residents (as defined in subclause (II)) practice medicine or participate in fellowships immediately following their residencies; and

"(CC) agrees to promote community-based training of qualifying residents (as defined in subclause (II)), as appropriate.

"(bb) OTHER REQUIREMENTS. — For the purpose of item (aa)(AA), an applicable hospital shall also be a subsection (d) hospital that has been recognized by the Accreditation Council for Graduate Medical Education as meeting the following requirements:

"(AA) Such hospital provides mentorships for residents.

"(BB) Such hospital includes cultural or structural competency as part of the training of residents.

"(CC) The hospital has a demonstrated record of training medical residents in health professional shortage areas, medically underserved areas, public hospitals, or rural areas.

"(IV) OTHER DEFINITIONS. —

"(aa) HEALTH PROFESSIONAL SHORTAGE AREA. — The team 'health professional shortage area' has the meaning given such term in subparagraphs (A) or (B) of section 332(a)(1) of the Public Health Service Act.

"(bb) MEDICALLY UNDERSERVED AREA. — The term 'medically underserved area' means an area designated pursuant to section 330(b)(3)(A) of the Public Health Service Act.

"(cc) QUALIFYING MEDICAL SCHOOL. — The term 'qualifying medical school' has the meaning given such term in section 1899C(e)(6).

"(dd) QUALIFYING MEDICAL STUDENT. — The term 'qualifying medical student' has the meaning given such term in section 1899C(b).

"(ee) RURAL AREA. — The term 'rural area' has the meaning given such term in section 1886(d)(2)(D).".

SEC. 137405. DISTRIBUTION OF ADDITIONAL RESIDENCY POSITIONS.

(a) IN GENERAL. — Section 1886(h) of the Social Security Act (42 U.S.C. 1395ww(h)) is amended —

(1) in paragraph (4)(F)(i), by striking "and (9)" and inserting "(9), and (10)";

(2) in paragraph (4)(H)(i), by striking "and (9)" and inserting "(9), and (10)"; and

(3) by adding at the end the following new paragraph:

"(10) DISTRIBUTION OF ADDITIONAL RESIDENCY POSITIONS. —

"(A) ADDITIONAL RESIDENCY POSITIONS. —

"(i) IN GENERAL. — For fiscal years 2025 and 2026, and for each succeeding fiscal year until the aggregate number of full-time equivalent residency positions distributed under this paragraph is equal to the aggregate number of such positions made available (as specified in clause (ii)), the Secretary shall, subject to the succeeding provisions of this paragraph, increase the otherwise applicable resident limit for each qualifying hospital (as defined in subparagraph (F)) that submits a timely application under this subparagraph by such number as the Secretary may approve effective beginning July 1 of the fiscal year of the increase.

"(ii) NUMBER AVAILABLE FOR DISTRIBUTION. —

"(I) TOTAL NUMBER AVAILABLE. — The aggregate number of such positions made available under this paragraph shall be equal to 4,000.

"(II) ANNUAL LIMIT. — The aggregate number of such positions so made available shall not exceed 2,000 for a fiscal year.

"(iii) ROUNDS OF APPLICATIONS. — The Secretary shall initiate a separate round of applications for an increase under clause (i) for each fiscal year for which such an increase is to be provided.

"(iv) DISTRIBUTION FOR PRIMARY CARE, PSYCHIATRY, AND OTHER RESIDENCIES. —

"(I) IN GENERAL. — Except as provided under subclause (II), of the positions made available under this paragraph —

"(aa) not less than 25 percent shall be in a primary care residency (as defined in subparagraph (F)) or obstetrics and gynecology residency; and

"(bb) not less than 15 percent shall be in a psychiatry residency (as defined in such subparagraph).

"(II) DISTRIBUTION FOR OTHER RESIDENCIES. — The requirement under subclause (I) shall not apply with respect to any positions made available under this paragraph that are not distributed to a qualifying hospital by July 1, 2027, and such positions shall be distributed to hospitals in accordance with subparagraph (B), without regard to specialty.

"(v) CLARIFICATION REGARDING AVAILABILITY OF OTHER INCREASE. — A qualifying hospital may apply for, and receive, an increase under this paragraph and paragraph (9) for a fiscal year.

"(B) DISTRIBUTION. — For purposes of providing an increase in the otherwise applicable resident limit under subparagraph (A), the following shall apply:

"(i) ELIGIBLE HOSPITALS. — With respect to the aggregate number of such positions available for distribution under this paragraph, the Secretary shall distribute 30 percent of such aggregate number to the category of hospitals described in subclause (II) of clause (ii), 20 percent of such aggregate number to each of the categories of hospitals described in subclauses (I), (III), and (IV) of such clause, and 10 percent of such aggregate number to the category of hospitals described in subclause (V) of such clause, subject to clauses (iii) and (iv).

"(ii) CATEGORIES OF HOSPITALS DESCRIBED. — The following categories of hospitals are described in this clause:

"(I) Hospitals that are located in a rural area (as defined in subsection (d)(2)(D)) or are treated as being located in a rural area pursuant to subsection (d)(8)(E), hospitals that are located in a census tract assigned a rural-urban commuting area code of 4 or greater, and hospitals that are a sole community hospital (as defined in subsection (d)(5)(D)(iii)).

"(II) Hospitals in which the reference resident level of the hospital (as specified in subparagraph (F)(v)) is greater than the otherwise applicable resident limit.

"(III) Hospitals in States with —

"(aa) a new medical school that received 'Candidate School' status from the Liaison Committee on Medical Education or 'Pre-Accreditation' status from the American Osteopathic Association Commission on Osteopathic College Accreditation on or after January 1, 2000, and achieved or continued to progress toward 'Full Accreditation' status (as such term is defined by the Liaison Committee on Medical Education) or toward 'Accreditation' status (as such term is defined by the American Osteopathic Association Commission on Osteopathic College Accreditation); or

"(bb) an additional location or branch campus established on or after January 1, 2000, by a medical school with 'Full Accreditation' status (as such term is defined by the Liaison Committee on Medical Education) or 'Accreditation' status (as such term is defined by the American Osteopathic Association Commission on Osteopathic College Accreditation).

"(IV) Hospitals that are located in or serve an area designated as a health professional shortage area under section 332(a)(1)(A) of the Public Health Service Act or serve a population group designated under section 332(a)(1)(B) of such Act, as determined by the Secretary.

"(V) Hospitals located in States in the lowest quartile for resident-to-population ratios, as defined by the Secretary.

"(iii) DISTRIBUTION TO OTHER HOSPITALS. — Any positions made available under this paragraph that are not distributed to a qualifying hospital in accordance with clause (i) by July 1, 2027, shall be distributed to other hospitals, subject to the requirement under clause (iv). In carrying out the preceding sentence, the Secretary shall ensure that such positions are first offered to qualifying hospitals in categories described in clause (ii) before being distributed to other hospitals.

"(iv) REQUIREMENT. — A hospital shall only be eligible to receive positions made available under this paragraph if the hospital demonstrates to the Secretary that the hospital is likely to —

"(I) fill such positions within the first 5 training years beginning after the date the increase would be effective, as determined by the Secretary; and

"(II) use some portion (as specified by the Secretary) of such positions for the residencies described in (A)(iv).

"(C) CONDITIONS OF DISTRIBUTION. —

"(i) IN GENERAL. — Subject to clause (iv), a hospital that receives an increase in the otherwise applicable resident limit under this paragraph shall ensure, during the 5-year period beginning on the date of such increase, that the numbers of full-time equivalent residents in a primary care or psychiatry residency (as those terms are defined in subparagraph (F)), excluding any additional positions attributable to an increase under this paragraph, are not less than the average numbers of full-time equivalent residents in a primary care or psychiatry residency (as so defined) during the 3 most recent cost reporting periods ending prior to the date of enactment of this paragraph.

"(ii) REPORTING REQUIREMENTS. — Subject to clause (iv), a hospital that receives an increase in the otherwise applicable resident limit under this paragraph shall, after making a good faith attempt to collect information from former residents, report to the Secretary in a time and manner specified by the Secretary the following information for each year (beginning with the first year for which the hospital receives an increase in the otherwise applicable resident limit under this paragraph), as applicable:

"(I) Race and ethnicity of residents.

"(II) The practice patterns of residents one and two years after completion of their residency, including the number and percent of residents who —

"(aa) practice in a primary care, psychiatry, or other specialty;

"(bb) primarily serve or are located in a health professional shortage area with a designation in effect under section 332 of the Public Health Service Act; or

"(cc) primarily serve or are located in a rural area (as defined in subsection (d)(2)(D)).

"(iii) REQUIREMENT FOR RURAL HOSPITALS TO EXPAND EXISTING PROGRAMS. — Subject to clause (iv), if a hospital that receives an increase in the otherwise applicable resident limit under this paragraph would be eligible for an adjustment to the otherwise applicable resident limit for participation in a new medical residency training program under section 413.79(e)(3) of title 42, Code of Federal Regulations (or any successor regulation), the hospital shall ensure that any positions made available under this paragraph are used to expand an existing program of the hospital, and not for participation in a new medical residency training program.

"(iv) REDISTRIBUTION OF POSITIONS IF HOSPITAL NO LONGER MEETS CERTAIN REQUIREMENTS. — In the case where the Secretary determines that a hospital that receives an increase in the otherwise applicable resident limit under this paragraph does not meet either of the requirements under clause (i), the reporting requirements under clause (ii), or, if applicable, the requirement under clause (iii), the Secretary shall —

"(I) reduce the otherwise applicable resident limit of the hospital by the amount by which such limit was increased under this paragraph; and

"(II) provide for the distribution of positions attributable to such reduction to other qualifying hospitals in accordance with the requirements of this paragraph.

"(v) LIMITATION. — A hospital may not receive more than 25 additional full-time equivalent residency positions under this paragraph.

"(D) APPLICATION OF PER RESIDENT AMOUNTS FOR PRIMARY CARE AND NONPRIMARY CARE. — With respect to additional residency positions in a hospital attributable to the increase provided under this paragraph, the approved FTE per resident amounts are deemed to be equal to the hospital per resident amounts for primary care and nonprimary care computed under paragraph (2)(D) for that hospital.

"(E) PERMITTING FACILITIES TO APPLY AGGREGATION RULES. — The Secretary shall permit hospitals receiving additional residency positions attributable to the increase provided under this paragraph to, beginning in the fifth year after the effective date of such increase, apply such positions to the limitation amount under paragraph (4)(F) that may be aggregated pursuant to paragraph (4)(H) among members of the same affiliated group.

"(F) DEFINITIONS. — In this paragraph:

"(i) OTHERWISE APPLICABLE RESIDENT LIMIT. — The term 'otherwise applicable resident limit' means, with respect to a hospital, the limit otherwise applicable under subparagraphs (F)(i) and (H) of paragraph (4) on the resident level for the hospital determined without regard to this paragraph but taking into account paragraphs (7)(A), (7)(B), (8)(A), (8)(B), or (9)(A).

"(ii) PRIMARY CARE RESIDENCY. — The term 'primary care residency' means a residency training program described in paragraph (5)(H).

"(iii) PSYCHIATRY RESIDENCY. — The term 'psychiatry residency' means a residency in psychiatry, addiction medicine, addiction psychiatry, pain medicine, child and adolescent psychiatry, consultation-liaison psychiatry, geriatric psychiatry, brain injury medicine, forensic psychiatry, hospice and palliative medicine, and sleep medicine. Such term includes a residency in a program that is a prerequisite (as determined by the Secretary) for a residency described in the preceding sentence.

"(iv) QUALIFYING HOSPITAL. — The term 'qualifying hospital' means a hospital described in any of subclauses (I) through (V) of subparagraph (B)(ii).

"(v) REFERENCE RESIDENT LEVEL. — The term 'reference resident level' means, with respect to a hospital, the resident level for the most recent cost reporting period of the hospital ending on or before the date of enactment of this paragraph, for which a cost report has been settled (or, if not, submitted (subject to audit)), as determined by the Secretary.

"(vi) RESIDENT LEVEL. — The term 'resident level' has the meaning given such term in paragraph (7)(C)(i).

"(G) FUNDING. — There is appropriated to the Secretary, out of any amounts in the Treasury not otherwise appropriated, $10,000,000, to remain available until expended, for purposes of carrying out this paragraph and subsection (d)(5)(B)(xiii).".

(b) IME. — Section 1886(d)(5)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(5)(B)) is amended —

(1) in clause (v), in the third sentence, by striking "and (h)(9)" and inserting "(h)(9), and (h)(10)";

(2) by adding at the end the following new clause:

"(xiii) For discharges occurring on or after July 1, 2024, insofar as an additional payment amount under this subparagraph is attributable to resident positions distributed to a hospital under subsection (h)(10), the indirect teaching adjustment factor shall be computed in the same manner as provided under clause (ii) with respect to such resident positions.".

PART 5 — HIGHER EDUCATION

SEC. 137501. CREDIT FOR PUBLIC UNIVERSITY RESEARCH INFRASTRUCTURE.

(a) IN GENERAL. — Subpart D of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is amended by adding at the end the following new section:

"SEC. 45AA. PUBLIC UNIVERSITY RESEARCH INFRASTRUCTURE CREDIT.

"(a) ALLOWANCE OF CREDIT. — For purposes of section 38, the public university research infrastructure credit determined under this section for a taxable year is an amount equal to 40 percent of the qualified cash contributions made by a taxpayer during such taxable year.

"(b) QUALIFIED CASH CONTRIBUTION. —

"(1) IN GENERAL. —

"(A) DEFINED. — For purposes of subsection (a), the qualified cash contribution for any taxable year is the aggregate amount contributed in cash by a taxpayer during such taxable year to a certified educational institution in connection with a qualifying project that, but for this section, would be treated as a charitable contribution for purposes of section 170(c).

"(B) QUALIFIED CASH CONTRIBUTIONS TAKEN INTO ACCOUNT FOR PURPOSES OF CHARITABLE CONTRIBUTION LIMITATIONS. — Any qualified cash contributions made by a taxpayer under this section shall be taken into account for purposes of determining the percentage limitations under section 170(b).

"(2) DESIGNATION REQUIRED. — A contribution shall only be treated as a qualified cash contribution to the extent that it is designated as such by a certified educational institution under subsection (d).

"(c) DEFINITIONS. — For purposes of this section —

"(1) QUALIFYING PROJECT. — The term 'qualifying project' means a project to purchase, construct, or improve research infrastructure property.

"(2) RESEARCH INFRASTRUCTURE PROPERTY. — The term 'research infrastructure property' means any portion of a property, building, or structure of an eligible educational institution, or any land associated with such property, building, or structure, that is used for research.

"(3) ELIGIBLE EDUCATIONAL INSTITUTION. — The term 'eligible educational institution' means —

"(A) an institution of higher education (as such term is defined in section 101 or 102(c) of the Higher Education Act of 1965) that is a college or university described in section 511(a)(2)(B), or

"(B) an organization described in section 170(b)(1)(A)(iv), section 170(b)(1)(A)(vi), or section 509(a)(3) to which authority has been delegated by an institution described in subparagraph (A) for purposes of applying for or administering credit amounts on behalf of such institution.

"(4) CERTIFIED EDUCATIONAL INSTITUTION. — The term 'certified educational institution' means an eligible educational institution which has been allocated a credit amount for a qualifying project and —

"(A) has received a certification for such project by submitting an application as required under subsection (d)(2), and

"(B) designates credit amounts to taxpayers for qualifying cash contributions toward such project under subsection (d)(4).

"(d) QUALIFYING UNIVERSITY RESEARCH INFRASTRUCTURE PROGRAM. —

"(1) ESTABLISHMENT. —

"(A) IN GENERAL. — Not later than 180 days after the date of the enactment of this section, the Secretary, after consultation with the Secretary of Education, shall establish a program to —

"(i) certify and allocate credit amounts for qualifying projects to eligible educational institutions, and

"(ii) allow certified educational institutions to designate cash contributions for qualifying projects of such certified educational institutions as qualified cash contributions.

"(B) LIMITATIONS. —

"(i) ALLOCATION LIMITATION PER INSTITUTION. — The credit amounts allocated to a certified educational institution under subparagraph (A)(i) for all projects shall not exceed $50,000,000 per calendar year.

"(ii) OVERALL ALLOCATION LIMITATION. —

"(I) IN GENERAL. — The total amount of qualifying project credit amounts that may be allocated under subparagraph (A)(i) shall not exceed —

"(aa) $500,000,000 for each of calendar years 2022, 2023, 2024, 2025, and 2026, and

"(bb) $0 for each subsequent year.

"(II) ROLLOVER OF UNALLOCATED CREDIT AMOUNTS. — Any credit amounts described in subclause (I) that are unallocated during a calendar year shall be carried to the succeeding calendar year and added to the limitation allowable under such subclause for such succeeding calendar year.

"(iii) DESIGNATION LIMITATION. — The aggregate amount of cash contributions which are designated by a certified educational institution as qualifying cash contributions with respect to any qualifying project shall not exceed 250 percent of the credit amount allocated to such certified educational institution for a qualifying project under subparagraph (A)(i).

"(2) CERTIFICATION APPLICATION. — Each eligible educational institution which applies for certification of a project under this paragraph shall submit an application in such time, form, and manner as the Secretary may require.

"(3) SELECTION CRITERIA FOR ALLOCATIONS TO ELIGIBLE EDUCATIONAL INSTITUTIONS. — The Secretary, after consultation with the Secretary of Education, shall select applications from eligible educational institutions —

"(A) based on the extent of the expected expansion of an eligible educational institution's targeted research within disciplines in science, mathematics, engineering, and technology, and

"(B) in a manner that ensures consideration is given to eligible educational institutions with full-time student populations of less than 12,000.

"(4) DESIGNATION OF QUALIFIED CASH CONTRIBUTIONS TO TAXPAYERS. — The Secretary, after consultation with the Secretary of Education, shall establish a process by which certified educational institutions shall designate cash contributions to such institutions as qualified cash contributions.

"(5) DISCLOSURE OF ALLOCATIONS AND DESIGNATIONS. —

"(A) ALLOCATIONS. — The Secretary shall, upon allocating credit amounts to an applicant under this subsection, publicly disclose the identity of the applicant and the credit amount allocated to such applicant.

"(B) DESIGNATIONS. — Each certified educational institution shall, upon designating contributions of a taxpayer as qualified cash contributions under this subsection, publicly disclose the identity of the taxpayer and the amount of contributions designated in such time, form, and manner as the Secretary may require.

"(e) REGULATIONS AND GUIDANCE. — The Secretary, after consultation with the Secretary of Education when applicable, shall prescribe such regulations and guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance for —

"(1) prevention of abuse,

"(2) establishment of reporting requirements,

"(3) establishment of selection criteria for applications, and

"(4) disclosure of allocations.

"(f) PENALTY FOR NONCOMPLIANCE. —

"(1) IN GENERAL. — If at any time during the 5-year period beginning on the date of the allocation of credit amounts to a certified educational institution under subsection (d)(1)(A)(i) there is a noncompliance event with respect to such credit amounts, then the following rules shall apply:

"(A) GENERAL RULE. — Any cash contribution designated as a qualifying cash contribution with respect to a qualifying project for which such credit amounts were allocated under subsection (d)(1)(A)(ii) shall be treated as unrelated business taxable income (as defined in section 512) of such certified educational institution.

"(B) RULE FOR UNUSED CREDIT AMOUNTS. — In the case of credit amounts described under paragraph (2)(A) which are unused and identified pursuant to subsection (g), the Secretary shall reallocate any portion of such credit amounts that are unused to certified educational institutions in lieu of imposing the general rule under subparagraph (A).

"(2) NONCOMPLIANCE EVENT. — For purposes of this subsection, the term 'noncompliance event' means, with respect to a credit amount allocated to a certified educational institution —

"(A) cash contributions equaling the amount of such credit amount are not designated as qualifying cash contributions within 2 years after December 31 of the year such credit amount is allocated,

"(B) a qualifying project with respect to which such credit amount was allocated is not placed in service within either —

"(i) 4 years after December 31 of the year such credit amount is allocated, or

"(ii) a period of time that the Secretary determines is appropriate, or

"(C) the research infrastructure property placed in service as part of a qualifying project with respect to which such credit amount was allocated ceases to be used for research within five years after such property is placed in service.

"(g) REVIEW AND REALLOCATION OF CREDIT AMOUNTS. —

"(1) REVIEW. — Not later than 5 years after the date of enactment of this section, the Secretary shall review the credit amounts allocated under this section as of such date.

"(2) REALLOCATION. —

"(A) IN GENERAL. — The Secretary may reallocate credit amounts allocated under this section if the Secretary determines, as of the date of the review in paragraph (1), that such credit amounts are subject to a noncompliance event.

"(B) ADDITIONAL PROGRAM. — If the Secretary determines that credits under this section are available for reallocation pursuant to the requirements set forth in subparagraph (A), the Secretary is authorized to conduct an additional program for applications for certification.

"(C) DEADLINE FOR REALLOCATION. — The Secretary shall not certify any project, or reallocate any credit amount, pursuant to this paragraph after December 31, 2031.

"(h) DENIAL OF DOUBLE BENEFIT. — No credit or deduction shall be allowed under any other provision of this chapter for any qualified cash contribution for which a credit is allowed under this section.

"(i) RULE FOR TRUSTS AND ESTATES. — For purposes of this section, rules similar to the rules of subsection (d) of section 52 shall apply.

"(j) TERMINATION. — This section shall not apply to qualified cash contributions made after December 31, 2033.".

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT. — Subsection (b) of section 38, as amended by the preceding provisions of this Act, is amended by striking "plus" at the end of paragraph (41), by striking the period at the end of paragraph (42) and inserting ", plus", and by adding at the end the following new paragraph:

"(43) the public university research infrastructure credit determined under section 45AA.".

(c) CLERICAL AMENDMENT. — The table of sections for subpart D of part IV of subchapter A of chapter 1, as amended by the preceding provisions of this Act, is amended by adding at the end the following new item:

"Sec. 45AA. Public university research infrastructure credit.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to qualified cash contributions made after December 31, 2021.

SEC. 137502. TREATMENT OF FEDERAL PELL GRANTS FOR INCOME TAX PURPOSES.

(a) EXCLUSION FROM GROSS INCOME. — Section 117(b)(1) is amended by striking "means any amount" and all that follows and inserting "means —

"(A) any amount received by an individual as a scholarship or fellowship grant to the extent the individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expenses, and

"(B) any amount received by an individual after December 31, 2021, and before January 1, 2026, as a Federal Pell Grant under section 401 of the Higher Education Act of 1965.".

(b) TREATMENT FOR PURPOSES OF AMERICAN OPPORTUNITY TAX CREDIT AND LIFETIME LEARNING CREDIT. — Section 25A(g)(2) is amended —

(1) in subparagraph (A), by inserting "described in section 117(b)(1)(A)" after "a qualified scholarship", and

(2) in subparagraph (C), by inserting "or amount described in section 117(b)(1)(B)" after "within the meaning of section 102(a)".

(c) EFFECTIVE DATE. — The amendment made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 137503. REPEAL OF DENIAL OF AMERICAN OPPORTUNITY TAX CREDIT ON BASIS OF FELONY DRUG CONVICTION.

(a) IN GENERAL. — Section 25A(b)(2) is amended by striking subparagraph (D).

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to taxable years beginning after December 31, 2021.

PART 6 — DEDUCTION FOR STATE AND LOCAL TAXES, ETC.

SEC. 137601. MODIFICATION OF LIMITATION ON DEDUCTION FOR STATE AND LOCAL TAXES, ETC.

(a) IN GENERAL. — Paragraph (6) of section 164(b) is amended —

(1) by striking "2025" in the heading and inserting "2031",

(2) by striking "January 1, 2026" and inserting "January 1, 2032",

(3) in subparagraph (A), by inserting "or section 216(a)(1)" after "subsection (a)(1)", and

(4) in subparagraph (B) —

(A) by striking "$10,000 ($5,000 in the case of a married individual filing a separate return)" and inserting "$72,500 ($36,250 in the case of an estate, trust, or married individual filing a separate return)", and

(B) by inserting "(and any tax described in any such paragraph taken into account under section 216(a)(1))" after "paragraph (5) of this subsection".

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2020.

(c) NO INFERENCE. — The amendments made by paragraphs (3) or (4)(B) shall not be construed to create any inference with respect to the proper application of section 164(b)(6) or section 216(a) with respect to any taxable year beginning before January 1, 2021.

Subtitle H — Responsibly Funding Our Priorities

SEC. 138001. AMENDMENT OF 1986 CODE.

Except as otherwise expressly provided, whenever in this subtitle 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.

PART 1 — CORPORATE AND INTERNATIONAL TAX REFORMS

Subpart A — Corporate Provisions

SEC. 138101. CORPORATE ALTERNATIVE MINIMUM TAX.

(a) IMPOSITION OF TAX. —

(1) IN GENERAL. — Paragraph (2) of section 55(b) is amended to read as follows:

"(2) CORPORATIONS. —

"(A) APPLICABLE CORPORATIONS. — In the case of an applicable corporation, the tentative minimum tax for the taxable year shall be the excess of —

"(i) 15 percent of the adjusted financial statement income for the taxable year (as determined under section 56A), over

"(ii) the corporate AMT foreign tax credit for the taxable year.

"(B) OTHER CORPORATIONS. — In the case of any corporation which is not an applicable corporation, the tentative minimum tax for the taxable year shall be zero.".

(2) APPLICABLE CORPORATION. — Section 59 is amended by adding at the end the following new subsection:

"(k) APPLICABLE CORPORATION. — For purposes of this part —

"(1) APPLICABLE CORPORATION DEFINED. —

"(A) IN GENERAL. — The term 'applicable corporation' means, with respect to any taxable year, any corporation (other than an S corporation, a regulated investment company, or a real estate investment trust) which meets the average annual adjusted financial statement income test of subparagraph (B) for one or more taxable years which —

"(i) are prior to such taxable year, and

"(ii) end after December 31, 2021.

"(B) AVERAGE ANNUAL ADJUSTED FINANCIAL STATEMENT INCOME TEST. — For purposes of this subsection —

"(i) a corporation meets the average annual adjusted financial statement income test for any taxable year if the average annual adjusted financial statement income of such corporation for the 3-taxable-year period ending with such taxable year exceeds $1,000,000,000, and

"(ii) in the case of a corporation described in paragraph (2), such corporation meets the average annual adjusted financial statement income test if —

"(I) the corporation meets the requirements of clause (i) (determined after the application of paragraph (2)), and

"(II) the average annual adjusted financial statement income of such corporation (determined without regard to the application of paragraph (2)) for the 3-taxable-year-period ending with such taxable year is $100,000,000 or more.

"(C) EXCEPTION. — Notwithstanding subparagraph (A), the term 'applicable corporation' shall not include any corporation which otherwise meets the requirements of subparagraph (A) if —

"(i) such corporation —

"(I) has a change in ownership, or

"(II) has a specified number (to be determined by the Secretary and which shall, as appropriate, take into account the facts and circumstances of the taxpayer) of consecutive taxable years, including the most recent taxable year, in which the corporation does not meet the average annual adjusted financial statement income test of subparagraph (B), and

"(ii) the Secretary determines that it would not be appropriate to continue to treat such corporation as an applicable corporation.

The preceding sentence shall not apply to any corporation if, after the Secretary makes the determination described in clause (ii), such corporation meets the average annual adjusted financial statement income test for any taxable year beginning after the first taxable year for which the determination applies.

"(D) SPECIAL RULES FOR DETERMINING AVERAGE ANNUAL ADJUSTED FINANCIAL STATEMENT INCOME. — Solely for purposes of determining whether a corporation is an applicable corporation under paragraph (1) —

"(i) all persons treated as a single employer under subsection (a) or (b) of section 52 shall be treated as 1 person, and

"(ii) in the case of a foreign corporation, only income described in paragraph (3) or (4) of section 56A(c) shall be taken into account.

"(E) OTHER SPECIAL RULES. —

"(i) CORPORATIONS IN EXISTENCE FOR LESS THAN 3 YEARS. — If the corporation was in existence for less than 3-taxable years, subparagraph (B) shall be applied on the basis of the period during which such corporation was in existence.

"(ii) SHORT TAXABLE YEARS. — Adjusted financial statement income for any taxable year of less than 12 months shall be annualized by multiplying the adjusted financial statement income for the short period by 12 and dividing the result by the number of months in the short period.

"(iii) TREATMENT OF PREDECESSORS. — Any reference in this subparagraph to a corporation shall include a reference to any predecessor of such corporation.

"(2) SPECIAL RULE FOR FOREIGN-PARENTED CORPORATIONS. —

"(A) IN GENERAL. — Solely for purposes of determining whether a corporation meets the average annual adjusted financial statement income test under paragraph (1)(B)(i), notwithstanding paragraph (1)(D)(ii), any corporation which for any taxable year is a member of an international financial reporting group the common parent of which is a foreign corporation shall include in the adjusted financial statement income of such corporation for such taxable year the adjusted financial statement income of all foreign members of such group.

"(B) INTERNATIONAL FINANCIAL REPORTING GROUP. — For purposes of subparagraph (A), the term 'international financial reporting group' shall have the meaning given such term by section 163(n)(3).

"(3) REGULATIONS OR OTHER GUIDANCE. — The Secretary shall provide regulations or other guidance for the purposes of carrying out this subsection, including regulations or other guidance —

"(A) providing a simplified method for determining whether a corporation meets the requirements of paragraph (1), and

'"(B) addressing the application of this subsection to a corporation that experiences a change in ownership.".

(3) REDUCTION FOR BASE EROSION AND ANTIABUSE TAX. — Section 55(a)(2) is amended by inserting "plus, in the case of an applicable corporation (as defined in subsection (b)(2)), the tax imposed by section 59A" before the period at the end.

(4) CONFORMING AMENDMENTS. —

(A) Section 55(a) is amended by striking "In the case of a taxpayer other than a corporation, there" and inserting "There".

(B)(i) Section 55(b)(1) is amended —

(I) by striking so much as precedes subparagraph (A) and inserting the following:

"(1) NONCORPORATE TAXPAYERS. — In the case of a taxpayer other than a corporation — ", and

(II) by adding at the end the following new subparagraph:

"(D) ALTERNATIVE MINIMUM TAXABLE INCOME. — The term 'alternative minimum taxable income' means the taxable income of the taxpayer for the taxable year —

"(i) determined with the adjustments provided in section 56 and section 58, and

"(ii) increased by the amount of the items of tax preference described in section 57.

If a taxpayer is subject to the regular tax, such taxpayer shall be subject to the tax imposed by this section (and, if the regular tax is determined by reference to an amount other than taxable income, such amount shall be treated as the taxable income of such taxpayer for purposes of the preceding sentence).".

(ii) Section 860E(a)(4) is amended by striking "55(b)(2)" and inserting "55(b)(1)(D)".

(iii) Section 897(a)(2)(A)(i) is amended by striking "55(b)(2)" and inserting "55(b)(1)(D)".

(C) Section 11(d) is amended by striking "the tax imposed by subsection (a)" and inserting "the taxes imposed by subsection (a) and section 55".

(D) Section 12 is amended by adding at the end the following new paragraph:

"(5) For alternative minimum tax, see section 55.".

(E) Section 882(a)(1) is amended by inserting ", 55," after "section 11".

(F) Section 6425(c)(1)(A) is amended to read as follows:

"(A) the sum of —

"(i) the tax imposed by section 11 or subchapter L of chapter 1, whichever is applicable, plus

"(ii) the tax imposed by section 55, plus

"(iii) the tax imposed by section 59A, over".

(G) Section 6655(e)(2) is amended by inserting ", adjusted financial statement income (as defined in section 56A)," before "and modified taxable income" each place it appears in subparagraphs (A)(i) and (B)(i).

(H) Section 6655(g)(1)(A) is amended by redesignating clauses (ii) and (iii) as clauses

(iii) and (iv), respectively, and by inserting after clause (i) the following new clause:

"(ii) the tax imposed by section 55,".

(b) ADJUSTED FINANCIAL STATEMENT INCOME. —

(1) IN GENERAL. — Part VI of subchapter A of chapter 1 is amended by inserting after section 56 the following new section:

"SEC. 56A. ADJUSTED FINANCIAL STATEMENT INCOME.

"(a) IN GENERAL. — For purposes of this part, the term 'adjusted financial statement income' means, with respect to any corporation for any taxable year, the net income or loss of the taxpayer set forth on the taxpayer's applicable financial statement for such taxable year, adjusted as provided in this section.

"(b) APPLICABLE FINANCIAL STATEMENT. — For purposes of this section, the term 'applicable financial statement' means, with respect to any taxable year, an applicable financial statement (as defined in section 451(b)(3) or as specified by the Secretary in regulations or other guidance) which covers such taxable year.

"(c) GENERAL ADJUSTMENTS. —

"(1) STATEMENTS COVERING DIFFERENT TAXABLE YEARS. — Appropriate adjustments shall be made in adjusted financial statement income in any case in which an applicable financial statement covers a period other than the taxable year.

"(2) SPECIAL RULES FOR RELATED ENTITIES. —

"(A) CONSOLIDATED FINANCIAL STATEMENTS. — If the financial results of a taxpayer are reported on the applicable financial statement for a group of entities, rules similar to the rules of section 451(b)(5) shall apply.

"(B) CONSOLIDATED RETURNS. — Except as provided in regulations prescribed by the Secretary, if the taxpayer files a consolidated return for any taxable year, adjusted financial statement income of the taxpayer for such taxable year shall take into account items on the taxpayer's applicable financial statement which are properly allocable to members of such group included on such return.

"(C) TREATMENT OF DIVIDENDS AND OTHER AMOUNTS. — In the case of any corporation which is not included on a consolidated return with the taxpayer, adjusted financial statement income of the taxpayer shall take into account the earnings of such other corporation only to the extent of the sum of the dividends received from such other corporation (reduced to the extent provided by the Secretary in regulations or other guidance) and other amounts required to be included in gross income under this chapter (other than amounts required to be included under sections 951 and 951A) in respect of the earnings of such other corporation.

"(D) GROUP INCLUDING ONE OR MORE PARTNERSHIPS. — Under rules prescribed by the Secretary, if the financial results of a taxpayer are reported on the applicable financial statement for a group of entities that includes one or more partnerships, adjusted financial statement income shall take into account the earnings of such partnerships in the same proportion as the taxpayer's distributive share of items from the partnerships required to be included in gross income under this chapter.

"(3) ADJUSTMENTS TO TAKE INTO ACCOUNT CERTAIN ITEMS OF FOREIGN INCOME. —

"(A) IN GENERAL. — If, for any taxable year, a taxpayer is a United States shareholder of one or more controlled foreign corporations, the adjusted financial statement income of such taxpayer shall be adjusted to take into account such taxpayer's pro rata share (determined under rules similar to the rules under section 951(a)(2)) of items taken into account in computing the net income or loss set forth on the applicable financial statement of each such controlled foreign corporation with respect to which such taxpayer is a United States shareholder.

"(B) NEGATIVE ADJUSTMENTS. — In any case in which the adjustment determined under subparagraph (A) would result in a negative adjustment for such taxable year —

"(i) no adjustment shall be made under this paragraph for such taxable year, and

"(ii) the amount of the adjustment determined under this paragraph for the succeeding taxable year (determined without regard to this paragraph) shall be reduced by an amount equal to the negative adjustment for such taxable year.

"(4) EFFECTIVELY CONNECTED INCOME. — In the case of a foreign corporation, to determine adjusted financial statement income, the principles of section 882 shall apply.

"(5) ADJUSTMENTS FOR CERTAIN TAXES. — Adjusted financial statement income shall be appropriately adjusted to disregard any Federal income taxes, or income, war profits, or excess profits taxes (within the meaning of section 901) with respect to a foreign country or possession of the United States, which are taken into account on the taxpayer's applicable financial statement. To the extent provided by the Secretary, the preceding sentence shall not apply to income, war profits, or excess profits taxes (within the meaning of section 901) that are imposed by a foreign country or possession of the United States and taken into account on the taxpayer's applicable financial statement if the taxpayer does not choose to take the benefits of section 901. The Secretary shall prescribe such regulations or other guidance as may be necessary and appropriate to provide for the proper treatment of current and deferred taxes for purposes of this paragraph, including the time at which such taxes are properly taken into account.

"(6) ADJUSTMENT WITH RESPECT TO DISREGARDED ENTITIES. — Adjusted financial statement income shall be adjusted to take into account any adjusted financial statement income of a disregarded entity owned by the taxpayer.

"(7) SPECIAL RULE FOR COOPERATIVES. — In the case of a cooperative to which section 1381 applies, the adjusted financial statement income (determined without regard to this paragraph) shall be reduced by the amounts referred to in section 1382(b) (relating to patronage dividends and per-unit retain allocations) to the extent such amounts were not otherwise taken into account in determining adjusted financial statement income.

"(8) RULES FOR ALASKA NATIVE CORPORATIONS. — Adjusted financial statement income shall be appropriately adjusted to allow —

"(A) cost recovery and depletion attributable to property the basis of which is determined under section 21(c) of the Alaska Native Claims Settlement Act (43 U.S.C. 1620(c)), and

"(B) deductions for amounts payable made pursuant to section 7(i) or section 7(j) of such Act (43 U.S.C. 1606(i) and 1606(j)) only at such time as the deductions are allowed for tax purposes.

"(9) AMOUNTS ATTRIBUTABLE TO ELECTIONS FOR DIRECT PAYMENT OF CERTAIN CREDITS. — Adjusted financial statement income shall be appropriately adjusted to disregard any amount received as a refund of taxes which is attributable to an election under section 6417.

"(10) CONSISTENT TREATMENT OF MORTGAGE SERVICING INCOME OF TAXPAYER OTHER THAN A REGULATED INVESTMENT COMPANY. —

"(A) IN GENERAL. — Adjusted financial statement income shall be adjusted so as not to include any item of income in connection with a mortgage servicing contract any earlier than when such income is included in gross income under any other provision of this chapter.

"(B) RULES FOR AMOUNTS NOT REPRESENTING REASONABLE COMPENSATION. — The Secretary shall provide regulations to prevent the avoidance of taxes imposed by this chapter with respect to amounts not representing reasonable compensation (as determined by the Secretary) with respect to a mortgage servicing contract.

"(11) SECRETARIAL AUTHORITY TO ADJUST ITEMS. — The Secretary shall issue regulations or other guidance to provide for such adjustments to adjusted financial statement income as the Secretary determines necessary to carry out the purposes of this section, including adjustments —

"(A) to prevent the omission or duplication of any item,

"(B) to take into account the ownership of a member of a group by a corporation or partnership which is not a member of such group, and

"(C) to carry out the principles of part II of subchapter C of this chapter (relating to corporate liquidations), part III of subchapter C of this chapter (relating to corporate organizations and reorganizations), and part II of subchapter K of this chapter (relating to partnership contributions and distributions).

"(d) DEDUCTION FOR FINANCIAL STATEMENT NET OPERATING LOSS. —

"(1) IN GENERAL. — Adjusted financial statement income (determined after application of subsection (c) and without regard to this subsection) shall be reduced by an amount equal to the lesser of —

"(A) the aggregate amount of financial statement net operating loss carryovers to the taxable year, or

"(B) 80 percent of adjusted financial statement income computed without regard to the deduction allowable under this subsection.

"(2) FINANCIAL STATEMENT NET OPERATING LOSS CARRYOVER. — A financial statement net operating loss for any taxable year shall be a financial statement net operating loss carryover to each taxable year following the taxable year of the loss. The portion of such loss which shall be carried to subsequent taxable years shall be the amount of such loss remaining (if any) after the application of paragraph (1).

"(3) FINANCIAL STATEMENT NET OPERATING LOSS DEFINED. — For purposes of this subsection, the term 'financial statement net operating loss' means the amount of the net loss (if any) set forth on the corporation's applicable financial statement (determined after application of subsection (c) and without regard to this subsection) for taxable years ending after December 31, 2019.

"(e) REGULATIONS AND OTHER GUIDANCE. — The Secretary shall provide for such regulations and other guidance as necessary to carry out the purposes of this section, including regulations and other guidance relating to the effect of the rules of this section on partnerships with income taken into account by an applicable corporation.".

(2) CLERICAL AMENDMENT. — The table of sections for part VI of subchapter A of chapter 1 is amended by inserting after the item relating to section 56 the following new item:

"Sec. 56A. Adjusted financial statement income.".

(c) CORPORATE AMT FOREIGN TAX CREDIT. — Section 59, as amended by this section, is amended by adding at the end the following new subsection:

"(l) CORPORATE AMT FOREIGN TAX CREDIT. —

"(1) IN GENERAL. — For purposes of this part, if an applicable corporation chooses to have the benefits of subpart A of part III of subchapter N for any taxable year, the corporate AMT foreign tax credit for the taxable year of the applicable corporation is an amount equal to sum of —

"(A) the lesser of —

"(i) the aggregate of the applicable corporation's pro rata share (as determined under section 56A(c)(3)) of the amount of income, war profits, and excess profits taxes (within the meaning of section 901) imposed by any foreign country or possession of the United States which are —

"(I) taken into account on the applicable financial statement of each controlled foreign corporation with respect to which the applicable corporation is a United States shareholder, and

"(II) paid or accrued (for Federal income tax purposes) by each such controlled foreign corporation, or

"(ii) the product of the amount of the adjustment under section 56A(c)(3) and the percentage specified in section 55(b)(2)(A)(i), and

"(B) the amount of income, war profits, and excess profits taxes (within the meaning of section 901) imposed by any foreign country or possession of the United States to the extent such taxes are —

"(i) taken into account on the applicable corporation's applicable financial statement, and

"(ii) paid or accrued (for Federal income tax purposes) by the applicable corporation.

"(2) CARRYOVER OF EXCESS TAX PAID. — For any taxable year for which an applicable corporation chooses to have the benefits of subpart A of part III of subchapter N, the excess of the amount described in paragraph (1)(A)(i) over the amount described in paragraph (1)(A)(ii) shall increase the amount described in paragraph (1)(A)(i) in any of the first 5 succeeding taxable years to the extent not taken into account in a prior taxable year.

"(3) REGULATIONS OR OTHER GUIDANCE. — The Secretary shall provide for such regulations or other guidance as is necessary to carry out the purposes of this subsection.".

(d) TREATMENT OF GENERAL BUSINESS CREDIT. — Section 38(c)(6)(E) is amended to read as follows:

"(E) CORPORATIONS. — In the case of a corporation —

"(i) the first sentence of paragraph (1) shall be applied by substituting '25 percent of the taxpayer's net income tax as exceeds $25,000' for 'the greater of' and all that follows,

"(ii) paragraph (2)(A) shall be applied without regard to clause (ii)(I) thereof, and

"(iii) paragraph (4)(A) shall be applied without regard to clause (ii)(I) thereof.".

(e) CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY. —

(1) IN GENERAL. — Section 53(e) is amended to read as follows:

"(e) APPLICATION TO APPLICABLE CORPORATIONS. — In the case of a corporation —

"(1) subsection (b)(1) shall be applied by substituting 'the net minimum tax for all prior taxable years beginning after 2022' for 'the adjusted net minimum tax imposed for all prior taxable years beginning after 1986', and

"(2) the amount determined under subsection (c)(1) shall be increased by the amount of tax imposed under section 59A for the taxable year.".

(2) CONFORMING AMENDMENTS. — Section 53(d) is amended —

(A) in paragraph (2), by striking ", except that in the case" and all that follows through "treated as zero", and

(B) by striking paragraph (3).

(f) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

SEC. 138102. EXCISE TAX ON REPURCHASE OF CORPORATE STOCK.

(a) IN GENERAL. — Subtitle D is amended by inserting after chapter 36 the following new chapter:

"CHAPTER 37 — REPURCHASE OF CORPORATE STOCK

"Sec. 4501. Repurchase of corporate stock.

"SEC. 4501. REPURCHASE OF CORPORATE STOCK.

"(a) GENERAL RULE. — There is hereby imposed on each covered corporation a tax equal to 1 percent of the fair market value of any stock of the corporation which is repurchased by such corporation during the taxable year.

"(b) COVERED CORPORATION. — For purposes of this section, the term 'covered corporation' means any domestic corporation the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)).

"(c) REPURCHASE. — For purposes of this section —

"(1) IN GENERAL. — The term 'repurchase' means —

"(A) a redemption within the meaning of section 317(b) with regard to the stock of a covered corporation, and

"(B) any transaction determined by the Secretary to be economically similar to a transaction described in subparagraph (A).

"(2) TREATMENT OF PURCHASES BY SPECIFIED AFFILIATES. —

"(A) IN GENERAL. — The acquisition of stock of a covered corporation by a specified affiliate of such covered corporation, from a person who is not the covered corporation or a specified affiliate of such covered corporation, shall be treated as a repurchase of the stock of the covered corporation by such covered corporation.

"(B) SPECIFIED AFFILIATE. — For purposes of this section, the term 'specified affiliate' means, with respect to any corporation —

"(i) any corporation more than 50 percent of the stock of which is owned (by vote or by value), directly or indirectly, by such corporation, and

"(ii) any partnership more than 50 percent of the capital interests or profits interests of which is held, directly or indirectly, by such corporation.

"(3) ADJUSTMENT. — The amount taken into account under subsection (a) with respect to any stock repurchased by a covered corporation shall be reduced by the fair market value of any stock issued by the covered corporation during the taxable year, including the fair market value of any stock issued to employees of such covered corporation or a specified affiliate of such covered corporation during the taxable year, whether or not such stock is issued in response to the exercise of an option to purchase such stock.

"(d) SPECIAL RULES FOR ACQUISITION OF STOCK OF CERTAIN FOREIGN CORPORATIONS. —

"(1) IN GENERAL. — In the case of an acquisition of stock of an applicable foreign corporation by a specified affiliate of such corporation (other than a foreign corporation or a foreign partnership (unless such partnership has a domestic entity as a direct or indirect partner)) from a person who is not the applicable foreign corporation or a specified affiliate of such applicable foreign corporation, for purposes of this section —

"(A) such specified affiliate shall be treated as a covered corporation with respect to such acquisition,

"(B) such acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and

"(C) the adjustment under subsection (c)(3) shall be determined only with respect to stock issued by such specified affiliate to employees of the specified affiliate.

"(2) SURROGATE FOREIGN CORPORATIONS. — In the case of a repurchase of stock of a covered surrogate foreign corporation by such covered surrogate foreign corporation, or an acquisition of stock of a covered surrogate foreign corporation by a specified affiliate of such corporation, for purposes of this section —

"(A) the expatriated entity with respect to such covered surrogate foreign corporation shall be treated as a covered corporation with respect to such repurchase or acquisition,

"(B) such repurchase or acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and

"(C) the adjustment under subsection (c)(3) shall be determined only with respect to stock issued by such expatriated entity to employees of the expatriated entity.

"(3) DEFINITIONS. — For purposes of this subsection —

"(A) APPLICABLE FOREIGN CORPORATION. — The term 'applicable foreign corporation' means any foreign corporation the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)).

"(B) COVERED SURROGATE FOREIGN CORPORATION. — The term 'covered surrogate foreign corporation' means any surrogate foreign corporation (as determined under section 7874(a)(2)(B) by substituting 'September 20, 2021' for 'March 4, 2003' each place it appears) the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)), but only with respect to taxable years which include any portion of the applicable period with respect to such corporation under section 7874(d)(1).

"(C) EXPATRIATED ENTITY. — The term 'expatriated entity' has the meaning given such term by section 7874(a)(2)(A).

"(e) EXCEPTIONS. — Subsection (a) shall not apply —

"(1) to the extent that the repurchase is part of a reorganization (within the meaning of section 368(a)) and no gain or loss is recognized on such repurchase by the shareholder under chapter 1 by reason of such reorganization,

"(2) in any case in which the stock repurchased is, or an amount of stock equal to the value of the stock repurchased is, contributed to an employer-sponsored retirement plan, employee stock ownership plan, or similar plan,

"(3) in any case in which the total value of the stock repurchased during the taxable year does not exceed $1,000,000,

"(4) under regulations prescribed by the Secretary, in cases in which the repurchase is by a dealer in securities in the ordinary course of business,

"(5) to repurchases by a regulated investment company (as defined in section 851) or a real estate investment trust, or

"(6) to the extent that the repurchase is treated as a dividend for purposes of this title.

"(f) REGULATIONS AND GUIDANCE. — The Secretary shall prescribe such regulations and other guidance as are necessary or appropriate to administer and to prevent the avoidance of the purposes of this section, including regulations and other guidance —

"(1) to prevent the abuse of the exceptions provided by subsection (e),

"(2) to address special classes of stock and preferred stock, and

"(3) for the application of the rules under subsection (d).".

(b) TAX NOT DEDUCTIBLE. — Paragraph (6) of section 275(a) is amended by inserting "37," before "41".

(c) CLERICAL AMENDMENT. — The table of chapters for subtitle D is amended by inserting after the item relating to chapter 36 the following new item:

"CHAPTER 37 — REPURCHASE OF CORPORATE STOCK".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to repurchases (within the meaning of section 4501(c) of the Internal Revenue Code of 1986, as added by this section) of stock after December 31, 2021.

Subpart B — Limitations on Deduction for Interest Expense

SEC. 138111. LIMITATIONS ON DEDUCTION FOR INTEREST EXPENSE.

(a) INTEREST EXPENSE OF CERTAIN MEMBERS OF INTERNATIONAL FINANCIAL REPORTING GROUPS. — Section 163 is amended by redesignating subsection (n) as subsection (p) and by inserting after subsection (m) the following new subsection:

"(n) LIMITATION ON DEDUCTION OF INTEREST BY CERTAIN MEMBERS OF INTERNATIONAL FINANCIAL REPORTING GROUPS. —

"(1) IN GENERAL. — In the case of any specified domestic corporation which is a member of any international financial reporting group, the deduction under this chapter for interest paid or accrued during the taxable year in excess of the amount of interest includible in the gross income of such corporation shall not exceed the allowable percentage of 110 percent of such excess.

"(2) SPECIFIED DOMESTIC CORPORATION. — For purposes of this subsection —

"(A) IN GENERAL. — The term 'specified domestic corporation' means any domestic corporation other than —

"(i) any corporation if the excess of —

"(I) the average amount of interest paid or accrued by such corporation during the 3-taxable-year period ending with the taxable year to which paragraph (1) applies, over

"(II) the average amount of interest includible in the gross income of such corporation for such 3-taxable-year period, does not exceed $12,000,000,

"(ii) any corporation to which paragraph (1) of section 163(j) does not apply by reason of paragraph (3) of such section (determined without regard to paragraph (4)(B) of such section), and

"(iii) any S corporation, real estate investment trust, or regulated investment company.

"(B) AGGREGATION RULE. — For purposes of clauses (i) and (ii) of subparagraph (A), all domestic corporations which are members of the same international financial reporting group shall be treated as a single corporation.

"(C) FOREIGN CORPORATIONS ENGAGED IN TRADE OR BUSINESS WITHIN THE UNITED STATES. — If a foreign corporation is engaged in a trade or business within the United States, such foreign corporation shall be treated as a domestic corporation with respect to the items that are effectively connected with such trade or business.

"(3) INTERNATIONAL FINANCIAL REPORTING GROUP. — For purposes of this subsection —

"(A) IN GENERAL. — The term 'international financial reporting group' means, with respect to any reporting year, two or more entities if —

"(i) either —

"(I) at least one entity is a foreign corporation engaged in a trade or business within the United States, or

"(II) at least one entity is a domestic corporation and another entity is a foreign corporation, and

"(ii) such entities are included in the same applicable financial statement with respect to such year.

"(B) ELECTION TO INCLUDE ELIGIBLE CORPORATIONS IN GROUP. —

"(i) IN GENERAL. — To the extent provided by the Secretary in regulations or other guidance, an international financial reporting group may elect (at such time and in such manner as the Secretary may provide) to treat all eligible corporations with respect to such group as members of such group for purposes of this subsection. As a condition of such election, all such eligible corporations must maintain (and provide access to) such books and records as the Secretary determines are satisfactory to allow for the application of this subsection with respect to such eligible corporations. Such election may be revoked only with the consent of the Secretary.

"(ii) ELIGIBLE CORPORATION. — The term 'eligible corporation' means, with respect to any international financial reporting group, any corporation if at least 20 percent of the stock of such corporation (determined by vote and value) is held (directly or indirectly) by members of such international financial reporting group (determined without regard to this subparagraph).

"(4) ALLOWABLE PERCENTAGE. — For purposes of this subsection —

"(A) IN GENERAL. — The term 'allowable percentage' means, with respect to any specified domestic corporation for any taxable year, the ratio (expressed as a percentage and not greater than 100 percent) of —

"(i) such corporation's allocable share of the international financial reporting group's reported net interest expense for the reporting year of such group which ends in or with such taxable year of such corporation, over

"(ii) such corporation's reported net interest expense for such reporting year of such group.

"(B) REPORTED NET INTEREST EXPENSE. — The term 'reported net interest expense' means —

"(i) with respect to any international financial reporting group for any reporting year, the excess of —

"(I) the aggregate amount of interest expense reported in such group's applicable financial statements for such taxable year, over

"(II) the aggregate amount of interest income reported in such group's applicable financial statements for such taxable year, and

"(ii) with respect to any specified domestic corporation for any reporting year, the excess of —

"(I) the amount of interest expense of such corporation reported in the books and records of the international financial reporting group which are used in preparing such group's applicable financial statements for such taxable year, over

"(II) the amount of interest income of such corporation reported in such books and records.

"(C) ALLOCABLE SHARE OF REPORTED NET INTEREST EXPENSE. — With respect to any specified domestic corporation which is a member of any international financial reporting group, such corporation's allocable share of such group's reported net interest expense for any reporting year is the portion of such expense which bears the same ratio to such expense as —

"(i) the EBITDA of such corporation for such reporting year, bears to

"(ii) the EBITDA of such group for such reporting year.

"(D) EBITDA. —

"(i) IN GENERAL. — The term 'EBITDA' means, with respect to any reporting year, earnings before interest income and interest expense, taxes, depreciation, depletion, and amortization —

"(I) as determined in the international financial reporting group's applicable financial statements for such year, or

"(II) as determined in the books and records of the international financial reporting group which are used in preparing such statements if not determined in such statements.

"(ii) DETERMINATION OF EBITDA OF A SPECIFIED DOMESTIC CORPORATION. — The EBITDA of any specified domestic corporation shall be determined on a stand-alone basis and without regard to any distribution received by such corporation from any other member of the international financial reporting group.

"(E) SPECIAL RULES FOR NON-POSITIVE EBITDA. —

"(i) NON-POSITIVE GROUP EBITDA. — In the case of any international financial reporting group the EBITDA of which is zero or less, paragraph (1) shall not apply to any specified domestic corporation which is a member of such group.

"(ii) NON-POSITIVE ENTITY EBITDA. — In the case of any specified domestic corporation the EBITDA of which is zero or less, the allowable percentage shall be 0 percent.

"(5) APPLICABLE FINANCIAL STATEMENT. — For purposes of this subsection, the term 'applicable financial statement' has the meaning given such term in section 451(b)(3).

"(6) REPORTING YEAR. — For purposes of this subsection, the term 'reporting year' means any year for which an applicable financial statement is prepared or required to be prepared.

"(7) REGULATIONS. — The Secretary may issue such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which —

"(A) allows or requires the adjustment of amounts reported on applicable financial statements,

"(B) allows or requires any corporation to be included or excluded as a member of any international financial reporting group for purposes of any determination or calculation under this subsection,

"(C) treats interest income of a controlled foreign corporation which is subpart F income, and any interest expense of such corporation which is related to subpart F income, as income and interest expense, respectively, of a specified domestic corporation for purposes of this subsection,

"(D) prevents the omission, inclusion, or duplication of any item or amount of interest income or interest expense, and

"(E) provides rules for the application of this subsection with respect to —

"(i) a domestic corporation that is a partner (directly or indirectly) in a partnership,

"(ii) a domestic corporation that owns (directly or indirectly) an interest in an entity that is fiscally transparent in one or more jurisdictions, and

"(iii) a foreign corporation to which this subsection applies by reason of paragraph (2)(C).".

(b) MODIFICATION OF APPLICATION OF LIMITATION ON BUSINESS INTEREST TO PARTNERSHIPS AND S CORPORATIONS. —

(1) IN GENERAL. — Section 163(j)(4) is amended to read as follows:

"(4) APPLICATION TO PARTNERSHIPS AND S CORPORATIONS. —

"(A) IN GENERAL. — In the case of any partnership or S corporation, this subsection shall be applied at the partner or shareholder level, respectively.

"(B) APPLICATION OF EXEMPTION FOR CERTAIN SMALL BUSINESSES. — In the case of any partnership or S corporation which does not meet the gross receipts test of section 448(c) for any taxable year, paragraph (3) shall not apply with respect to any distributive, or pro rata, share of business interest and other items under this subsection of such partnership or S corporation.

"(C) REGULATIONS. — The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance —

"(i) for requiring or restricting the allocation of business interest and other items under this subsection,

"(ii) to provide for such reporting requirements as the Secretary determines appropriate, and

"(iii) for the application of this subsection in the case of tiered structures or trades or businesses described in paragraph (7).".

(2) CONFORMING AMENDMENT. — Section 163(j)(3) is amended by inserting "except to the extent provided in paragraph (4)(B)" after "to such taxpayer for such taxable year".

(c) CARRYFORWARD OF DISALLOWED INTEREST. —

(1) IN GENERAL. — Section 163 is amended by inserting after subsection (n), as added by subsection (a), the following new subsection:

"(o) CARRYFORWARD OF CERTAIN DISALLOWED INTEREST. — The amount of any interest not allowed as a deduction for any taxable year by reason of subsection (j) or (n)(1) (whichever imposes the lower limitation with respect to such taxable year) shall be treated as interest (and as business interest for purposes of subsection (j) to the extent such amount is properly attributable to a trade or business as defined in subsection (j)(7)) paid or accrued in the succeeding taxable year.".

(2) CONFORMING AMENDMENTS. —

(A) Section 163(j)(2) is amended to read as follows:

"(2) CARRYFORWARD CROSS-REFERENCE. — For carryforward treatment, see subsection (o).".

(B) Section 381(c)(20) is amended to read as follows:

"(20) CARRYFORWARD OF DISALLOWED INTEREST. — The carryover of disallowed interest described in section 163(o) to taxable years ending after the date of distribution or transfer.".

(C) Section 382(d)(3) is amended to read as follows:

"(3) APPLICATION TO CARRYFORWARD OF DISALLOWED INTEREST. — The term 'pre-change loss' shall include any carryover of disallowed interest described in section 163(o) under rules similar to the rules of paragraph (1).".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2022.

(e) TRANSITION RULE. — In the case of a partner's first succeeding taxable year described in subclause (II) of section 163(j)(4)(B)(ii) of the Internal Revenue Code of 1986 (as in effect before the amendment made by subsection (b)) which begins after December 31, 2022, the amount of excess business interest which would (but for such amendment) be carried to such taxable year under such subclause shall be treated as interest (and as business interest for purposes of section 163(j) of such Code, as amended by this section) paid or accrued in such taxable year. A rule similar to the rule in the preceding sentence shall apply in the case of an S corporation and its shareholders. For carryover of any such interest disallowed for such taxable year, see section 163(o) of such Code, as amended by this section.

Subpart C — Outbound International Provisions

SEC. 138121. MODIFICATIONS TO DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE LOW-TAXED INCOME.

(a) IN GENERAL. — Section 250(a) is amended to read as follows:

"(a) IN GENERAL. — In the case of a domestic corporation for any taxable year, there shall be allowed as a deduction an amount equal to the sum of —

"(1) 24.8 percent of the foreign-derived intangible income of such domestic corporation for such taxable year, plus

"(2) 28.5 percent of —

"(A) the global intangible low-taxed income (if any) which is included in the gross income of such domestic corporation under section 951A for such taxable year, and

"(B) the amount treated as a dividend received by such corporation under section 78 which is attributable to the amount described in subparagraph (A).".

(b) DEDUCTION TAKEN INTO ACCOUNT IN DETERMINING NET OPERATING LOSS DEDUCTION. — Section 172(d) is amended by striking paragraph (9).

(c) CERTAIN OTHER MODIFICATIONS. —

(1) Section 250(b)(3) is amended —

(A) in subparagraph (A)(i) —

(i) by striking "and" at the end of subclause (V),

(ii) by striking "over" at the end of subclause (VI), and

(iii) by adding at the end the following new subclauses:

"(VII) any income described in clause (i) or (ii) of section 904(d)(2)(B), determined without regard to clause (iii)(II) thereof,

"(VIII) except as otherwise provided by the Secretary, any income and gain from the sale or other disposition (including the deemed sale or other deemed disposition) of property giving rise to rents or royalties derived in the active conduct of a trade or business, and

"(IX) any disqualified extraterritorial income, over", and

(B) by adding at the end the following new subparagraph:

"(C) DISQUALIFIED EXTRATERRITORIAL INCOME. —

"(i) IN GENERAL. — For purposes of subparagraph (A)(i)(IX), the term 'disqualified extraterritorial income' means any amount included in the gross income of the corporation with respect to any transaction for any taxable year if any amount could (determined after application of clause (ii) but without regard to any election under section 942(a)(3) as in effect before its repeal) be excluded from the gross income of the corporation with respect to such transaction for such taxable year by reason of section 114 pursuant to the application of subsection (d) or (f) of section 101 of the American Jobs Creation Act of 2004.

"(ii) ELECTION OUT OF EXTRATERRITORIAL INCOME BENEFITS. —

"(I) IN GENERAL. — Except as provided in subclause (II), the corporation referred to in clause (i) may make an irrevocable election (at such time and in such form and manner as the Secretary may provide) to have subsections (d) and (f) of section 101 of the American Jobs Creation Act of 2004 not apply with respect to such corporation for the taxable year for which such election is made and all succeeding taxable years (applicable with respect to all transactions, including transactions occurring before such taxable year).

"(II) EXPANDED AFFILIATED GROUPS. — In the case of any corporation which is a member of an expanded affiliated group, the election described in subclause (I) may be made only by the common parent of such group (or, in the case of a common parent which is not required to file a return of tax under this chapter, the delegate of such common parent) and shall apply with respect to all members of such group. For purposes of the preceding sentence, the term 'expanded affiliated group' means an affiliated group as defined in section 1504(a), determined without regard to section 1504(b)(3) and by substituting 'more than 50 percent' for 'at least 80 percent' each place it appears.".

(C) Section 250(b)(5)(E) is amended by inserting "(other than paragraph (3)(A)(i)(VIII))" after "For purposes of this subsection".

(2) Section 613A(d)(1) is amended by striking "and" at the end of subparagraph (D), by striking the period at the end of subparagraph (E) and inserting ", and", and by inserting after subparagraph

(E) the following new subparagraph:

"(F) any deduction allowable under section 250.".

(d) EFFECTIVE DATE. —

(1) IN GENERAL. — Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2022.

(2) CERTAIN MODIFICATIONS. — The amendments made by subsection (c) shall apply to taxable years beginning after the date of the enactment of this Act.

(e) NO INFERENCE REGARDING CERTAIN MODIFICATIONS. — The amendments made by subsection (c) shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to any taxable year beginning before the taxable years to which such amendments apply.

(f) TRANSITION RULE FOR ACCELERATED PERCENTAGE REDUCTION. —

(1) IN GENERAL. — In the case of any taxable year which includes December 31, 2022 (other than a taxable year with respect to which such date is the last day of such taxable year) —

(A) the percentage in effect under section 250(a)(1)(A) of the Internal Revenue Code of 1986 shall be treated as being equal to the sum of —

(i) the pre-effective date percentage of 37.5 percent, plus

(ii) the post-effective date percentage of 24.8 percent, and

(B) the percentage in effect under section 250(a)(1)(B) of such Code shall be treated as being equal to the sum of —

(i) the pre-effective date percentage of 50 percent, plus

(ii) the post-effective date percentage of 28.5 percent.

(2) PRE- AND POST-EFFECTIVE DATE PERCENTAGES. — For purposes of this subsection, with respect to any taxable year —

(A) the term "pre-effective date percentage" means the ratio that the number of days in such taxable year which are before January 1, 2023, bears to the number of days in such taxable year, and

(B) the term "post-effective date percentage" means the ratio that the number of days in such taxable year which are after December 31, 2022, bears to the number of days in such taxable year.

SEC. 138122. REPEAL OF ELECTION FOR 1-MONTH DEFERRAL IN DETERMINATION OF TAXABLE YEAR OF SPECIFIED FOREIGN CORPORATIONS.

(a) IN GENERAL. — Section 898(c) is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years of specified foreign corporations beginning after November 30, 2022.

(c) TRANSITION RULE. — In the case of a corporation that is a specified foreign corporation as of November 30, 2022, such corporation's first taxable year beginning after such date shall end at the same time as the first required year (within the meaning of section 898(c)(1) of the Internal Revenue Code of 1986) ending after such date. If any specified foreign corporation is required by this section (or the amendments made by this section) to change its taxable year for its first taxable year beginning after November 30, 2022 —

(1) such change shall be treated as initiated by such corporation,

(2) such change shall be treated as having been made with the consent of the Secretary, and

(3) the Secretary (including the Secretary's delegate in the case of any reference to the Secretary in this paragraph) shall issue regulations or other guidance for allocating foreign taxes that accrue in such first taxable year between such taxable year and the prior taxable year, including such adjustments as the Secretary determines are necessary or appropriate to carry out the purposes of this section.

SEC. 138123. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE TO CERTAIN TAXPAYERS RECEIVING SPECIFIC ECONOMIC BENEFITS.

(a) IN GENERAL. — Section 901 is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection:

"(n) SPECIAL RULES RELATING TO DUAL CAPACITY TAXPAYERS. —

"(1) GENERAL RULE. — Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer to a foreign country or possession of the United States for any period shall not be considered a tax —

"(A) if, for such period, the foreign country or possession does not impose a generally applicable income tax, or

"(B) to the extent such amount exceeds the amount which would be paid or accrued by such dual capacity taxpayer under the generally applicable income tax imposed by such country or possession if such taxpayer were not a dual capacity taxpayer.

Nothing in this paragraph shall be construed to imply the proper treatment of any such amount not in excess of the amount determined under subparagraph (B).

"(2) DUAL CAPACITY TAXPAYER. — For purposes of this subsection, the term 'dual capacity taxpayer' means, with respect to any foreign country or possession of the United States, a person who —

"(A) is subject to a levy of such country or possession, and

"(B) receives (or will receive) directly or indirectly a specific economic benefit from such country or possession (or any political subdivision, agency, or instrumentality thereof).

"(3) GENERALLY APPLICABLE INCOME TAX. — For purposes of this subsection, the term 'generally applicable income tax' means an income tax (or a series of income taxes) which is generally imposed under the laws of a foreign country or possession of the United States on residents of such foreign country or possession that are not dual capacity taxpayers.".

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to amounts paid or accrued after December 31, 2021.

SEC. 138124. MODIFICATIONS TO FOREIGN TAX CREDIT LIMITATIONS.

(a) COUNTRY-BY-COUNTRY APPLICATION OF LIMITATION ON FOREIGN TAX CREDIT BASED ON TAXABLE UNITS. —

(1) IN GENERAL. — Section 904 is amended by inserting after subsection (d) the following new subsection:

"(e) COUNTRY-BY-COUNTRY APPLICATION BASED ON TAXABLE UNITS. —

"(1) IN GENERAL. — Subsection (d) (and the provisions of this title referred to in paragraph (1) of such subsection) shall be applied separately with respect to each country by taking into account the aggregate income properly attributable or otherwise allocable to a taxable unit of the taxpayer which is a tax resident of (or, in the case of a branch, is located in) such country.

"(2) TAXABLE UNITS. —

"(A) IN GENERAL. — Except as otherwise provided by the Secretary, each item shall be attributable or otherwise allocable to exactly one taxable unit of the taxpayer.

"(B) DETERMINATION OF TAXABLE UNITS. — Except as otherwise provided by the Secretary, the taxable units of a taxpayer are as follows:

"(i) GENERAL TAXABLE UNIT. — The person that is the taxpayer and that is not otherwise described in a separate clause of this subparagraph.

"(ii) CERTAIN FOREIGN CORPORATIONS. — Each foreign corporation with respect to which the taxpayer is a United States shareholder.

"(iii) INTERESTS IN PASS-THROUGH ENTITIES. — Each interest held (directly or indirectly) by the taxpayer or any controlled foreign corporation referred to in clause (ii) in a pass-through entity if such pass-through entity is a tax resident of a country other than the country with respect to which such taxpayer or controlled foreign corporation (as the case may be) is a tax resident.

"(iv) BRANCHES. — Each branch (or portion thereof) the activities of which are directly or indirectly carried on by the taxpayer or any controlled foreign corporation referred to in clause (ii) and which give rise to a taxable presence in a country other than the country with respect to which such taxpayer or controlled foreign corporation (as the case may be) is a tax resident.

"(3) DEFINITIONS AND SPECIAL RULES. — For purposes of this subsection —

"(A) TAX RESIDENT. — Except as otherwise provided by the Secretary, the term 'tax resident' means a person or entity subject to tax under the tax law of a country as a resident. If an entity is organized under the law of a country, or resident in a country, that does not impose an income tax with respect to such entities, such entity shall, except as provided by the Secretary, be treated as subject to tax under the tax law of such country for the purposes of the preceding sentence.

"(B) PASS-THROUGH ENTITY. — Except as otherwise provided by the Secretary, the term 'pass-through entity' includes any partnership or other entity to the extent that income, gain, deduction, or loss of the entity is taken into account in determining the income or loss of a person that owns (directly or indirectly) an interest in such entity.

"(C) BRANCH. — Except as otherwise provided by the Secretary, the term 'branch' means a taxable presence of a tax resident in a country other than its country of residence as determined under such other country's tax law. The Secretary shall provide regulations or other guidance applying such term to activities in a country that do not give rise to a taxable presence.

"(D) TREATMENT OF FISCALLY AUTONOMOUS JURISDICTIONS. — Any fiscally autonomous jurisdiction shall be treated as a separate country. Any possession of the United States shall also be treated as a separate country.

"(E) POSSESSION OF THE UNITED STATES. — The term 'possession of the United States' means each of American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the Virgin Islands.

"(4) REGULATIONS. — The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out, or prevent avoidance of, the purposes of this subsection, including regulations or other guidance —

"(A) providing for the application of this subsection to an entity or arrangement that is considered a tax resident of more than one country or of no country,

"(B) providing for the application of this subsection to hybrid entities or hybrid transactions (as such terms are used for purposes of section 267A), pass-through entities, passive foreign investment companies, trusts, and other entities or arrangements not otherwise described in this subsection, and

"(C) providing for the assignment of any item (including foreign taxes and deductions) to taxable units, including in the case of amounts not otherwise taken into account in determining taxable income under this chapter.".

(2) APPLICATION OF SEPARATE LIMITATION LOSSES WITH RESPECT TO GLOBAL INTANGIBLE LOW-TAXED INCOME. —

(A) IN GENERAL. — Section 904(f)(5)(B) is amended to read as follows:

"(B) ALLOCATION OF LOSSES. — Except as otherwise provided in this subparagraph, the separate limitation losses for any taxable year (to the extent such losses do not exceed the separate limitation incomes for such year) shall be allocated among (and operate to reduce) such incomes on a proportionate basis. In the case of a separate limitation loss for any taxable year in any category other than subparagraph (d)(1)(A), the amount of such separate limitation loss shall be allocated among (and operate to reduce) separate limitation income in any category other than income described in subparagraph (d)(1)(A) on a proportionate basis (without regard to income described in subparagraph (d)(1)(A)). The remaining separate limitation losses may reduce separate limitation income described in subparagraph (d)(1)(A) only to the extent that the aggregate amount of such losses exceeds the aggregate amount of separate limitation incomes (other than income described in subparagraph (d)(1)(A)) for such taxable year.".

(B) INCOME CATEGORY. — Section 904(f)(5)(E)(i) is amended to read as follows:

"(i) INCOME CATEGORY. — The term 'income category' means each category of income with respect to which this section is required to be applied separately by reason of any provision of this title.".

(C) SEPARATE LIMITATION LOSS. — Section 904(f)(5)(E)(iii) is amended to read as follows:

"(iii) SEPARATE LIMITATION LOSS. — The term 'separate limitation loss' means, with respect to any income category, the amount by which the gross income from sources outside the United States is exceeded by the sum of the deductions properly allocated and apportioned thereto.".

(b) REPEAL OF SEPARATE APPLICATION TO FOREIGN BRANCH INCOME. —

(1) IN GENERAL. — Section 904(d)(1) is amended by striking subparagraph (B) and redesignating subparagraphs (C) and (D) as subparagraph (B) and (C).

(2) COORDINATION WITH DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME. — Section 250(b)(3)(A) is amended —

(A) by striking subclause (VI) of clause (i) and inserting the following new subclause:

"(VI) the income which is attributable to 1 or more branches (within the meaning of section 904(e)(3)(C)) or pass-through entities (within the meaning of section 904(e)(3)(B)) in 1 or more foreign countries, over", and

(B) by adding at the end the following flush sentence:

"For purposes of clause (i)(VI), the amount of income attributable to a branch or pass-through entity shall be determined under rules established by the Secretary.".

(3) AMENDMENTS. —

(A) Section 904(d)(2)(A)(ii) is amended by striking ", foreign branch income,".

(B) Section 904(d)(2)(H) is amended to read as follows:

"(H) TREATMENT OF INCOME TAX BASE DIFFERENCES. — The Secretary shall issue regulations or other guidance assigning to the proper category of income any tax imposed under the law of a foreign country or possession of the United States on an amount which does not constitute income under United States tax principles.".

(C) Section 904(d)(2) is amended by striking subparagraph (J).

(c) MODIFICATION OF FOREIGN TAX CREDIT CARRYBACK AND CARRYFORWARD. —

(1) REPEAL OF CARRYBACK. — Section 904(c) is amended —

(A) by striking "in the first preceding taxable year, and",

(B) by striking "preceding or" each place it appears, and

(C) by striking "CARRYBACK AND" in the heading thereof.

(2) APPLICATION TO LIMITATION ON FOREIGN OIL AND GAS TAXES. — Section 907(f)(1) is amended by striking "in the first preceding taxable year and".

(3) APPLICATION OF CARRYFORWARD TO TAXES ON GLOBAL INTANGIBLE LOW-TAXED INCOME. —

(A) IN GENERAL. — Section 904(c) is amended by striking the last sentence.

(B) TEMPORARY LIMITATION OF CARRYFORWARD TO 5 TAXABLE YEARS. — Section 904(c), as amended by the preceding provisions of this Act, is amended —

(i) by striking "Any amount by which all taxes" and all that precedes it and inserting the following:

"(c) CARRYBACK AND CARRYOVER OF EXCESS TAX PAID. —

"(1) IN GENERAL. — Any amount by which all taxes", and

(ii) by adding at the end the following new paragraph:

"(2) TEMPORARY LIMITATION ON CARRYFORWARD OF TAXES ON GLOBAL INTANGIBLE LOW-TAXED INCOME. —

"(A) IN GENERAL. — In the case of taxes paid or accrued with respect to amounts described in subsection (d)(1)(A), paragraph (1) shall be applied by substituting '5 succeeding taxable years' for '10 succeeding taxable years'.

"(B) TERMINATION. — Subparagraph (A) shall not apply to any tax paid or accrued in a taxable year beginning after December 31, 2030.".

(d) TREATMENT OF CERTAIN TAX-EXEMPT DIVIDENDS. —

(1) CERTAIN TAX-EXEMPT DIVIDENDS TAKEN INTO ACCOUNT IN APPLYING LIMITATIONS ON FOREIGN TAX CREDITS. — Section 904(b) is amended by striking paragraph (4).

(2) CERTAIN TAX-EXEMPT DIVIDENDS NOT TAKEN INTO ACCOUNT IN ALLOCATING INTEREST EXPENSE. — Section 864(e)(3) is amended by striking "or 245(a)" and inserting ", 245(a), or 245A".

(e) RULES FOR ALLOCATION OF CERTAIN DEDUCTIONS TO FOREIGN SOURCE GLOBAL INTANGIBLE LOW-TAXED INCOME FOR PURPOSES OF FOREIGN TAX CREDIT LIMITATION. — Section 904(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(4) DEDUCTIONS TREATED AS ALLOCABLE TO FOREIGN SOURCE GLOBAL INTANGIBLE LOW-TAXED INCOME. — In the case of a domestic corporation and solely for purposes of the application of subsection

(a) with respect to amounts described in subsection (d)(1)(A), the taxpayer's taxable income from sources without the United States shall be determined —

"(A) by allocating and apportioning any deduction allowed under section 250(a)(2) (and any deduction allowed under section 164(a)(3) for taxes imposed on amounts described in section 250(a)(2)) to such income, and

"(B) by allocating and apportioning any other deduction to such income only if the Secretary determines that such deduction is directly allocable to such income.

Any deduction which would (but for subparagraph (B)) have been allocated or apportioned to such income shall only be allocated or apportioned to income which is from sources within the United States.".

(f) TREATMENT OF CERTAIN ASSET DISPOSITIONS. — Section 904(b), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:

"(5) TREATMENT OF CERTAIN ASSET DISPOSITIONS. —

"(A) IN GENERAL. — Except as otherwise provided by the Secretary, in the case of any covered asset disposition, the principles of section 338(h)(16) shall apply in determining the source and character of any item for purposes of this part.

"(B) COVERED ASSET DISPOSITION. — For purposes of this paragraph, the term 'covered asset disposition' means any transaction which —

"(i) is treated as a disposition of assets under subchapter N of this chapter, and

"(ii) is treated as a disposition of stock of a corporation (or is disregarded) for purposes of the tax laws of a relevant foreign country or possession of the United States.

"(C) REGULATIONS. — The Secretary shall issue such regulations or other guidance as is necessary or appropriate to carry out, or to prevent the avoidance of, the purposes of this paragraph.".

(g) REDETERMINATION OF FOREIGN TAXES AND RELATED CLAIMS. —

(1) IN GENERAL. — Section 905(c) is amended —

(A) in paragraph (1), by striking "or" at the end of subparagraph (B) and by inserting after subparagraph (C) the following new subparagraphs:

"(D) the taxpayer makes a timely change in its choice to claim a credit or deduction for taxes paid or accrued, or

"(E) there is any other change in the amount, or treatment, of taxes, which affects the taxpayer's tax liability under this chapter,",

(B) in paragraph (2)(B), by striking "Any such taxes" and inserting "Except as otherwise provided by the Secretary, any such taxes", and

(C) by striking "ACCRUED" in the heading thereof.

(2) MODIFICATION TO TIME FOR CLAIMING CREDIT OR DEDUCTION. — Section 901(a) is amended by striking the second sentence and inserting the following: " Such choice for any taxable year may be made or changed at any time before the expiration of the applicable period prescribed by section 6511 for making a claim for credit or refund of an overpayment of the tax imposed by this chapter for such taxable year that is attributable to such amounts.".

(3) MODIFICATION TO SPECIAL PERIOD OF LIMITATION. — Section 6511(d)(3) is amended —

(A) in subparagraph (A) —

(i) by inserting "a change in the liability for" before "any taxes paid or accrued",

(ii) by striking "actually paid" and inserting "paid (or deemed paid under section 960)", and

(iii) by inserting "CHANGE IN THE LIABILITY FOR" before "FOREIGN TAXES" in the heading thereof, and

(B) in subparagraph (B), by striking "the allowance of a credit for the taxes" and inserting "the allowance of an additional credit by reason of the change in liability for the taxes".

(h) EFFECTIVE DATES. —

(1) IN GENERAL. — Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2022.

(2) MODIFICATION OF FOREIGN TAX CREDIT CARRYBACK AND CARRYFORWARD. — The amendments made by subsection (c) shall apply to taxes paid or accrued in taxable years beginning after December 31, 2022.

(3) TREATMENT OF CERTAIN ASSET DISPOSITIONS. —

(A) IN GENERAL. — The amendment made by subsection (f) shall apply to transactions after the date of the enactment of this Act.

(B) BINDING CONTRACT EXCEPTION. — The amendment made by subsection (f) shall not apply to any transaction which is made pursuant to a written binding contract which was in effect on September 13, 2021, and is not modified in any material respect thereafter.

(4) REDETERMINATION OF FOREIGN TAXES AND RELATED CLAIMS. —

(A) IN GENERAL. — Except as otherwise provided in this paragraph, the amendments made by subsection (g) shall apply to taxes paid or accrued in taxable years beginning after December 31, 2021.

(B) CERTAIN CHANGES. — The amendments made by subparagraphs (A) and (C) of subsection (g)(1) shall apply to changes that occur on or after the date which is 60 days after the date of the enactment of this Act.

(C) MODIFICATION TO SPECIAL PERIOD OF LIMITATION. — The amendments made by subsection (g)(3) shall apply to taxes paid, accrued, or deemed paid in taxable years beginning after December 31, 2021.

(i) REGULATIONS. — The Secretary shall issue regulations or other guidance providing for the application of subsections (d), (e), (f), and (g) of section 904 of the Internal Revenue Code of 1986 (as amended by this section) with respect to amounts carried over under subsections (c), (f), or (g) from a taxable year with respect to which subsection (e) of such section does not apply to a taxable year with respect to which such subsection (e) does apply and from a taxable year with respect to which subsection (d)(1)(B) of such section (determined without regard to the amendments made by this section) applies to a taxable year with respect to which such section does not apply.

SEC. 138125. FOREIGN OIL AND GAS EXTRACTION INCOME AND FOREIGN OIL RELATED INCOME TO INCLUDE OIL SHALE AND TAR SANDS.

(a) IN GENERAL. — Paragraphs (1)(A) and (2)(A) of section 907(c) are each amended by inserting "(or oil shale or tar sands)" after "oil or gas wells".

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138126. MODIFICATIONS TO INCLUSION OF GLOBAL INTANGIBLE LOW-TAXED INCOME.

(a) COUNTRY-BY-COUNTRY APPLICATION OF SECTION BASED ON CFC TAXABLE UNITS. — Section 951A is amended by adding at the end the following new subsection:

"(g) COUNTRY-BY-COUNTRY APPLICATION OF SECTION BASED ON CFC TAXABLE UNITS. —

"(1) IN GENERAL. — If any CFC taxable unit of a United States shareholder is a tax resident of (or, in the case of a branch, is located in) a country which is different from the country with respect to which any other CFC taxable unit of such United States shareholder is a tax resident (or, in the case of a branch, is located in) —

"(A) such shareholder's global intangible low-taxed income for purposes of subsection (a) shall be the sum of the amounts of global intangible low-taxed income determined separately with respect to each such country, and

"(B) for purposes of determining such separate amounts of global intangible low-taxed income —

"(i) except as otherwise provided by the Secretary, any reference in subsection (b), (c), or (d) to a controlled foreign corporation of such shareholder shall be treated as reference to a CFC taxable unit of such shareholder, and

"(ii) net CFC tested income, net deemed tangible income return, qualified business asset investment, interest expense described in subsection (b)(2)(B), and such other items and amounts as the Secretary may provide, shall be determined separately with respect to each such country by determining such amounts with respect to the CFC taxable units of such shareholder which are a tax resident of such country.

"(2) DEFINITIONS. — For purposes of this subsection —

"(A) CFC TAXABLE UNIT. — The term 'CFC taxable unit' means any taxable unit described in clause (ii), (iii), or (iv) of section 904(e)(2)(B), determined —

"(i) by substituting 'Each controlled foreign corporation' for 'Each foreign corporation' in clause (ii) of such section, and

"(ii) without regard to the references to the taxpayer in clauses (iii) and (iv) of such section.

"(B) APPLICATION OF OTHER DEFINITIONS. — Terms used in this subsection which are also used in section 904(e) shall have the same meaning as when used in section 904(e).

"(3) SPECIAL RULES. — For purposes of this subsection —

"(A) APPLICATION OF CERTAIN RULES. — Except as otherwise provided by the Secretary, rules similar to the rules of section 904(e) shall apply.

"(B) ALLOCATION OF GLOBAL INTANGIBLE LOW-TAXED INCOME TO CONTROLLED FOREIGN CORPORATIONS. — Except as otherwise provided by the Secretary, subsection (f)(2) shall be applied separately with respect to each CFC taxable unit.".

(b) REGULATORY AUTHORITY. —

(1) IN GENERAL. — Section 951A, as amended by subsection (a), is amended by adding at the end the following new subsection:

"(h) REGULATIONS. — The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out, or prevent the avoidance of, the purposes of this section, including regulations or guidance which provide for —

"(1) the treatment of property if such property is transferred, or held, temporarily,

"(2) the treatment of property if the avoidance of the purposes of this section is a factor in the transfer or holding of such property,

"(3) appropriate adjustments to the basis of stock and other ownership interests, and to earnings and profits, to reflect tested losses (whether or not taken into account in determining global intangible low-taxed income),

"(4) rules similar to the rules provided under the regulations or guidance issued under section 904(e)(4),

"(5) other appropriate basis adjustments,

"(6) appropriate adjustments to be made, and appropriate tax attributes and records to be maintained, separately with respect to CFC taxable units, and

"(7) appropriate adjustments in determining tested income or tested loss if property is transferred between related parties or amounts are paid or accrued between related parties.".

(2) CONFORMING AMENDMENT. — Section 951A(d) is amended —

(A) by striking paragraph (4), and

(B) by redesignating the second paragraph (3) (relating to partnership property) as paragraph (4).

(c) CARRYOVER OF NET CFC TESTED LOSS. —

(1) IN GENERAL. — Section 951A(c) is amended by adding at the end the following new paragraph:

"(3) CARRYOVER OF NET CFC TESTED LOSS. —

"(A) IN GENERAL. — If the amount described in paragraph (1)(B) with respect to any United States shareholder for any taxable year of such United States shareholder (determined after the application of this paragraph with respect to amounts arising in preceding taxable years) exceeds the amount described in paragraph (1)(A) with respect to such shareholder of such taxable year, the amount otherwise described in paragraph (1)(B) with respect to such shareholder for the succeeding taxable year shall be increased by the amount of such excess.

"(B) PROPER ADJUSTMENT IN ALLOCATIONS OF GLOBAL INTANGIBLE LOW-TAXED INCOME TO CONTROLLED FOREIGN CORPORATIONS. — Proper adjustments shall be made in the application of subsection (f)(2)(B) to take into account any decrease in global intangible low-taxed income by reason of the application of subparagraph (A).".

(2) COORDINATION WITH COUNTRY-BY-COUNTRY APPLICATION. — Section 951A(g)(1)(B)(ii), as added by subsection (a), is amended by inserting "any increase determined under subsection (c)(3)(A)," after "interest expense described in subsection (b)(2)(B),".

(3) APPLICATION OF RULES WITH RESPECT TO OWNERSHIP CHANGES. — Section 382(d) is amended by adding at the end the following new paragraph:

"(4) APPLICATION TO CARRYOVER OF NET CFC TESTED LOSS. — The term 'pre-change loss' shall include any excess carried over under section 951A(c)(3) under rules similar to the rules of paragraph (1).".

(d) REDUCTION IN NET DEEMED TANGIBLE INCOME RETURN FOR PURPOSES OF DETERMINING GLOBAL INTANGIBLE LOW-TAXED INCOME. —

(1) IN GENERAL. — Section 951A(b)(2)(A) is amended by striking "10 percent" and inserting "5 percent".

(2) APPLICATION TO ASSETS LOCATED IN POSSESSIONS OF THE UNITED STATES. — Section 951A(b) is amended by adding at the end the following new paragraph:

"(3) APPLICATION TO ASSETS LOCATED IN POSSESSIONS OF THE UNITED STATES. — In the case of any specified tangible property located in a possession of the United States, paragraph (2)(A) and subsection (d) shall be applied by substituting '10 percent' for '5 percent' in paragraph (2)(A).".

(e) INCLUSION OF FOREIGN OIL AND GAS EXTRACTION INCOME IN DETERMINING TESTED INCOME AND LOSS. — Section 951A(c)(2)(A)(i) is amended by inserting "and" at the end of subclause (III), by striking "and" at the end of subclause (IV) and inserting "over", and by striking subclause (V).

(f) COORDINATION WITH OTHER PROVISIONS. — Section 951A(f)(1) is amended by adding at the end the following new subparagraph:

"(C) TREATMENT OF CERTAIN REFERENCES. — Except as otherwise provided by the Secretary, references to section 951 or section 951(a) in sections 959, 961, 962, and such other provisions as the Secretary may identify shall include references to section 951A or section 951A(a), respectively.".

(g) EFFECTIVE DATE. —

(1) IN GENERAL. — Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2022, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.

(2) REGULATORY AUTHORITY AND COORDINATION WITH OTHER PROVISIONS. — The amendments made by subsections (b) and (f) 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 in which or with which such taxable years of foreign corporations end.

(h) NO INFERENCE REGARDING CERTAIN MODIFICATIONS. — The amendments made by subsections (b) and (f) shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to any taxable year beginning before the taxable years to which such amendments apply.

SEC. 138127. MODIFICATIONS TO DETERMINATION OF DEEMED PAID CREDIT FOR TAXES PROPERLY ATTRIBUTABLE TO TESTED INCOME.

(a) INCREASE IN DEEMED PAID CREDIT. — Section 960(d)(1) is amended by striking "80 percent" and inserting "95 percent (100 percent in the case of tested foreign income taxes paid or accrued to a possession of the United States)".

(b) INCLUSION OF TAXES PROPERLY ATTRIBUTABLE TO TESTED LOSS. —

(1) IN GENERAL. — Section 960(d)(3) is amended to read as follows:

"(3) TESTED FOREIGN INCOME TAXES. — For purposes of paragraph (1), the term 'tested foreign income taxes' means, with respect to any domestic corporation which is a United States shareholder of a controlled foreign corporation —

"(A) the foreign income taxes paid or accrued by such foreign corporation which are properly attributable to the tested income or tested loss of such foreign corporation taken into account by such domestic corporation under section 951A, and

"(B) solely to the extent provided in regulations prescribed by the Secretary, the foreign income taxes (as so defined) paid or accrued by a foreign corporation (other than a controlled foreign corporation) which owns, directly or indirectly, 80 percent or more (by vote or value) of the stock in such domestic corporation but only if —

"(i) such foreign income taxes are properly attributable to amounts of such controlled foreign corporation taken into account in determining tested income or tested loss under section 951A(c)(2), and

"(ii) no credit is allowed, in whole or in part, for such foreign taxes in any foreign jurisdiction.".

(2) CONFORMING AMENDMENT. — Section 960(d)(2)(B) is amended by striking "the aggregate amount described in section 951A(c)(1)(A)" and inserting "the net CFC tested income (as defined in section 951A(c)(1))".

(c) APPLICATION OF FOREIGN TAX CREDIT LIMITATION TO AMOUNTS INCLUDED UNDER SECTION 78. —

(1) Section 904(d)(2) is amended by redesignating subparagraph (K) as subparagraph (L) and by inserting after subparagraph (J) the following new subparagraph:

"(K) AMOUNTS INCLUDIBLE UNDER SECTION 78. — Any amount includible in gross income under section 78 shall be treated as income in the same separate category as the related foreign taxes deemed paid.".

(2) Section 904(d)(3)(G) is amended by striking the second sentence and inserting the following: "Any amount included in gross income under section 78 shall not be treated as a dividend.".

(d) DISALLOWANCE OF FOREIGN TAX CREDIT WITH RESPECT TO DISTRIBUTIONS OF PREVIOUSLY TAXED GLOBAL INTANGIBLE LOW-TAXED INCOME. — Section 960(d) is amended by adding at the end the following new paragraph:

"(4) DISALLOWANCE OF FOREIGN TAX CREDIT WITH RESPECT TO DISTRIBUTIONS OF PREVIOUSLY TAXED GLOBAL INTANGIBLE LOW-TAXED INCOME. — No credit shall be allowed under section 901 for 20 percent of any foreign income taxes paid or accrued (or deemed paid under section 960(b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a).".

(e) MODIFICATION OF DISALLOWANCE OF FOREIGN TAX CREDIT RESPECT TO DISTRIBUTIONS OF PREVIOUSLY TAXED GLOBAL INTANGIBLE LOW-TAXED INCOME. — Section 960(d)(4), as added by subsection (d), is amended by striking "20 percent" and inserting "5 percent".

(f) EFFECTIVE DATE. —

(1) IN GENERAL. — Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2022, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.

(2) SUBSECTIONS (c) AND (d). — The amendments made by subsections (c) and (d) 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 in which or with which such taxable years of foreign corporations end.

(g) NO INFERENCE REGARDING CERTAIN MODIFICATIONS. — The amendments made by subsections (c) and

(d) shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to any taxable year beginning before the taxable years to which such amendments apply.

SEC. 138128. DEDUCTION FOR FOREIGN SOURCE PORTION OF DIVIDENDS LIMITED TO CONTROLLED FOREIGN CORPORATIONS, ETC.

(a) IN GENERAL. — Section 245A is amended —

(1) in subsections (a), (c)(1), and (c)(2), by striking "specified 10-percent owned foreign corporation" each place it appears and inserting "controlled foreign corporation", and

(2) by striking subsection (b).

(b) MODIFICATIONS RELATED TO DETERMINATION OF STATUS AS A CONTROLLED FOREIGN CORPORATION. —

(1) Subpart F of part III of subchapter N of chapter 1 is amended by inserting after section 951A the following new section:

"SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF FOREIGN CONTROLLED UNITED STATES SHAREHOLDERS.

"(a) IN GENERAL. — In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation —

"(1) this subpart (other than sections 951A, 951(b), and 957) shall be applied with respect to such shareholder (separately from, and in addition to, the application of this subpart without regard to this section) —

"(A) by substituting 'foreign controlled United States shareholder' for 'United States shareholder' each place it appears therein, and

"(B) by substituting 'foreign controlled foreign corporation' for 'controlled foreign corporation' each place it appears therein, and

"(2) section 951A shall be applied with respect to such shareholder —

"(A) by treating each reference to 'United States shareholder' in such sections as including a reference to such shareholder, and

"(B) by treating each reference to 'controlled foreign corporation' in such sections as including a reference to such foreign controlled foreign corporation.

"(b) FOREIGN CONTROLLED UNITED STATES SHAREHOLDER. — For purposes of this section, the term 'foreign controlled United States shareholder' means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if —

"(1) section 951(b) were applied by substituting 'more than 50 percent' for '10 percent or more', and

"(2) section 958(b) were applied without regard to paragraph (4) thereof.

"(c) FOREIGN CONTROLLED FOREIGN CORPORATION. — For purposes of this section, the term 'foreign controlled foreign corporation' means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a)(1) were applied —

"(1) by substituting 'foreign controlled United States shareholders' for 'United States shareholders', and

"(2) by substituting 'section 958(b) (other than paragraph (4) thereof)' for 'section 958(b)'.

"(d) REGULATIONS. — The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance —

"(1) to treat a foreign controlled United States shareholder or a foreign controlled foreign corporation as a United States shareholder or as a controlled foreign corporation, respectively, for purposes of provisions of this title other than this subpart, and

"(2) to prevent the avoidance of the purposes of this section.".

(2) Section 957(a) is amended to read as follows:

"(a) CONTROLLED FOREIGN CORPORATION. — For purposes of this title —

"(1) IN GENERAL. — The term 'controlled foreign corporation' means any foreign corporation if more than 50 percent of —

"(A) the total combined voting power of all classes of stock of such corporation entitled to vote, or

"(B) the total value of the stock of such corporation, is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation.

"(2) ELECTION TO TREAT A FOREIGN CORPORATION AS A CONTROLLED FOREIGN CORPORATION FOR CERTAIN PURPOSES. —

"(A) IN GENERAL. — In the case of a foreign corporation with respect to which an election is in effect under this paragraph, such foreign corporation shall be treated as a controlled foreign corporation for purposes of this title.

"(B) EXCEPTIONS. — Notwithstanding any other provision of this paragraph, a foreign corporation shall not be treated as a controlled foreign corporation by reason of this paragraph for purposes of any provision of this title if the Secretary determines that treatment of such foreign corporation as a controlled foreign corporation for purposes of such provision would be inconsistent with the purposes of this subchapter.

"(C) ELECTION. —

"(i) BY WHOM. — An election under subparagraph (A) shall be effective only if made by the foreign corporation and by all United States shareholders of such foreign corporation (determined as of the time of such election by such foreign corporation).

"(ii) WITH RESPECT TO WHOM. — Any election under this paragraph, once effective, shall apply to such foreign corporation and to all United States shareholders of such foreign corporation (including any person who becomes a United States shareholder of such foreign corporation after such election takes effect).

"(iii) TIME, MANNER, ETC. — The election under this paragraph shall be made at such time and in such manner as the Secretary may provide and, once effective, may be revoked only with the consent of the Secretary.

"(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 for the application of this paragraph to an acquisition described in section 381(a) with respect to any corporation to which an election under this paragraph applies.".

(3) Section 958(b) is amended —

(A) by inserting after paragraph (3) the following:

"(4) Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.", and

(B) by striking "Paragraph (1)" in the last sentence and inserting "Paragraphs (1) and (4)".

(4) Section 959(b) is amended —

(A) by striking "the earnings and profits of a controlled foreign corporation" and inserting "the earnings and profits of a foreign corporation",

(B) by striking "another controlled foreign corporation" and inserting "a controlled foreign corporation",

(C) by striking "such other controlled foreign corporation" and inserting "such controlled foreign corporation", and

(D) by striking "of such United States shareholder in the controlled foreign corporation" and inserting "of such United States shareholder in the foreign corporation".

(5) The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by inserting after the item relating to section 951A the following new item:

"Sec. 951B. Amounts included in gross income of foreign controlled United States shareholders.".

(c) CERTAIN OTHER MODIFICATIONS. —

(1) Section 245A(e)(4) is amended by striking "an amount received" and all that follows through "for which the controlled foreign corporation received a deduction" and inserting "any dividend received from a controlled foreign corporation for which such controlled foreign corporation received a deduction".

(2) Section 245A(g) is amended to read as follows:

"(g) REGULATIONS. — The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance for —

"(1) the treatment of United States shareholders owning stock of a controlled foreign corporation through a partnership, and

"(2) the denial of all or a portion of the deduction under this section with respect to dividends received from foreign corporations in situations in which —

"(A) any portion of the dividend is out of earnings and profits arising from transactions with related parties which —

"(i) do not occur in the ordinary course of a trade or business, and

"(ii) occur on or after January 1, 2018, and during a taxable year to which section 951A did not apply, or

"(B) a transfer or issuance of stock on or after January 1, 2018, results in a reduction in a United States shareholder's pro rata share of a controlled foreign corporation's subpart F income or tested income (as defined in section 951A).".

(d) CONFORMING AMENDMENTS. —

(1) Section 91 is amended —

(A) in subsection (a), by striking "specified 10-percent owned foreign corporation (as defined in section 245A)" and inserting "controlled foreign corporation", and

(B) in subsection (e), by striking "specified 10-percent owned foreign corporation" and inserting "controlled foreign corporation".

(2)(A) The heading of section 245A is amended by striking "SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS" and inserting "CONTROLLED FOREIGN CORPORATIONS".

(B) The item relating to section 245A in the table of sections for part VIII of subchapter B of chapter 1 is amended by striking "specified 10-percent owned foreign corporations" and inserting "controlled foreign corporations".

(3) Section 246(c)(5) is amended —

(A) in subparagraph (B), by striking "specified 10-percent owned foreign corporation" each place it appears and inserting "controlled foreign corporation", and

(B) by striking "SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION" in the heading and inserting "CONTROLLED FOREIGN CORPORATION".

(4) Section 904 is amended —

(A) in subsection (b)(4), by striking "specified 10-percent owned foreign corporation" both places it appears and inserting "controlled foreign corporation", and

(B) in subsection (d)(2)(E) —

(i) in clause (i)(I), by striking "(as defined in section 245A(b))", and

(ii) by redesignating clause (ii) as clause (iii) and by inserting after clause (i) the following new clause:

"(ii) SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION. — For purposes of this subparagraph —

"(I) IN GENERAL. — The term 'specified 10-percent owned foreign corporation' means any foreign corporation with respect to which any domestic corporation is a United States shareholder with respect to such corporation.

"(II) EXCLUSION OF PASSIVE FOREIGN INVESTMENT COMPANIES. — Such term shall not include any corporation which is a passive foreign investment company (as defined in section 1297) with respect to the shareholder and which is not a controlled foreign corporation.".

(5) Section 909(b) is amended by striking "(as defined in section 245A(b) without regard to paragraph (2) thereof)" and inserting "(as defined in section 904(d)(2)(E)(ii) without regard to subclause (II) thereof)".

(6) Section 961(d) is amended —

(A) by striking "specified 10-percent owned foreign corporation (as defined in section 245A)" and inserting "controlled foreign corporation", and

(B) by striking "SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION" in the heading and inserting "CONTROLLED FOREIGN CORPORATION".

(e) EFFECTIVE DATES. —

(1) IN GENERAL. — Except as otherwise provided in this subsection, the amendments made by this section shall apply to distributions made after the date of the enactment of this Act.

(2) MODIFICATIONS RELATED TO DETERMINATION OF STATUS AS A CONTROLLED FOREIGN CORPORATION. — The amendments made by subsection (b) shall apply to taxable years of foreign corporations beginning after the date of the enactment of this Act, and taxable years of United States persons in which or with which such taxable years of foreign corporations end.

(f) NO INFERENCE REGARDING CERTAIN MODIFICATIONS. — The amendments made by subsections (b)(1), (b)(3), (b)(5), and (c) shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to distributions made, or taxable years beginning, respectively, before the distributions or taxable years, respectively, to which such amendments apply.

SEC. 138129. LIMITATION ON FOREIGN BASE COMPANY SALES AND SERVICES INCOME.

(a) FOREIGN BASE COMPANY SALES INCOME. —

(1) IN GENERAL. — Section 954(d)(2) is amended to read as follows:

"(2) LIMITATION AND REGULATORY AUTHORITY. —

"(A) IN GENERAL. — For purposes of this subsection, the term 'related person' shall not include any person unless such person is —

"(i) a taxable unit which is a tax resident of (or, in the case of a branch, is located in) the United States, or

"(ii) is subject to tax under this chapter by reason of such person's activities in the United States.

"(B) REGULATIONS. — The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this subsection (and subsection (e)), including —

"(i) regulations or other guidance providing for the proper application of subparagraph (A) in the case of a transaction (or series of transactions) in which a person described in subparagraph (A) is a party, and

"(ii) regulations or other guidance providing that a pass-through entity or branch held directly or indirectly by a controlled foreign corporation (whether tax resident or located inside or outside the country in which the controlled foreign corporation is a tax resident) shall be treated as a wholly owned subsidiary of the controlled foreign corporation.

"(C) CERTAIN TERMS. — Any term used in this subsection or subsection (e) which is also used in section 904(e) shall have the same meaning as when used in such section.".

(2) CONFORMING AMENDMENT. — Section 954(d)(1)(A) is amended by striking "under the laws of which the controlled foreign corporation is created or organized" and inserting "in which the controlled foreign corporation is a tax resident".

(b) FOREIGN BASE COMPANY SERVICES INCOME. —

(1) IN GENERAL. — Section 954(e)(1)(A) is amended by striking "subsection (d)(3)" and inserting "subsection (d)".

(2) CONFORMING AMENDMENT. — Section 954(e)(1)(B) is amended by striking "under the laws of which the controlled foreign corporation is created or organized" and inserting "in which the controlled foreign corporation is a tax resident".

(c) CERTAIN OTHER MODIFICATIONS. —

(1) Section 78 is amended by striking ", (b),". (2)(A) Section 951(a) is amended to read as follows:

"(a) AMOUNTS INCLUDED. —

"(1) IN GENERAL. — If a foreign corporation is a controlled foreign corporation on any day during a taxable year, every person who is a United States shareholder of such corporation, and who owns (within the meaning of section 958(a)) stock in such corporation on any such day, shall include in such shareholder's gross income for such shareholder's taxable year in which or with which such taxable year of such corporation ends —

"(A) his pro rata share (determined under paragraph (2)) of the corporation's subpart F income for such year, and

"(B) if such shareholder owns (within the meaning of section 958(a)) stock of such foreign corporation as of the close of the last relevant day of such foreign corporation's taxable year, the amount determined under section 956 with respect to such shareholder for such year (but only to the extent not excluded from gross income under section 959(a)(2)).

"(2) PRO RATA SHARE OF SUBPART F INCOME. — In the case of any United States shareholder with respect to a foreign corporation, the pro rata share referred to in paragraph (1)(A) is the sum of —

"(A) if such shareholder owns (within the meaning of section 958(a)) stock of such foreign corporation as of the close of the last relevant day of such foreign corporation's taxable year, such shareholder's general pro rata share determined under paragraph (3), plus

"(B) if such shareholder owns (within the meaning of section 958(a)) stock of such foreign corporation during such taxable year but does not own (within the meaning of section 958(a)) such stock as of the close of such last relevant day, such shareholder's nontaxed current dividend share determined under paragraph (4).

"(3) GENERAL PRO RATA SHARE. —

"(A) IN GENERAL. — In the case of any United States shareholder with respect to a foreign corporation, the general pro rata share determined under this paragraph is the excess (if any) of —

"(i) the pro rata current earnings percentage of the amount which bears the same ratio to such corporation's subpart F income for the taxable year (reduced by the aggregate nontaxed current dividend shares determined under paragraph (4) with respect to such shareholder or any other United States shareholder) as the part of such year during which such corporation is a controlled foreign corporation bears to the entire year, over

"(ii) the lesser of —

"(I) the amount of any pre-holding period dividends with respect to stock of such foreign corporation which such shareholder owns (within the meaning of section 958(a)) as of the close of the last relevant day of such foreign corporation's taxable year, or

"(II) the amount which bears the same ratio to the subpart F income of such corporation for the taxable year (reduced by the aggregate nontaxed current dividend shares determined under paragraph (4) with respect to such shareholder or any other United States shareholder) as the part of such year during which such shareholder did not own (within the meaning of section 958(a)) such stock bears to the entire year.

"(B) PRO RATA CURRENT EARNINGS PERCENTAGE. — For purposes of subparagraph (A)(i), the term 'pro rata current earnings percentage' means, in the case of any United States shareholder with respect to a foreign corporation for any taxable year of such foreign corporation, the ratio (expressed as a percentage) of —

"(i) the amount which would have been distributed with respect to the stock which such shareholder owns (within the meaning of section 958(a)) in such corporation if on the last relevant day of such taxable year it had distributed its earnings and profits for such taxable year (computed as of the close of such taxable year without diminution by reason of any distributions made during such taxable year), divided by

"(ii) such corporation's earnings and profits for such taxable year (as so computed).

"(C) PRE-HOLDING PERIOD DIVIDENDS. — For purposes of subparagraph (A)(ii)(I), the term 'pre-holding period dividends' means, in the case of any United States shareholder with respect to a foreign corporation for any taxable year of such foreign corporation, dividends which are —

"(i) made out of such corporation's earnings and profits for the taxable year (other than nontaxed current dividends as defined in paragraph (4)(C)), and

"(ii) received —

"(I) by any other United States person with respect to stock of such foreign corporation which such shareholder owns (within the meaning of section 958(a)) as of the close of the last relevant day of such foreign corporation's taxable year, and

"(II) while such foreign corporation was a controlled foreign corporation and before such shareholder owned (within the meaning of section 958(a)) such stock.

"(4) NONTAXED CURRENT DIVIDEND SHARE. —

"(A) IN GENERAL. — In the case of any United States shareholder with respect to a foreign corporation, the nontaxed current dividend share determined under this paragraph is the nontaxed current dividend percentage of the subpart F income of such foreign corporation for the taxable year.

"(B) NONTAXED CURRENT DIVIDEND PERCENTAGE. — For purposes of this paragraph, the term 'nontaxed current dividend percentage' means, in the case of any United States shareholder with respect to a foreign corporation for any taxable year of such foreign corporation, the ratio (expressed as a percentage) of —

"(i) the amount of nontaxed current dividends with respect to such taxable year received with respect to the stock of such foreign corporation which such shareholder owns (within the meaning of section 958(a)) at the time of the dividend on a day in which such corporation is a controlled foreign corporation, divided by

"(ii) such foreign corporation's earnings and profits for such taxable year (computed as of the close of such taxable year without diminution by reason of any distributions made during such taxable year).

"(C) NONTAXED CURRENT DIVIDENDS. — For purposes of this paragraph, the term 'nontaxed current dividends' means the portion of any amount received with respect to stock to the extent such amount (without regard to amounts included in the gross income of a United States shareholder for the taxable year by reason of this subpart) —

"(i) would result in a dividend out of the corporation's earnings and profits for the taxable year (including a dividend under section 1248 attributable to earnings and profits for the taxable year), and

"(ii) either —

"(I) would give rise to a deduction under section 245A(a), or

"(II) in the case of a dividend paid directly or indirectly to a controlled foreign corporation with respect to stock owned by the shareholder within the meaning of section 958(a)(2), would not result in subpart F income with respect to such controlled foreign corporation by reason of subsection (b)(4), (c)(3), or (c)(6) of section 954.

"(5) LAST RELEVANT DAY OF TAXABLE YEAR OF A CONTROLLED FOREIGN CORPORATION. — For purposes of this subsection, the term 'last relevant day' means, with respect to any taxable year of a foreign corporation, the last day of such taxable year on which such corporation is a controlled foreign corporation.

"(6) REGULATIONS. — The Secretary may prescribe 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 a partnership as an aggregate of its partners,

"(B) to provide rules allowing a foreign corporation to close its taxable year upon a change in ownership, and

"(C) to treat a distribution followed by an issuance of stock to a shareholder not subject to tax under this chapter in the same manner as an acquisition of stock.".

(B) Section 951A(a) is amended to read as follows:

"(a) IN GENERAL. — If a foreign corporation is a controlled foreign corporation on any day during a taxable year, every person who is a United States shareholder of such corporation, and who owns (within the meaning of section 958(a)) stock in such corporation on any such day, shall include in such shareholder's gross income for such shareholder's taxable year in which or with which such taxable year of such corporation ends, such shareholder's global intangible low-taxed income for such taxable year.".

(C) Section 951A(e) is amended to read as follows:

"(e) DETERMINATION OF PRO RATA SHARES. — For purposes of this section, the pro rata shares referred to in subsections (b), (c)(1)(A), and (c)(1)(B), respectively, shall be determined under rules similar to the rules of section 951(a)(2) and shall be taken into account in the taxable year of the United States shareholder in which or with which the taxable year of the controlled foreign corporation ends.".

(D) Section 953(c)(5)(A)(i) is amended —

(i) in subclause (I), by adding "and" at the end,

(ii) in subclause (II) —

(I) by striking "on the last day of the taxable year" and inserting "during the taxable year", and

(II) by striking "and" at the end and inserting "or", and

(iii) by striking subclause (III).

(3) Section 959 is amended by adding at the end the following:

"(g) REGULATIONS. — The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section.".

(4) Section 961(b)(1) is amended by inserting after the first sentence the following: "The Secretary shall prescribe such other reductions to basis as are necessary or appropriate to carry out the purposes of this section.".

(5) Section 961(c) is amended —

(A) by striking "BASIS ADJUSTMENTS IN" in the heading of such subsection and inserting "APPLICATION OF RULES TO", and

(B) by striking "then adjustments similar to" and all that follows in such subsection and inserting "then rules similar to the rules of subsections (a) and (b) shall apply to —

"(1) such stock,

"(2) stock in any other controlled foreign corporation by reason of which the United States shareholder is considered under section 958(a)(2) as owning the stock described in paragraph (1), and

"(3) property by reason of which the United States shareholder is considered as owning stock described in paragraph (1) or (2), but only for purposes of determining the amount included under section 951 in the gross income of such United States shareholder (or any other United States shareholder who acquires from any person any portion of the interest of such United States shareholder by reason of which such shareholder was treated as owning such stock, but only to the extent of such portion, and subject to such proof of identity of such interest as the Secretary may prescribe by regulations). The preceding sentence shall not apply with respect to any stock or property to which subsection (a) or (b) applies.".

(d) EFFECTIVE DATES. — The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2021, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.

(e) NO INFERENCE REGARDING CERTAIN MODIFICATIONS. — The amendments made by paragraphs (1) and

(1) of subsection (c) shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to any taxable year beginning before the taxable years to which such amendments apply.

Subpart D — Inbound International Provisions

SEC. 138131. MODIFICATIONS TO BASE EROSION AND ANTIABUSE TAX.

(a) MODIFICATIONS TO BASE EROSION MINIMUM TAX AMOUNT. —

(1) MODIFICATION OF RATES. — Section 59A(b)(1)(A) is amended by striking "10 percent (5 percent in the case of taxable years beginning in calendar year 2018)" and inserting "the applicable percentage".

(2) BASE EROSION MINIMUM TAX AMOUNT DETERMINED WITHOUT REGARD TO CREDITS. — Section 59A(b)(1)(B) is amended to read as follows:

"(B) an amount equal to the regular tax liability (as defined in section 26(b)) of the taxpayer for the taxable year.".

(3) APPLICABLE PERCENTAGE. — Section 59A(b)(2) is amended to read as follows:

"(2) APPLICABLE PERCENTAGE. — For purposes of this section, the term 'applicable percentage' means —

"(A) in the case of any taxable year beginning after December 31, 2021, and before January 1, 2023, 10 percent,

"(B) in the case of any taxable year beginning after December 31, 2022, and before January 1, 2024, 12.5 percent,

"(C) in the case of any taxable year beginning after December 31, 2023, and before January 1, 2025, 15 percent, and

"(D) in the case of any taxable year beginning after December 31, 2024, 18 percent.".

(4) TAXPAYERS SUBJECT TO RULES FOR BANKS AND SECURITIES DEALERS. — Section 59A(b)(3)(B) is amended to read as follows:

"(B) TAXPAYER DESCRIBED. — A taxpayer is described in this subparagraph if such taxpayer is —

"(i) a bank (as defined in section 585(a)(2)),

"(ii) a securities dealer registered under section 15(a) of the Securities Exchange Act of 1934, or

"(iii) a member of an affiliated group (as defined in section 1504(a)(1), determined without regard to section 1504(b)(3)) which includes any person described in clause (i) or (ii).".

(5) TERMINATION OF INCREASED RATE FOR BANKS AND SECURITIES DEALERS. — Section 59A(b)(3) is amended by adding at the end the following new subparagraph:

"(C) TERMINATION. — Subparagraph (A) shall not apply to any taxable year beginning after December 31, 2024.".

(6) GENERAL BUSINESS CREDIT ALLOWED AGAINST BASE EROSION AND ANTI-ABUSE TAX. — Section 38(c)(1) is amended by striking "the tax imposed by section 55" and inserting "the taxes imposed by sections 55 and 59A".

(7) CONFORMING AMENDMENTS. —

(A) Section 59A(b)(3)(A) is amended by striking "paragraphs (1)(A) and (2)(A) shall each" and inserting "paragraph (2) shall".

(B) Section 59A(b) is amended by striking paragraph (4).

(b) MODIFICATION OF RULES FOR DETERMINING MODIFIED TAXABLE INCOME. —

(1) IN GENERAL. — Section 59A(c) is amended to read as follows:

"(c) MODIFIED TAXABLE INCOME. — For purposes of this section —

"(1) IN GENERAL. — The term 'modified taxable income' means the taxable income of the taxpayer computed under this chapter for the taxable year with the following adjustments:

"(A) BASE EROSION PAYMENTS. — Taxable income shall be determined without regard to any base erosion tax benefit, including for purposes of determining the adjusted basis of property described in subsection (d)(2).

"(B) ADJUSTMENTS WITH RESPECT TO COST OF GOODS SOLD. — Cost of goods sold shall be determined without regard to any base erosion payment described in subparagraph (A) or (B) of subsection (d)(5).

"(C) NET OPERATING LOSSES. — The net operating loss deduction for the taxable year under section 172 shall be determined —

"(i) by substituting 'modified taxable income (as determined under section 59A(c)(1) without regard to subparagraph (A) thereof)' for 'taxable income' in section 172(a)(2)(B)(ii)(I),

"(ii) by determining any net operating loss arising in any taxable year beginning after December 31, 2021, without regard to any base erosion tax benefit (determined with respect to each such taxable year), and

"(iii) by making appropriate adjustments in the application of section 172(b)(2) to take into account clauses (i) and (ii) of this subparagraph.

"(D) APPLICATION OF CERTAIN OTHER ADJUSTMENTS. — Except as otherwise provided by the Secretary, rules similar to the rules of subsections (g) and (h) of section 59 shall apply.

"(2) BASE EROSION TAX BENEFIT. — The term 'base erosion tax benefit' means —

"(A) any deduction allowed under this chapter for the taxable year with respect to any base erosion payment described in subsection (d)(1),

"(B) in the case of a base erosion payment described in subsection (d)(2), any deduction allowed under this chapter for the taxable year for depreciation (or amortization in lieu of depreciation) with respect to property referred to in subparagraph (A) or (B) of such subsection to the extent of the amounts described in such subsection with respect to such property,

"(C) in the case of a base erosion payment described in subsection (d)(3) —

"(i) any reduction under section 803(a)(1)(B) in the gross amount of premiums and other consideration on insurance and annuity contracts for premiums and other consideration arising out of indemnity insurance, and

"(ii) any deduction under section 832(b)(4)(A) from the amount of gross premiums written on insurance contracts during the taxable year for premiums paid for reinsurance, and

"(D) in the case of a base erosion payment described in subsection (d)(4), any reduction in gross receipts with respect to such payment in computing gross income of the taxpayer for the taxable year for purposes of this chapter.".

(2) CERTAIN PAYMENTS WITH RESPECT TO PROPERTY PRODUCED BY THE TAXPAYER. — Section 59A(d)(2) is amended to read as follows:

"(2) TREATMENT OF CERTAIN RELATED-PARTY PAYMENTS WITH RESPECT TO DEPRECIABLE PROPERTY. — Such term shall also include any amount paid or accrued by the taxpayer to a foreign person which is a related party of the taxpayer in connection with —

"(A) the acquisition by the taxpayer from such person of property of a character subject to the allowance for depreciation (or amortization in lieu of depreciation), or

"(B) property produced by the taxpayer that is of a character subject to the allowance for depreciation (or amortization in lieu of depreciation) if such amount is required to be capitalized under section 263A, including payments in respect of indebtedness or services.".

(3) CERTAIN PAYMENTS WITH RESPECT TO INVENTORY TREATED AS BASE EROSION PAYMENTS. — Section 59A(d) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:

"(5) CERTAIN PAYMENTS WITH RESPECT TO INVENTORY. —

"(A) INDIRECT COSTS INCLUDED IN INVENTORY UNDER SECTION 263A. — Such term shall also include any amount paid or incurred by the taxpayer to a foreign person which is a related party of the taxpayer if such amount is described in paragraph (2)(B) of section 263A(a) and required to be included in inventory costs of the taxpayer under paragraph (1)(A) of such section. Such term shall also include any amount paid or incurred by the taxpayer to a foreign person which is a related party of the taxpayer if such amount is capitalized to the basis of property that is of a character subject to the allowance for depreciation (or amortization in lieu of depreciation), and the depreciation (or amortization in lieu of depreciation) is required to be included in inventory costs of the taxpayer under section 263A(a)(1)(A).

"(B) CERTAIN COSTS OF FOREIGN RELATED PARTIES. — Such term shall also include so much of any amount which is paid or incurred by the taxpayer to a foreign person which is a related party of the taxpayer, is described in paragraph (2)(A) of section 263A(a), and is required to be included in inventory costs of the taxpayer under paragraph (1)(A) of such section, as exceeds the sum of —

"(i) the direct costs of such property in the hands of such foreign person, plus

"(ii) so much of the costs described in section 263A(a)(2)(B) with respect to such property in the hands of such foreign person as the taxpayer demonstrates to the satisfaction of the Secretary are attributable to amounts —

"(I) paid or incurred by such foreign person to a United States person or a person which is not a related party of the taxpayer, or

"(II) otherwise subject to the tax imposed by this chapter.

"(C) APPLICATION TO RELATED-PARTY TRANSACTIONS. — In the case of direct costs otherwise described in clause (i) of subparagraph (B) which are paid or incurred by the foreign person referred to in such clause to another foreign person which is a related party of the taxpayer, such costs shall be taken into account under such clause only to the extent that the taxpayer demonstrates to the satisfaction of the Secretary that such costs are attributable to amounts —

"(i) paid or incurred (directly or indirectly) to a United States person or a person which is not a related party of the taxpayer, or

"(ii) otherwise subject to the tax imposed by this chapter.

"(D) SAFE HARBOR WITH RESPECT TO INDIRECT COSTS OF FOREIGN RELATED PARTIES. — In the case of a taxpayer which elects the application of this subparagraph (at such time, in such manner, and with respect to such inventory property, as the Secretary may provide), the amount described in subparagraph (B)(ii) with respect to such property shall be treated for purposes of this section as being equal to 20 percent of the amount paid or incurred by the taxpayer to the related party of the taxpayer in connection with the acquisition of such property.

"(E) APPLICATION OF CERTAIN RULES. — Rules similar to the rules of subparagraphs (B) and (C) of subsection (i)(1) shall apply for purposes of determining whether any amount is treated as subject to the tax imposed by this chapter for purposes of subparagraph (B) or (C) of this paragraph.".

(4) EXPANSION AND CONSOLIDATION OF RULES TO EXEMPT CERTAIN PAYMENTS FROM TREATMENT AS BASE EROSION PAYMENTS. —

(A) IN GENERAL. — Section 59A is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

"(i) CERTAIN PAYMENT NOT TREATED AS BASE EROSION PAYMENTS. —

"(1) EXCEPTION FOR PAYMENTS ON WHICH TAX IS IMPOSED. —

"(A) IN GENERAL. — An amount shall not be treated as a base erosion payment if tax is (or was at the time of payment or accrual) imposed by this chapter with respect to such amount (other than by this section).

"(B) TREATMENT OF CERTAIN DEDUCTIONS. — For purposes of subparagraph (A), tax shall be treated as imposed by this chapter without regard to any deduction allowed under part VIII of subchapter B.

"(C) APPLICATION OF CERTAIN RULES. — The amount not treated as a base erosion payment by reason of this paragraph shall be determined under rules similar to the rules of section 163(j)(5) (as in effect before the date of the enactment of Public Law 115-97).

"(2) EXCEPTION FOR CERTAIN PAYMENTS SUBJECT TO SUFFICIENT FOREIGN TAX. —

"(A) IN GENERAL. — An amount shall not be treated as a base erosion payment if the taxpayer establishes to the satisfaction of the Secretary that such amount was made to a foreign person which is a related party of the taxpayer that is subject to an effective rate of foreign income tax (as defined in section 904(d)(2)(F)) which is not less than the lesser of —

"(i) 15 percent, or

"(ii) the applicable percentage in effect under subsection (b)(2) (determined without regard to subsection (b)(3)) for the taxable year in which such amount is paid or accrued.

"(B) CERTAIN PAYMENTS TO RELATED PARTIES. — To the extent provided by the Secretary in regulations, an amount paid to a foreign person which is a related party of the taxpayer shall be treated as paid to another foreign person which is a related party of the taxpayer if such second foreign person is subject to an effective rate of foreign income tax (as defined in section 904(d)(2)(F)) which is less than the lesser of 15 percent or the percentage described in subparagraph (A)(ii), to the extent the amount so paid directly or indirectly funds a payment to such second foreign person.

"(C) DETERMINATION ON BASIS OF APPLICABLE FINANCIAL STATEMENTS. — Except as otherwise provided by the Secretary under subparagraph (D), the effective rate of foreign income tax with respect to any amount may be established on the basis of applicable financial statements (as defined in section 451(b)(3)).

"(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 procedures for determining the effective rate of foreign income tax to which any amount is subject. Such procedures may require that any transaction or series of transactions among multiple parties be recharacterized as one or more transactions directly among any 2 or more of such parties where the Secretary determines that such recharacterization is appropriate to carry out, or prevent avoidance of, the purposes of this section.

"(3) EXCEPTION FOR CERTAIN AMOUNTS WITH RESPECT TO SERVICES. — Subsections (d)(1) and (d)(5)(A) shall not apply to so much of any amount paid or accrued by a taxpayer for services as does not exceed the total services cost of such services. The preceding sentence shall not apply unless such services meet the requirements for eligibility for use of the services cost method under section 482 (determined without regard to the requirement that the services not contribute significantly to fundamental risks of business success or failure).".

(B) CONFORMING AMENDMENT. — Section 59A(d), as amended by paragraph (2), is amended by striking paragraph (6).

(c) TERMINATION OF EXEMPTION FROM BASE EROSION AND ANTI-ABUSE TAX FOR TAXPAYERS WITH LOW BASE EROSION PERCENTAGE. — Section 59A(e)(1)(C) is amended by striking "the base erosion percentage (as determined under subsection (c)(4))" and inserting "in the case of any taxable year beginning before January 1, 2024, the base erosion percentage (as determined under subsection (c)(4) as in effect before the date of the enactment of the Act enacted during the 117th Congress which is entitled 'An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14.')".

(d) TREATMENT OF APPLICABLE TAXPAYERS. — Section 59A(e) is amended by adding at the end the following new paragraph:

"(4) CONTINUATION OF TREATMENT AS APPLICABLE TAXPAYER. — If a taxpayer is an applicable taxpayer with respect to any taxable year beginning after December 31, 2021 (other than by reason of this paragraph), such taxpayer (and any successor of such taxpayer) shall be an applicable taxpayer with respect to each of the 10 succeeding taxable years.".

(e) OTHER MODIFICATIONS. —

(1) Section 59A(b)(1) is amended by striking "Except as provided in paragraphs (2) and (3), the" and inserting "The".

(2) Section 59A(h)(2)(B) is amended by striking "section 6038B(b)(2)" and inserting "section 6038A(b)(2)".

(3) Section 59A(j)(2), as redesignated by subsection (b), is amended by striking "subsection (g)(3)" and inserting "subsection (h)(3)".

(f) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

Subpart E — Other Business Tax Provisions

SEC. 138141. CREDIT FOR CLINICAL TESTING OF ORPHAN DRUGS LIMITED TO FIRST USE OR INDICATION.

(a) IN GENERAL. — Section 45C(b)(2)(B) is amended to read as follows:

"(B) TESTING MUST BE RELATED TO FIRST USE OR INDICATION FOR RARE DISEASE OR CONDITION. — Human clinical testing may be taken into account under subparagraph (A) only to the extent such testing is related to the first use or indication with respect to which a drug for a rare disease or condition is designated under section 526 of the Federal Food, Drug, and Cosmetic Act.".

(b) ELIGIBLE TESTING MUST BE CONDUCTED BEFORE APPROVAL FOR ANY USE OR INDICATION. — Section 45C(b)(2)(A)(ii)(II) is amended to read as follows:

"(II) before the first date on which an application (with respect to any use or indication with respect to any disease or condition) with respect to such drug is approved under section 505(c) of such Act or, if the drug is a biological product, before the first date on which a license (with respect to any use or indication with respect to any disease or condition) for such drug is issued under section 351(a) of the Public Health Service Act, and".

(c) ELIGIBILITY OF BIOLOGICAL PRODUCTS. —

(1) IN GENERAL. — Section 45C(b)(2)(A)(i) is amended by inserting "or, if the drug is a biological product, section 351(a)(3) of the Public Health Service Act" before the comma at the end.

(2) CONFORMING AMENDMENT. — Section 45C(b)(2)(A)(ii)(I) is amended by striking "such Act" and inserting "the Federal Food, Drug, and Cosmetic Act".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138142. MODIFICATIONS TO TREATMENT OF CERTAIN LOSSES.

(a) LOSSES FROM CERTAIN CAPITAL ASSETS WHICH BECOME WORTHLESS. —

(1) WHEN TREATED AS LOSS. — Section 165(g)(1) is amended by striking "on the last day of the taxable year" and inserting "at the time of the identifiable event establishing worthlessness".

(2) TREATMENT OF PARTNERSHIP INDEBTEDNESS. — Section 165(g)(2)(C) is amended by inserting ", by a partnership," after "by a corporation".

(3) TREATMENT OF ABANDONMENT. — Section 165(g) is amended by adding at the end the following new paragraph:

"(4) TREATMENT OF ABANDONMENT. — For purposes of this subsection and subsection (m), abandonment shall be treated as an identifiable event establishing worthlessness.".

(4) TREATMENT OF PARTNERSHIP INTEREST. — Section 165 is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

"(m) WORTHLESS PARTNERSHIP INTEREST. — If any interest in a partnership becomes worthless during the taxable year, the loss resulting therefrom shall, for purposes of this subtitle, be treated as a loss from the sale or exchange of the interest in the partnership at the time of the identifiable event establishing worthlessness.".

(b) DEFERRAL OF LOSSES IN CERTAIN CONTROLLED GROUP CORPORATE LIQUIDATIONS. — Section 267 is amended by adding at the end the following new subsection:

"(h) DEFERRAL OF LOSSES IN CERTAIN CONTROLLED GROUP LIQUIDATIONS. —

"(1) IN GENERAL. — In the case of any specified controlled group liquidation, no loss shall be recognized by any member of the controlled group on any stock or security of the liquidating corporation until all property received by members of the controlled group in connection with such liquidation has been transferred to one or more persons who are not related (within the meaning of subsection (b)(3) or section 707(b)(1)) to the member which received such property.

"(2) SPECIFIED CONTROLLED GROUP LIQUIDATION. — For purposes of this subsection, the term 'specified controlled group liquidation' means, with respect to any corporation which is a member of a controlled group —

"(A) one or more distributions in complete liquidation (within the meaning of section 346) of such corporation,

"(B) any other transfer (including any series of transfers) of property of such corporation if any stock or security of such corporation becomes worthless in connection with such transfer, and

"(C) any issuance of debt by such corporation to one or more persons who are related (within the meaning of subsection (b)(3) or section 707(b)(1)) to such corporation if any stock or security of such corporation becomes worthless in connection with such issuance.

"(3) 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 to apply the principles of this subsection to liquidating corporation stock or securities owned by a corporation indirectly through 1 or more partnerships.".

(c) CROSS REFERENCE. — Section 331(c) is amended —

(1) by striking "CROSS REFERENCE" and all that follows through "For general rule" and inserting the following: "CROSS REFERENCE. —

"(1) For general rule", and

(2) by adding at the end the following new paragraph:

"(2) For losses in controlled group liquidations, see section 267(h).".

(d) EFFECTIVE DATE. —

(1) SUBSECTION (a). — The amendments made by this section shall apply to losses arising in taxable years beginning after December 31, 2021.

(2) SUBSECTION (b). — The amendment made by subsection (b) shall apply to liquidations on or after the date of the enactment of this Act.

SEC. 138143. ADJUSTED BASIS LIMITATION FOR DIVISIVE REORGANIZATION.

(a) IN GENERAL. — Section 361 is amended by adding at the end the following new subsections:

"(d) ADJUSTED BASIS LIMITATION FOR DIVISIVE REORGANIZATIONS. —

"(1) IN GENERAL. — Except as provided in paragraph (2), in the case of a reorganization described in section 368(a)(1)(D) with respect to which stock or securities of the controlled corporation (within the meaning of section 355) are distributed by the distributing corporation (within the meaning of such section) in a transaction which qualifies under such section, subsections (b)(3) and (c)(3) shall not apply to so much of the amount described in clauses (ii) and (iii) of subparagraph (A) as does not exceed the excess (if any) of —

"(A) the sum of —

"(i) the total amount of the liabilities assumed (within the meaning of section 357(c)) by the controlled corporation, and

"(ii) the total amount of money and the fair market value of other property transferred to the creditors,

"(iii) the fair market value of the stock described in section 354(a)(2)(C) and the total principal amount of obligations of the controlled corporation described in subsection (c)(2)(B) which are qualified property (as defined in subsection (c)(2)(B)) transferred to the creditors, over

"(B) the total adjusted bases of the assets transferred by the distributing corporation to the controlled corporation.

"(2) EXCEPTION REGARDING CERTAIN STOCK OR RIGHTS TO ACQUIRE STOCK. — Paragraph (1) shall not apply to any stock (or right to acquire stock) described in subsection (c)(2)(B).

"(3) REGULATIONS. — The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this subsection and to prevent avoidance of tax through abuse or circumvention of subsection (b)(3), subsection (c)(3), or this subsection, including to determine whether a disposition of property or any other transaction is in connection with the reorganization or pursuant to the plan of reorganization.

"(e) CROSS-REFERENCES. — For provisions providing for the inclusion of income or recognition of gain in certain distributions, see subsections (d), (e), (f), (g), and (h) of section 355.".

(b) CONFORMING AMENDMENTS. —

(1) Section 361(b)(3) is amended —

(A) in the first sentence, by inserting ", and except as provided in subsection (d)" after "paragraph (1)", and

(B) by striking the second and third sentences.

(2) Section 361(c) is amended —

(A) in paragraph (3), by inserting ", and except as provided in subsection (d)" after "this subsection", and

(B) by striking paragraph (5).

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to reorganizations occurring on or after the date of the enactment of this Act.

(d) TRANSITION RULE. — The amendments made by this section shall not apply to any exchange pursuant to a transaction which is —

(1) made pursuant to a written agreement which was binding on the date of the enactment of this Act, and at all times thereafter,

(2) described in a ruling request submitted to the Internal Revenue Service on or before such date, or

(3) described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission.

SEC. 138144. RENTS FROM PRISON FACILITIES NOT TREATED AS QUALIFIED INCOME FOR PURPOSES OF REIT INCOME TESTS.

(a) IN GENERAL. — Section 856(d)(2) 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 received or accrued, directly or indirectly, with respect to any real or personal property which is primarily used in connection with any correctional, detention, or penal facility.".

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138145. MODIFICATIONS TO EXEMPTION FOR PORTFOLIO INTEREST.

(a) IN GENERAL. — Section 871(h)(3)(B)(i) is amended to read as follows:

"(i) in the case of an obligation issued by a corporation —

"(I) any person who owns 10 percent or more of the total combined voting power of all classes of stock of such corporation entitled to vote, or

"(II) any person who owns 10 percent or more of the total value of the stock of such corporation, and".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to obligations issued after the date of the enactment of this Act.

SEC. 138146. CERTAIN PARTNERSHIP INTEREST DERIVATIVES.

(a) IN GENERAL. — Section 871(m) is amended by adding at the end the following new paragraph:

"(8) SPECIFIED PARTNERSHIP INTEREST INCOME EQUIVALENT PAYMENTS. —

"(A) IN GENERAL. — For purposes of this subsection, any payment made pursuant to a specified notional principal contract that (directly or indirectly) is contingent upon, or is determined by reference to, any income or gain in respect of an interest in a specified partnership (or any other payment the Secretary determines to be substantially similar) shall be treated as a dividend equivalent. For purposes of the preceding sentence, income or gain includes any income or gain from the deemed disposition of such interest as a result of the termination of, or payment with respect to, such contract (determined in the same manner as under section 864(c)(8) but without regard to subparagraph (A) thereof) and any income or gain described in subsection (a)(1) or section 881(a).

"(B) SPECIFIED PARTNERSHIP. — For purposes of this paragraph, the term 'specified partnership' means —

"(i) any publicly traded partnership (as defined in section 7704(b)) which is not treated as a corporation under such section, or

"(ii) any other partnership as the Secretary may by regulation prescribe.

"(C) EXCEPTIONS. —

"(i) CERTAIN PAYMENTS. — Subparagraph (A) shall not apply to any payment the Secretary determines does not have the potential for tax avoidance.

"(ii) CERTAIN INCOME. — Under such regulations as the Secretary shall prescribe, there shall not be taken into account under subparagraph (A) any payment to the extent determined by reference to income or gain in respect of an interest in a specified partnership which would be, if earned by a nonresident alien individual or a foreign corporation —

"(I) exempt from tax under this chapter, or

"(II) from sources without the United States and not effectively connected with the conduct of a trade or business within the United States.

"(D) TREATMENT OF DEFINITIONS AND SPECIAL RULES WITH RESPECT TO PARTNERSHIPS. — For purposes of this paragraph, rules similar to the rules and definitions in paragraphs (3), (4), (5), (6), and (7) shall apply to an interest in a specified partnership in a manner similar to an underlying security, and to income or gain in respect of an interest in a specified partnership in a manner similar to a dividend.

"(E) REGULATIONS. — The Secretary shall issue such regulations or other guidance as the Secretary determines is necessary or appropriate to carry out the purposes of this paragraph, including to apply this paragraph to payments determined under sale-repurchase agreements or securities lending transactions with respect to interests in specified partnerships, to determine the amount of a distribution by a specified partnership that is income or gain of the partnership (including the portion thereof that is excepted under subparagraph (C)) in a manner consistent with section 1441(g), and to require the provision of information by specified partnerships necessary to determine such amount.".

(b) WITHHOLDING OF TAX ON NONRESIDENT ALIENS. — Section 1441 is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection:

"(g) DIVIDEND EQUIVALENTS IN CASE OF CERTAIN SPECIFIED PARTNERSHIPS. — The Secretary may prescribe regulations, under rules similar to the rules of section 1446, to determine the amount of a payment in respect of income and gain of a specified partnership (as defined in 871(m)(8)) which is a dividend equivalent.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to payments made after December 31, 2022.

SEC. 138147. ADJUSTMENTS TO EARNINGS AND PROFITS OF CONTROLLED FOREIGN CORPORATIONS.

(a) IN GENERAL. — Section 312(n) is amended by adding at the end the following new paragraph:

"(9) SPECIAL RULES FOR CONTROLLED FOREIGN CORPORATIONS. — Earnings and profits of any controlled foreign corporation shall be determined without regard to paragraphs (4), (5), and (6).".

(b) CONFORMING AMENDMENT. — Section 952(c) is amended by striking paragraph (3).

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years of foreign corporations ending after the date of the enactment of this Act, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.

SEC. 138148. CERTAIN DIVIDENDS OF CONTROLLED FOREIGN CORPORATIONS TREATED AS EXTRAORDINARY DIVIDENDS.

(a) IN GENERAL. — Section 1059 is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection:

"(g) TREATMENT OF CERTAIN DIVIDENDS OF CONTROLLED FOREIGN CORPORATIONS. —

"(1) IN GENERAL. — Except as otherwise provided by the Secretary, any disqualified CFC dividend shall be treated as an extraordinary dividend to which paragraphs (1) and (2) of subsection (a) apply without regard to the period the taxpayer held the stock with respect to which such dividend is paid.

"(2) DISQUALIFIED CFC DIVIDEND. — For purposes of this subsection —

"(A) IN GENERAL. — The term 'disqualified CFC dividend' means any dividend paid by a controlled foreign corporation to the extent such dividend is attributable to earnings and profits which —

"(i) were earned during any period that such corporation was not a controlled foreign corporation, or

"(ii) are attributable to disqualified CFC dividends received by such controlled foreign corporation from another controlled foreign corporation.

"(B) APPLICATION TO CORPORATIONS NOT WHOLLY OWNED BY UNITED STATES SHAREHOLDERS. — If not all of the stock of any controlled foreign corporation is owned (within the meaning of section 958(a)) by one or more United States shareholders at the time that any earnings and profits are earned, the portion of such earnings and profits which is properly attributable to stock not so owned by United States shareholders shall be treated for purposes of subparagraph (A) as earned during a period that such corporation was not a controlled foreign corporation.

"(C) TREATMENT OF DOMESTIC PARTNERSHIPS AND CERTAIN TRUSTS. — For purposes of subparagraph (B) —

"(i) a domestic partnership shall not be treated as a United States shareholder, and

"(ii) to the extent provided by the Secretary in regulations or other guidance, a trust described in section 7701(a)(30)(E) shall not be treated as a United States shareholder.

"(D) SPECIAL RULE RELATED TO CONSTRUCTIVE OWNERSHIP. — In the case of the last taxable year of a foreign corporation beginning before January 1, 2018, and each subsequent taxable year of such foreign corporation which begins before the date of the enactment of this subsection, if such foreign corporation would not have been a controlled foreign corporation for any such taxable year if section 958(b)(4) (as applicable to taxable years beginning after the date of the enactment of this subsection) had applied to such taxable year, such corporation shall not be treated as a controlled foreign corporation for such taxable year for purposes of this subsection.".

(b) REGULATIONS. — Section 1059(h), as redesignated by subsection (a), is amended —

(1) by striking "regulations" both places it appears and inserting "regulations or other guidance", and

(2) 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) providing for the coordination of subsection (g) with the other provisions of this chapter, including section 1248.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to dividends paid (or amounts treated as dividends) after the date of the enactment of this Act.

SEC. 138149. LIMITATION ON CERTAIN SPECIAL RULES FOR SECTION 1202 GAINS.

(a) IN GENERAL. — Section 1202(a) is amended by adding at the end the following new paragraph:

"(5) LIMITATION ON CERTAIN SPECIAL RULES. — In the case of the sale or exchange of qualified small business stock after September 13, 2021, paragraphs (3) and (4) shall not apply to any taxpayer if —

"(A) the adjusted gross income of such taxpayer (determined without regard to this section and sections 911, 931, and 933) equals or exceeds $400,000, or

"(B) such taxpayer is a trust or estate.".

(b) EFFECTIVE DATE. — Except as provided in subsection (c), the amendment made by this section shall apply to sales and exchanges after September 13, 2021.

(c) BINDING CONTRACT EXCEPTION. — The amendment made by this section shall not apply to any sale or exchange which is made pursuant to a written binding contract which was in effect on September 13, 2021, and is not modified in any material respect thereafter.

SEC. 138150. CONSTRUCTIVE SALES.

(a) APPLICATION TO APPRECIATED DIGITAL ASSETS. —

(1) IN GENERAL. — Section 1259(b)(1) is amended by inserting "digital asset," after "debt instrument,".

(2) EXCEPTION FOR SALES OF NONPUBLICLY TRADED PROPERTY. — Section 1259(c)(2) is amended by adding at the end the following: "A similar rule shall apply in the case of a contract for sale of any digital asset.".

(3) DIGITAL ASSET. — Section 1259(d) is amended by adding at the end the following new paragraph:

"(3) DIGITAL ASSET. — Except as otherwise provided by the Secretary, the term 'digital asset' means any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.".

(b) TREATMENT OF CERTAIN CONTRACTS. — Section 1259(c)(1)(D) is amended by inserting "or enters into a contract to acquire" after "acquires".

(c) EFFECTIVE DATE. —

(1) IN GENERAL. — The amendments made by subsection (a) shall apply to constructive sales (determined after the application of the amendment made by subsection (b)) after the date of the enactment of this Act.

(2) TREATMENT OF CERTAIN CONTRACTS. — The amendment made by subsection (b) shall apply to contracts entered into after the date of the enactment of this Act.

SEC. 138151. RULES RELATING TO COMMON CONTROL.

(a) IN GENERAL. — Section 52 is amended by striking subsections (a) and (b) and inserting the following new subsections:

"(a) TREATMENT OF CONTROLLED GROUPS OF CORPORATIONS. —

"(1) IN GENERAL. — For purposes of this subpart, all employees of all corporations which are component members of the same controlled group of corporations shall be treated as employed by a single employer. In any such case, the credit (if any) determined under section 51(a) with respect to each such member shall be its proportionate share of the wages giving rise to such credit.

"(2) CONTROLLED GROUP OF CORPORATIONS. — For purposes of this subsection, the term 'controlled group of corporations' has the meaning given to such term by section 1563(a), except that —

"(A) 'more than 50 percent' shall be substituted for 'at least 80 percent' each place it appears in section 1563(a)(1), and

"(B) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563.

"(3) COMPONENT MEMBER. — For purposes of this subsection, the term 'component member' has the meaning given such term by section 1563(b), except that the determination shall be made without regard to whether such member is an excluded member (within the meaning of section 1563(b)(2)).

"(b) EMPLOYEES OF PARTNERSHIPS, PROPRIETORSHIPS, ETC., WHICH ARE UNDER COMMON CONTROL. — For purposes of this subpart, under regulations prescribed by the Secretary —

"(1) all employees of trades or business (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and

"(2) the credit (if any) determined under section 51(a) with respect to each trade or business shall be its proportionate share of the wages giving rise to such credit.

The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (a). For purposes of this subsection, the term 'trade or business' includes 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)).".

(b) CONFORMING AMENDMENT. — Section 1563(b)(2)(C) is amended to read as follows:

"(C) is a foreign corporation not engaged in a trade or business within the United States,".

(c) EFFECTIVE DATE. — The amendment made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138152. MODIFICATION OF WASH SALE RULES.

(a) IN GENERAL. — Section 1091 is amended to read as follows:

"SEC. 1091. LOSS FROM WASH SALES OF SPECIFIED ASSETS.

"(a) DISALLOWANCE OF LOSS DEDUCTION. — In the case of any loss claimed to have been sustained from any sale or disposition (including any termination) of specified assets where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer (or related party) has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law), or has entered into, or has entered into a contract or option so to acquire or a long notional principal contract in respect of, substantially identical specified assets, then no deduction shall be allowed under section 165 unless the taxpayer is a dealer in specified assets and the loss is sustained in a transaction made in the ordinary course of such business.

"(b) AMOUNT OF SPECIFIED ASSETS DIFFERENT FROM AMOUNT OF SPECIFIED ASSETS SOLD. — If the amount of specified assets acquired (or covered by the contract or option to acquire or long notional principal contract in respect of) is different from the amount of specified assets sold or otherwise disposed of, then the particular specified assets the acquisition of which (or the contract or option to acquire or long notional principal contract which) resulted in the non-deductibility of the loss shall be determined under regulations prescribed by the Secretary.

"(c) ADJUSTMENT TO BASIS IN CASE OF WASH SALE. — If the taxpayer (or the taxpayer's spouse) acquires or enters into substantially identical specified assets during the period which —

"(1) begins 30 days before the disposition with respect to which a deduction was disallowed under subsection (a), and

"(2) ends with the close of the taxpayer's first taxable year which begins after such disposition, the basis of such specified assets shall be increased by the amount of the deduction so disallowed (reduced by any amount of such deduction taken into account under this subsection to increase the basis of specified assets previously acquired).

"(d) CERTAIN SHORT SALES OF SPECIFIED ASSETS AND CONTRACTS TO SELL. — Rules similar to the rules of subsection (a) shall apply to any loss realized on the closing of a short sale of (or the sale, exchange, or termination of a contract or option to sell or a short notional principal contract in respect of) specified assets if, within a period beginning 30 days before the date of such closing and ending 30 days after such date —

"(1) substantially identical specified assets were sold or terminated by the taxpayer (or a related party), or

"(2) another short sale of (or contract or option to sell or short notional principal contract in respect of) substantially identical specified assets was entered into by the taxpayer (or related party).

"(e) CASH SETTLEMENT. — This section shall not fail to apply to a contract or option to acquire or sell specified assets solely by reason of the fact that the contract or option settles in (or could be settled in) cash or property other than such specified assets.

"(f) RELATED PARTY. — For purposes of this section —

"(1) IN GENERAL. — The term 'related party' means —

"(A) the taxpayer's spouse,

"(B) any dependent of the taxpayer and any other taxpayer with respect to whom the taxpayer is a dependent,

"(C) any individual, corporation, partnership, trust, or estate which controls, or is controlled by, (within the meaning of section 954(d)(3)) the taxpayer or any individual described in subparagraph (A) or (B) with respect to the taxpayer (or any combination thereof),

"(D) to the extent provided by the Secretary in regulations or other guidance, any individual who bears a relationship to the taxpayer described in section 267(b) if such taxpayer is an individual,

"(E) any individual retirement plan, Archer MSA (as defined in section 220(d)), or health savings account (as defined in section 223(d)), of the taxpayer or of any individual described in subparagraph (A) or (B) with respect to the taxpayer,

"(F) any account under a qualified tuition program described in section 529 or a Coverdell education savings account (as defined in section 530(b)) if the taxpayer, or any individual described in subparagraph (A) or (B) with respect to the taxpayer, is the designated beneficiary of such account or has the right to make any decision with respect to the investment of any amount in such account, and

"(G) any account under —

"(i) a plan described in section 401(a),

"(ii) an annuity plan described in section 403(a),

"(iii) an annuity contract described in section 403(b), or

"(iv) an eligible deferred compensation plan described in section 457(b) and maintained by an employer described in section 457(e)(1)(A), if the taxpayer or any individual described in subparagraph (A) or (B) with respect to the taxpayer has the right to make any decision with respect to the investment of any amount in such account.

"(2) RULES FOR DETERMINING STATUS. —

"(A) RELATIONSHIPS DETERMINED AT TIME OF ACQUISITION. — Determinations under paragraph (1) shall be made as of the time of the purchase or exchange (or entering into a contract, option, or notional principal contract) referred to in subsection (a) except that determinations under subparagraphs (A) and (B) of paragraph (1) shall be made for the taxable year which includes such purchase or exchange (or entering into).

"(B) DETERMINATION OF MARITAL STATUS. —

"(i) IN GENERAL. — Except as provided in clause (ii), marital status shall be determined under section 7703.

"(ii) SPECIAL RULE FOR MARRIED INDIVIDUALS FILING SEPARATELY AND LIVING APART. — A husband and wife who —

"(I) file separate returns for any taxable year, and

"(II) live apart at all times during such taxable year, shall not be treated as married individuals.

"(3) REGULATIONS. — The Secretary shall issue such regulations or other guidance as may be necessary to prevent the avoidance of the purposes of this subsection, including regulations which treat persons as related parties if such persons are formed or availed of to avoid the purposes of this subsection.

"(g) SPECIFIED ASSET. — For purposes of this section, the term 'specified asset' means any of the following:

"(1) Any security described in subparagraph (A), (B), (C), (D), or (E) of section 475(c)(2).

"(2) Any foreign currency.

"(3) Any commodity described in subparagraph (A), (B), or (C) of section 475(e)(2).

"(4) Except as otherwise provided by the Secretary, any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.

Such term shall, except as provided in regulations, include contracts or options to acquire or sell, or notional principal contracts in respect of, any specified assets.

"(h) EXCEPTION FOR BUSINESS NEEDS AND HEDGING TRANSACTIONS. — Except as provided in regulations prescribed by the Secretary, subsection (a) shall not apply in the case of any sale or other disposition —

"(1) of a foreign currency or commodity described in subsection (h), and

"(2) which —

"(A) is directly related to the business needs of a trade or business of the taxpayer (other than the trade or business of trading foreign currencies or commodities described in subsection (h)), or

"(B) is part of a hedging transaction (as defined in section 1221(b)(2)).".

(b) CONFORMING AMENDMENTS. —

(1) Section 6045(g)(2)(B) is amended —

(A) in clause (i)(I) —

(i) by striking "security (other than stock" and inserting "covered security (other than stock", and

(ii) by striking "stock sold or transferred" and inserting "covered security sold or transferred", and

(B) in clause (ii) —

(i) by striking "stock or securities" and inserting "specified assets", and

(ii) by striking "identical securities" and inserting "identical specified assets (as defined in section 1091(g))".

(2) The table of sections for part VII of subchapter O of chapter 1 is amended by striking the item relation to section 1091 and inserting the following new item:

"Sec. 1091. Loss from wash sales of specified assets.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to sales, dispositions, and terminations after December 31, 2021.

(d) NO INFERENCE. — Nothing in this section or the amendments made by this section shall be construed to create any inference with respect to the proper treatment of related parties under section 1091 of the Internal Revenue Code of 1986 with respect to sales, dispositions, and terminations before January 1, 2022.

SEC. 138153. RESEARCH AND EXPERIMENTAL EXPENDITURES.

(a) IN GENERAL. — Section 13206 of Public Law 115-97 is amended —

(1) in subsection (b)(3), by striking "2021" and inserting "2025", and

(2) in subsection (e), by striking "2021" and inserting "2025".

(b) EFFECTIVE DATE. — The amendment made by this section shall take effect on the date of the enactment of this Act.

PART 2 — TAX INCREASES FOR HIGH-INCOME INDIVIDUALS

SEC. 138201. APPLICATION OF NET INVESTMENT INCOME TAX TO TRADE OR BUSINESS INCOME OF CERTAIN HIGH INCOME INDIVIDUALS.

(a) IN GENERAL. — Section 1411 is amended by adding at the end the following new subsection:

"(f) APPLICATION TO CERTAIN HIGH INCOME INDIVIDUALS. —

"(1) IN GENERAL. — In the case of any individual whose modified adjusted gross income for the taxable year exceeds the high income threshold amount, subsection (a)(1) shall be applied by substituting 'the greater of specified net income or net investment income' for 'net investment income' in subparagraph (A) thereof.

"(2) PHASE-IN OF INCREASE. — The increase in the tax imposed under subsection (a)(1) by reason of the application of paragraph (1) of this subsection shall not exceed the amount which bears the same ratio to the amount of such increase (determined without regard to this paragraph) as —

"(A) the excess described in paragraph (1), bears to

"(B) $100,000 (1⁄2 such amount in the case of a married taxpayer (as defined in section 7703) filing a separate return).

"(3) HIGH INCOME THRESHOLD AMOUNT. — For purposes of this subsection, the term 'high income threshold amount' means —

"(A) except as provided in subparagraph (B) or (C), $400,000,

"(B) in the case of a taxpayer making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), $500,000, and

"(C) in the case of a married taxpayer (as defined in section 7703) filing a separate return, ½ of the dollar amount determined under subparagraph (B).

"(4) SPECIFIED NET INCOME. — For purposes of this section, the term 'specified net income' means net investment income determined —

"(A) without regard to the phrase 'other than such income which is derived in the ordinary course of a trade or business not described in paragraph (2),' in subsection (c)(1)(A)(i),

"(B) without regard to the phrase 'described in paragraph (2)' in subsection (c)(1)(A)(ii),

"(C) without regard to the phrase 'other than property held in a trade or business not described in paragraph (2)' in subsection (c)(1)(A)(iii),

"(D) without regard to paragraphs (2), (3), and (4) of subsection (c), and

"(E) by treating paragraphs (5) and (6) of section 469(c) (determined without regard to the phrase 'To the extent provided in regulations,' in such paragraph (6)) as applying for purposes of subsection (c) of this section.".

(b) APPLICATION TO TRUSTS AND ESTATES. — Section 1411(a)(2)(A) is amended by striking "undistributed net investment income" and inserting "the greater of undistributed specified net income or undistributed net investment income".

(c) CLARIFICATIONS WITH RESPECT TO DETERMINATION OF NET INVESTMENT INCOME. —

(1) CERTAIN EXCEPTIONS. — Section 1411(c)(6) is amended to read as follows:

"(6) SPECIAL RULES. — Net investment income shall not include —

"(A) any item taken into account in determining self-employment income for such taxable year on which a tax is imposed by section 1401(b),

"(B) wages received with respect to employment on which a tax is imposed under section 3101(b) or 3201(a) (including amounts taken into account under section 3121(v)(2)), and

"(C) wages received from the performance of services earned outside the United States for a foreign employer.".

(2) NET OPERATING LOSSES NOT TAKEN INTO ACCOUNT. — Section 1411(c)(1)(B) is amended by inserting "(other than section 172)" after "this subtitle".

(3) INCLUSION OF CERTAIN FOREIGN INCOME. —

(A) IN GENERAL. — Section 1411(c)(1)(A) is amended by striking "and" at the end of clause (ii), by striking "over" at the end of clause (iii) and inserting "and", and by adding at the end the following new clause:

"(iv) any amount includible in gross income under section 951, 951A, 1293, or 1296, over".

(B) PROPER TREATMENT OF CERTAIN PREVIOUSLY TAXED INCOME. — Section 1411(c) is amended by adding at the end the following new paragraph:

"(7) CERTAIN PREVIOUSLY TAXED INCOME. — The Secretary shall issue regulations or other guidance providing for the treatment of —

"(A) distributions of amounts previously included in gross income for purposes of chapter 1 but not previously subject to tax under this section, and

"(B) distributions described in section 962(d).".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

(e) TRANSITION RULE. — The regulations or other guidance issued by the Secretary under section 1411(c)(7) of the Internal Revenue Code of 1986 (as added by this section) shall include provisions which provide for the proper coordination and application of clauses (i) and (iv) of section 1411(c)(1)(A) with respect to —

(1) taxable years beginning on or before December 31, 2021, and

(2) taxable years beginning after such date.

SEC. 138202. LIMITATIONS ON EXCESS BUSINESS LOSSES OF NONCORPORATE TAXPAYERS.

(a) LIMITATION MADE PERMANENT. —

(1) IN GENERAL. — Section 461(l)(1) is amended to read as follows:

"(1) LIMITATION. — In the case of any taxpayer other than a corporation, any excess business loss of the taxpayer for the taxable year shall not be allowed.".

(2) CONFORMING AMENDMENT. — Section 461 is amended by striking subsection (j).

(b) MODIFICATION OF CARRYOVER OF DISALLOWED LOSSES. — Section 461(l)(2) is amended to read as follows:

"(2) DISALLOWED LOSS CARRYOVER. — Any loss which is disallowed under paragraph (1) for any taxable year shall be treated (solely for purposes of this chapter) as a deduction described in paragraph (3)(A)(i) for the next taxable year.".

(c) TREATMENT OF UNUSED EXCESS BUSINESS LOSS CARRYOVERS ON TERMINATION OF ESTATE OR TRUST. — Section 461(l) is amended by adding at the end the following new paragraph:

"(7) SPECIAL RULE FOR TERMINATION OF ESTATE OR TRUST. — If, on the termination of an estate or trust, the estate or trust has an excess business loss carryover, then such carryover or such excess shall be allowed as a deduction, in accordance with regulations prescribed by the Secretary, to the beneficiaries succeeding to the property of the estate or trust.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2020.

SEC. 138203. SURCHARGE ON HIGH INCOME INDIVIDUALS, ESTATES, AND TRUSTS.

(a) IN GENERAL. — Part I of subchapter A of chapter 1 is amended by inserting after section 1 the following new section:

"SEC. 1A. SURCHARGE ON HIGH INCOME INDIVIDUALS, ESTATES, AND TRUSTS.

"(a) GENERAL RULE. — In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to the sum of —

"(1) 5 percent of so much of the modified adjusted gross income of the taxpayer as exceeds —

"(A) $10,000,000, in the case of any taxpayer not described in subparagraph (B) or (C),

"(B) $5,000,000, in the case of a married individual filing a separate return, and

"(C) $200,000, in the case of an estate or trust, plus

"(2) 3 percent of so much of the modified adjusted gross income of the taxpayer as exceeds —

"(A) $25,000,000, in the case of any taxpayer not described in subparagraph (B) or (C),

"(B) $12,500,000, in the case of a married individual filing a separate return, and

"(C) $500,000, in the case of an estate or trust.

"(b) MODIFIED ADJUSTED GROSS INCOME. — For purposes of this section, the term 'modified adjusted gross income' means adjusted gross income reduced by any deduction (not taken into account in determining adjusted gross income) allowed for investment interest (as defined in section 163(d)) or business interest (as defined in section 163(j)). In the case of an estate or trust, adjusted gross income shall be determined as provided in section 67(e), and reduced by the amount allowed as a deduction under section 642(c).

"(c) SPECIAL RULES. —

"(1) NONRESIDENT ALIEN. — In the case of a nonresident alien individual (other than an individual described in section 876(a) or 877(a)), only amounts taken into account in connection with the tax imposed under section 871(b) shall be taken into account under this section.

"(2) CITIZENS AND RESIDENTS LIVING ABROAD. — Each dollar amount which is applicable to any taxpayer under subsection (a) shall be decreased (but not below zero) by the excess (if any) of —

"(A) the amounts excluded from the taxpayer's gross income under section 911, over

"(B) the amounts of any deductions or exclusions disallowed under section 911(d)(6) with respect to the amounts described in subparagraph (A).

"(3) CHARITABLE TRUSTS. — Subsection (a) shall not apply to a trust all the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B).

"(4) NOT TREATED AS TAX IMPOSED BY THIS CHAPTER FOR CERTAIN PURPOSES. — The tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter (other than sections 27 and 901) or for purposes of section 55.

"(5) ELECTING SMALL BUSINESS TRUSTS. — For purposes of the determination of adjusted gross income, section 641(c)(1)(A) shall not apply and all portions of any electing small business trust shall be treated as a single trust.

"(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, including regulations or other guidance to prevent the avoidance of the purposes of this section.".

(b) COORDINATION WITH CERTAIN PROVISIONS. —

(1) INTEREST ON CERTAIN DEFERRED TAX LIABILITY. — Section 453A(c) is amended by redesignating paragraph (6) as paragraph (7) and by inserting after paragraph (5) the following new paragraph:

"(6) SURCHARGE ON HIGH INCOME INDIVIDUALS TAKEN INTO ACCOUNT IN DETERMINING MAXIMUM RATE OF TAX. — For purposes of paragraph (3)(B), the maximum rate of tax in effect under section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 1A(a).".

(2) ALIEN RESIDENTS OF PUERTO RICO, GUAM, AMERICAN SAMOA, OR THE NORTHERN MARIANA ISLANDS. — Section 876(a) is amended by striking section 1 and inserting "sections 1 and 1A".

(3) EXPATRIATION TO AVOID TAX. — Section 877(b) is amended by inserting "and section 1A" after "section 1 or 55".

(4) LIMITATION ON FOREIGN TAX CREDIT. —

(A) Section 904(b)(3)(E)(i)(I) is amended by inserting "increased by the sum of the rates set forth in paragraphs (1) and (2) of section 1A(a)" after "(whichever applies)".

(B) Section 904(d)(2)(F) is amended by adding at the end the following: "For purposes of the first sentence of this subparagraph, the highest rate of tax specified in section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 1A(a).".

(5) ELECTION BY INDIVIDUALS TO BE SUBJECT TO TAX AT CORPORATE RATES. — Section 962(a)(1) is amended by inserting ", 1A," after "sections 1".

(6) INTEREST ON CERTAIN TAX DEFERRAL. — Section 1291(c)(2) is amended by adding at the end the following: "For purposes of the preceding sentence, the highest rate of tax in effect under section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 1A(a).".

(7) AVERAGING OF FARM INCOME. — Section 1301(a) is amended by striking "section 1" both places it appears and inserting "sections 1 and 1A".

(8) TITLE 11 CASES. — Section 1398(c)(2) is amended by inserting "and tax shall be imposed under section 1A by treating the estate as a married individual filing a separate return" before the period at the end.

(9) WITHHOLDING OF TAX ON FOREIGN PARTNERS' SHARE OF EFFECTIVELY CONNECTED INCOME. — Section 1446(b)(2) is amended by adding at the end the following flush sentence:

"For purposes of subparagraph (A), the highest rate of tax in effect under section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 1A(a).".

(10) RELIEF FROM JOINT AND SEVERAL LIABILITY ON JOINT RETURN. — Section 6015(d)(2)(B) is amended by inserting ", 1A," after "section 1".

(11) PARTNERSHIP ADJUSTMENTS. —

(A) Section 6225(b)(1) is amended by adding at the end the following flush sentence:

"For purposes of subparagraph (B), the highest rate of tax in effect under section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 1A(a).".

(B) Section 6225(c)(4)(A) is amended —

(i) by striking "subsection (b)(1)(A)" and inserting "subsection (b)(1)(B)", and

(ii) by striking "or" at the end of clause (i), by adding "or" at the end of clause (ii), and by inserting after clause

(ii) the following new clause:

"(iii) is not an individual subject to one or both of the rates of tax in effect under paragraphs (1) and (2) of section 1A(a),".

(12) REQUIRED PAYMENTS FOR ENTITIES ELECTING NOT TO HAVE REQUIRED TAXABLE YEAR. — Section 7519(b) is amended by inserting "and increased by the sum of the rates in effect under paragraphs (1) and (2) of section 1A(a)" before the period at the end.

(c) CLERICAL AMENDMENT. — The table of sections for part I of subchapter A of chapter 1 is amended by inserting after the item relating to section 1 the following new item:

"Sec. 1A. Surcharge on high income individuals.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

PART 3 — MODIFICATIONS OF RULES RELATING TO RETIREMENT PLANS

Subpart A — Limitations on High-income Taxpayers With Large Retirement Account Balances

SEC. 138301. CONTRIBUTION LIMIT FOR INDIVIDUAL RETIREMENT PLANS OF HIGH-INCOME TAXPAYERS WITH LARGE ACCOUNT BALANCES.

(a) CONTRIBUTION LIMIT. —

(1) IN GENERAL. — Subpart A of part I of subchapter D of chapter 1 is amended by adding at the end the following:

"SEC. 409B. CONTRIBUTION LIMIT ON INDIVIDUAL RETIREMENT PLANS OF HIGH-INCOME TAXPAYERS WITH LARGE ACCOUNT BALANCES.

"(a) GENERAL RULE. — Notwithstanding any other provision of this title, in the case of an individual who is an applicable taxpayer for any taxable year, no annual additions for such taxable year shall be made by, or on behalf of, such individual to any individual retirement plan to the extent such annual additions exceed the excess (if any) of —

"(1) the applicable dollar amount for such taxable year, over

"(2) the aggregate vested balances to the credit of the individual (whether as a participant, owner, or beneficiary) in all applicable retirement plans (determined as of the close of the calendar year preceding the calendar year in which such taxable year begins).

"(b) DEFINITIONS AND SPECIAL RULES. — For purposes of this section —

"(1) ANNUAL ADDITION. —

"(A) IN GENERAL. — Except as provided in this paragraph, the term 'annual addition' means any contribution to an individual retirement plan.

"(B) CONTRIBUTIONS TO SEP AND SIMPLE PLANS. — In the case of any employer or employee contributions by, or on behalf of, an individual to a simplified employee pension under section 408(k) or a simple retirement account under section 408(p) —

"(i) such contributions shall not be treated as annual additions for purposes of applying the limitation under subsection (a), but

"(ii) the excess described in subsection (a) shall be reduced by the amount of such contributions in applying such limitation to other annual additions with respect to such individual.

"(C) ROLLOVER CONTRIBUTIONS DISREGARDED. — A rollover contribution under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) shall not be treated as an annual addition.

"(D) ACCOUNTS ACQUIRED BY DEATH OR DIVORCE OR SEPARATION. — The acquisition of an individual retirement plan (or the transfer to or contribution of amounts to an individual retirement plan) by reason of —

"(i) the death of another individual, or

"(ii) divorce or separation (pursuant to section 408(d)(6)), shall not be treated as an annual addition.

"(2) APPLICABLE DOLLAR AMOUNT. — The term 'applicable dollar amount' means $10,000,000.

"(3) APPLICABLE RETIREMENT PLAN. — The term 'applicable retirement plan' means —

"(A) a defined contribution plan to which section 401(a) or 403(a) applies,

"(B) an annuity contract under section 403(b),

"(C) an eligible deferred compensation plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A), or

"(D) an individual retirement plan.

"(4) APPLICABLE TAXPAYER. —

"(A) IN GENERAL. — The term 'applicable taxpayer' means, with respect to any taxable year, a taxpayer whose modified adjusted gross income for such taxable year exceeds the amount determined under subparagraph (B).

"(B) DOLLAR LIMIT. — The amount determined under this subparagraph for any taxable year is —

"(i) $400,000 for an individual who is a taxpayer not described in clause (ii) or (iii),

"(ii) $425,000 in the case of an individual who is a head of household (as defined in section 2(b)), and

"(iii) $450,000 in the case of an individual who is a married individual filing a joint return or a surviving spouse (as defined in section 2(a)).

"(C) MODIFIED ADJUSTED GROSS INCOME. — For purposes of this paragraph, the term 'modified adjusted gross income' means adjusted gross income determined without regard to sections 911, 931, and 933, without regard to any deduction for annual additions to individual retirement plans to which subsection (a) applies, and without regard to any increase in minimum required distributions by reason of section 4974(e).

"(5) ADJUSTMENTS FOR INFLATION. —

"(A) IN GENERAL. — In the case of any taxable year beginning after 2029, the dollar amounts in paragraphs (2) and (4)(B) shall be increased by an amount equal to the product of —

"(i) such dollar amount, and

"(ii) the cost-of-living adjustment under section 1(f)(3) for the calendar year in which such taxable year begins, determined by substituting 'calendar year 2028' for 'calendar year 2016' in subparagraph (A)(ii) thereof.

"(B) ROUNDING. — If any amount as adjusted under subparagraph (A) is not —

"(i) in the case of the dollar amount under paragraph (2), a multiple of $250,000, such amount shall be rounded to the next lowest multiple of $250,000.

"(ii) in the case of a dollar amount under paragraph (4)(B), a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.

"(c) REGULATIONS. — The Secretary shall prescribe such regulations and guidance as are necessary or appropriate to carry out the purposes of this section, including regulations or guidance that provide for the application of this section and section 4974(e) in the case of plans with a valuation date other than the last day of a calendar year.".

(2) CONFORMING AMENDMENTS. —

(A) The table of contents for subpart A of part I of subchapter D of chapter 1 is amended by adding after the item relating to section 409A the following new item:

"Sec. 409B. Contribution limit on individual retirement plans of high-income taxpayers with large account balances.".

(B) Section 408(r) is amended by adding at the end the following new paragraph:

"(3) For additional limitations on contributions to individual retirement plans with large account balances, see sections 408A(e)(3) and 409B.".

(b) EXCISE TAX ON EXCESS ANNUAL ADDITIONS. —

(1) IN GENERAL. — Section 4973 is amended by adding at the end the following new subsection:

"(i) SPECIAL RULE FOR INDIVIDUAL RETIREMENT PLANS WITH EXCESS ANNUAL ADDITIONS. — For purposes of this section, in the case of individual retirement plans, the term 'excess contributions', with respect to any taxable year, is increased by the sum of —

"(1) the excess of the annual additions (within the meaning of section 409B(b)(1)) to such plans over the limitation under section 409B(a) for such taxable year, reduced by the amount of any excess contributions determined under subsections (b) and (f), and

"(2) the lesser of —

"(A) the amount determined under this subsection for the preceding taxable year with respect to such plans, reduced by the aggregate distributions from such plans for the taxable year (including distributions required under section 4974(e)) to the extent not contributed in a rollover contribution to another eligible retirement plan in accordance with section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), and 457(e)(16), or

"(B) the amount (if any) by which the amount determined under section 409B(a)(2) for the taxable year exceeds the applicable dollar amount under section 409B(b)(2) for the taxable year.".

(2) CONFORMING AMENDMENTS. — Subsections (b) and (f) of section 4973 are each amended by inserting ", except as further provided in subsection (i)" after "For purposes of this section".

(c) REPORTING REQUIREMENTS. — Section 6057(a) is amended by adding at the end the following:

"(3) ADDITIONAL INFORMATION REGARDING HIGH ACCOUNT BALANCES. —

"(A) IN GENERAL. — If, as of the close of any plan year, 1 or more participants or beneficiaries in an applicable retirement plan (as defined in section 409B(b)(3) without regard to subparagraph (D) thereof) have a vested account balance of at least $2,500,000, the plan administrator shall file a statement with the Secretary, within the period described in paragraph (1), which includes —

"(i) the name and identifying number of each such participant (without regard to whether such participant has separated from employment) or beneficiaries,

"(ii) the amount of the vested account balance of each such participant or beneficiary, and

"(iii) a separate accounting of such vested account balances in designated Roth accounts (within the meaning of section 402A) and all other vested account balances.

"(B) INCLUSION IN REGISTRATION STATEMENT. — If both subparagraph (A) and paragraph (1) apply to a plan, the plan administrator shall include the information required under subparagraph (A) in the registration statement under paragraph (1) rather than file a statement under subparagraph (A).

"(C) ADJUSTMENTS FOR INFLATION. — In the case of any plan year beginning after 2029, the $2,500,000 amount under subparagraph (A) shall be increased by an amount equal to the product of —

"(i) such dollar amount, and

"(ii) the cost-of-living adjustment under section 1(f)(3) for the calendar year in which such taxable year begins, determined by substituting 'calendar year 2028' for 'calendar year 2016' in subparagraph (A)(ii) thereof.

If the amount as adjusted under the preceding sentence is not a multiple of $250,000, such amount shall be rounded to the next lowest multiple of $250,000.".

(d) EFFECTIVE DATES. —

(1) IN GENERAL. — The amendments made by subsections (a) and (b) shall apply to taxable years beginning after December 31, 2028.

(2) PLAN REQUIREMENTS. — The amendments made by subsection (c) shall apply to plan years beginning after December 31, 2028.

SEC. 138302. INCREASE IN MINIMUM REQUIRED DISTRIBUTIONS FOR HIGH-INCOME TAXPAYERS WITH LARGE RETIREMENT ACCOUNT BALANCES.

(a) IN GENERAL. — Section 4974 is amended by adding at the end the following:

"(e) INCREASE IN MINIMUM REQUIRED DISTRIBUTIONS FOR HIGH-INCOME TAXPAYERS WITH LARGE AGGREGATE ACCOUNT BALANCES. —

"(1) IN GENERAL. — If this subsection applies to a payee who is an applicable taxpayer (as defined in section 409B(b)(4)) for a taxable year —

"(A) all qualified retirement plans and eligible deferred compensation plans of the payee which are applicable retirement plans taken into account in computing the excess described in paragraph (3)(A) shall be treated as 1 plan solely for purposes of applying this section to the increase in minimum required distributions for such taxable year determined under subparagraph (B), and

"(B) the minimum required distributions under this section for all plans treated as 1 plan under subparagraph (A) with respect to such payee for such taxable year shall be increased by the excess (if any) of —

"(i) the sum of —

"(I) if paragraph (2) applies to such taxable year, the applicable Roth excess amount, plus

"(II) 50 percent of the excess determined under paragraph (3)(A), reduced by the applicable Roth excess amount, over

"(ii) the sum of the minimum required distributions (determined without regard to this subsection) for all such plans.

"(2) APPLICABLE ROTH EXCESS AMOUNT. —

"(A) APPLICATION. — For purposes of paragraph (1)(B)(i), this paragraph applies to a taxable year of a payee if the aggregate vested balances to the credit of the payee (whether as a participant, owner, or beneficiary) in all applicable retirement plans (determined as of the close of the calendar year preceding the calendar year in which the taxable year begins) exceed 200 percent of the applicable dollar amount for the calendar year in which the taxable year begins.

"(B) APPLICABLE ROTH EXCESS AMOUNT. — The applicable Roth excess amount for any taxable year to which this paragraph applies is an amount equal to the lesser of —

"(i) the excess determined under subparagraph (A), or

"(ii) the aggregate balances to the credit of the payee (whether as a participant, owner, or beneficiary) in all Roth IRAs and designated Roth accounts (within the meaning of section 402A) as of the time described in subparagraph (A).

"(3) APPLICATION. — This subsection shall apply to a payee for a taxable year —

"(A) if the aggregate vested balances to the credit of the payee (whether as a participant, owner, or beneficiary) in all applicable retirement plans (determined as of the close of the calendar year preceding the calendar year in which the taxable year begins) exceed the applicable dollar amount for the calendar year in which the taxable year begins, and

"(B) without regard to whether amounts with respect to the payee are otherwise required to be distributed under section 401(a)(9), 403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2).

"(4) COORDINATION AND ALLOCATION. —

"(A) MINIMUM DISTRIBUTION REQUIREMENTS. — If this subsection applies to a payee for any taxable year —

"(i) this section shall apply first to minimum required distributions determined without regard to this subsection and then to any increase in minimum required distributions by reason of this subsection, and

"(ii) nothing in this subsection shall be construed to affect the amount of any minimum required distribution determined without regard to this subsection or the plan or plans from which it is required to be distributed.

"(B) ALLOCATION OF INCREASE IN MINIMUM REQUIRED DISTRIBUTIONS. —

"(i) IN GENERAL. — Except as provided in clauses (ii) and (iii), the taxpayer may, in such form and manner as the Secretary may prescribe, allocate any increase in minimum required distributions by reason of this subsection to applicable retirement plans treated as 1 plan under subparagraph (A) in such manner as the taxpayer chooses.

"(ii) ALLOCATION TO ROTH IRAS AND ACCOUNTS. — In the case of a taxable year to which paragraph (2) applies, the portion of any increase in minimum required distributions by reason of this subsection equal to the applicable Roth excess amount shall be allocated first to Roth IRAs and then to designated Roth accounts (within the meaning of section 402A) of the payee.

"(iii) SPECIAL RULES FOR EMPLOYEE STOCK OWNERSHIP PLANS. —

"(I) IN GENERAL. — In the case of a payee to which this subsection applies for any taxable year who has account balances in 1 or more employee stock ownership plans (as defined in section 4975(e)(7)) any portion of which is invested in employer securities which are not readily tradable on an established securities market, the increase in minimum required distributions by reason of this subsection shall not be allocated to any such portion.

"(II) EXCEPTION FOR AMOUNTS ATTRIBUTABLE TO ROLLOVER. — Subclause (I) shall not apply to so much of any account balance as is attributable to a rollover contribution after the date of the enactment of this subsection to the account in accordance with section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16).

"(5) DISTRIBUTIONS NOT ELIGIBLE FOR ROLLOVERS. — For purposes of determining whether a distribution is an eligible rollover distribution, any distribution from an applicable retirement plan which is attributable to any increase in minimum required distributions by reason of this subsection shall be treated as a distribution required under section 401(a)(9), 403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2), whichever is applicable.

"(6) ROTH DISTRIBUTIONS TREATED AS QUALIFIED DISTRIBUTIONS. — In the case of any distribution from a Roth IRA, or designated Roth account (within the meaning of section 402A), of the payee by reason of the allocation of an increase in minimum required distributions under this subsection, such distribution shall be treated as a qualified distribution under section 408A(d)(2) or 402A(d)(2), as the case may be.

"(7) DEFINITIONS. — For purposes of this subsection, any term used in this subsection which is also used in section 409B shall have the same meaning as when such term is used in such section.".

(b) SPECIAL RULES. —

(1) DISTRIBUTION RIGHTS. —

(A) QUALIFIED TRUSTS. —

(i) IN GENERAL. — Section 401(a) is amended by inserting after paragraph (38) the following new paragraph:

"(39) IMMEDIATE DISTRIBUTION RIGHT. — A trust forming part of a defined contribution plan shall not constitute a qualified trust under this section unless an employee who certifies to the plan that the employee is a taxpayer who is subject to the distribution requirements of section 4974(e) may elect to receive a distribution from the employee's account balance under the plan in such amount as the employee may elect, including any amounts attributable to a qualified cash or deferred arrangement (as defined in subsection (k)(2)). The preceding sentence shall not apply in the case of any portion of an account balance to which section 4974(e)(4)(B)(iii)(I) applies.".

(ii) APPLICATION TO EMPLOYEE'S ANNUITIES. — Section 404(a)(2) is amended by striking "and (37)" and inserting "(37), and (39)".

(B) ANNUITY CONTRACTS. —

(i) CUSTODIAL ACCOUNTS. — Section 403(b)(7)(A) is amended by adding at the end the following new flush sentence:

"Notwithstanding clause (i), the custodial account shall permit an employee who certifies that the employee is a taxpayer who is subject to the distribution requirements of section 4974(e) to elect to receive a distribution from the employee's custodial account in such amount as the employee may elect.".

(ii) ANNUITY CONTRACTS. — Section 403(b)(11) is amended by adding at the end the following new sentence: "Notwithstanding subparagraphs (A), (B), (C), and (D), the annuity contract shall permit an employee who certifies that the employee is a taxpayer who is subject to the distribution requirements of section 4974(e) to elect to receive a distribution of contributions made pursuant to a salary reduction agreement (within the meaning of section 402(g)(3)) from the employee's annuity contract in such amount as the employee may elect."

(C) GOVERNMENTAL PLANS. — Section 457(d)(1) is amended by adding at the end the following new flush sentence:

"Notwithstanding subparagraph (A), an eligible deferred compensation plan of an employer described in subsection (e)(1)(A) shall permit a participant or beneficiary who certifies that the participant or beneficiary is a taxpayer who is subject to the distribution requirements of section 4974(e) to elect to receive a distribution from the plan in such amount as the participant or beneficiary may elect.".

(2) EXCEPTION FROM 10 PERCENT ADDITIONAL TAX ON EARLY DISTRIBUTIONS. — Section 72(t)(2) is amended by adding at the end the following new subparagraph:

"(I) DISTRIBUTIONS OF EXCESS BALANCES. — Distributions from an applicable retirement plan (within the meaning of section 409B)) to the extent such distributions for the taxable year do not exceed the amount required to be distributed from such plan under section 4974(e).".

(3) WITHHOLDING. — Section 3405(b) is amended by adding at the end the following new paragraph:

"(3) ADDITIONAL WITHHOLDING FOR REQUIRED DISTRIBUTIONS FROM HIGH BALANCE RETIREMENT ACCOUNTS. —

"(A) IN GENERAL. — For purposes of this section, a distribution pursuant to section 401(a)(39), the last sentence of section 403(b)(7)(A), the last sentence of section 403(b)(11), and the last sentence of section 457(d)(1) shall be treated as a nonperiodic distribution, except that in applying this subsection to such distribution —

"(i) paragraph (1) shall be applied by substituting '35 percent' for '10 percent', and

"(ii) no election may be made under paragraph (2) with respect to such distribution.

"(B) EXCEPTION. — Subparagraph (A) shall not apply to any qualified distribution from a designated Roth account (within the meaning of section 402A).".

(c) EFFECTIVE DATES. —

(1) IN GENERAL. — The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2028.

(2) PLAN REQUIREMENTS. — The amendments made by subsection (b) shall apply to plan years beginning after December 31, 2028.

Subpart B — Other Provisions Relating to Individual Retirement Plans

SEC. 138311. TAX TREATMENT OF ROLLOVERS TO ROTH IRAS AND ACCOUNTS.

(a) ROLLOVERS AND CONVERSIONS LIMITED TO TAXABLE AMOUNTS. —

(1) ROTH IRAS. —

(A) IN GENERAL. — Paragraph (1) of section 408A(e) is amended by adding at the end the following new sentence: "A qualified rollover contribution shall not include any rollover contribution from any eligible retirement plan described in subparagraph (B) (other than from a designated Roth account (within the meaning of section 402A)) if any portion of the distribution from which such contribution is made would (without regard to such contribution) be treated as not includible in gross income."

(B) CONVERSIONS. — Subparagraph (C) of section 408A(d)(3) is amended by adding at the end the following new sentence: "This subparagraph shall not apply if any portion of the plan being converted would be treated as not includible in gross income if distributed at the time of the conversion."

(2) DESIGNATED ROTH ACCOUNTS. — Section 402A(c)(4)(B) is amended by inserting ", determined after the application of the last sentence of paragraph (1) thereof" after "section 408A(e)".

(3) EFFECTIVE DATE. — The amendments made by this subsection shall apply to distributions, transfers, and contributions made after December 31, 2021.

(b) NO ROLLOVERS OR CONVERSIONS FOR HIGH-INCOME TAXPAYERS. —

(1) ROTH IRAS. —

(A) QUALIFIED ROLLOVER CONTRIBUTION. — Section 408A(e), as amended by subsection (a), is amended by adding at the end the following:

"(3) HIGH-INCOME TAXPAYERS MAY ONLY ROLLOVER FROM ROTH IRAS AND ACCOUNTS. — If —

"(A) a taxpayer is an applicable taxpayer (as defined in section 409B(b)(4)) for the taxable year in which a distribution is made, and

"(B) such distribution is contributed to a Roth IRA in a rollover contribution, such contribution shall be treated as a qualified rollover contribution under paragraph (1) only if it is made from another Roth IRA or from a designated Roth account (within the meaning of section 402A).".

(B) ELIMINATION OF CONVERSIONS. — Paragraph (3) of section 408A(d), as amended by subsection (a), is amended by adding at the end the following:

"(G) PARAGRAPH NOT TO APPLY TO HIGH-INCOME TAXPAYERS. — If a taxpayer is an applicable taxpayer (as defined in section 409B(b)(4)) for any taxable year, this paragraph shall not apply to any distribution to which this paragraph otherwise applies (or to any conversion described in subparagraph (C)) which is made during such taxable year.".

(2) DESIGNATED ROTH ACCOUNTS. — Paragraph (4) of section 402A(c) is amended by adding at the end the following:

"(F) PARAGRAPH NOT TO APPLY TO HIGH-INCOME TAXPAYERS. — If a taxpayer is an applicable taxpayer (as defined in section 409B(b)(4)) for any taxable year, this paragraph shall not apply to any distribution to which this paragraph otherwise applies and which is made during such taxable year.".

(3) CONFORMING AMENDMENT. — Section 409B(b)(4)(C), as added by this Act, is amended —

(A) by striking "and without regard to" and inserting "without regard to", and

(B) by inserting before the period at the end the following: ", and without regard to the inclusion in gross income of any converted or contributed amount described in section 408A(e)(3), 408A(d)(3)(G), or 402A(c)(4)(F).".

(4) EFFECTIVE DATE. — The amendments made by this subsection shall apply to distributions, transfers, and contributions made in taxable years beginning after December 31, 2031.

SEC. 138312. STATUTE OF LIMITATIONS WITH RESPECT TO IRA NONCOMPLIANCE.

(a) IN GENERAL. — Subsection (c) of section 6501 is amended by adding at the end the following new paragraph:

"(13) NONCOMPLIANCE RELATING TO AN INDIVIDUAL RETIREMENT PLAN. —

"(A) MISREPORTING. — In the case of any substantial error (willful or otherwise) in the reporting on a return of any information relating to the valuation of investment assets with respect to an individual retirement plan, the time for assessment of any tax imposed by this title with respect to such plan shall not expire before the date which is 6 years after the return containing such error was filed (whether or not such return was filed on or after the date prescribed).

"(B) PROHIBITED TRANSACTIONS. — The time for assessment of any tax imposed by section 4975 shall not expire before the date which is 6 years after the return was filed (whether or not such return was filed on or after the date prescribed).".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to taxes with respect to which the 3-year period under section 6501(a) of the Internal Revenue Code of 1986 (without regard to the amendment made by this section) ends after December 31, 2021.

SEC. 138313. IRA OWNERS TREATED AS DISQUALIFIED PERSONS FOR PURPOSES OF PROHIBITED TRANSACTION RULES.

(a) IN GENERAL. — Paragraph (2) of section 4975(e) is amended —

(1) by striking "or" at the end of subparagraph (H),

(2) by striking the period at the end of subparagraph (I) and inserting "; or",

(3) by inserting after subparagraph (I) the following new subparagraph:

"(J) the individual for whose benefit a plan described in subparagraph (B) or (C) of paragraph (1) is maintained.",

(4) by striking "or (E)" both places it appears in subparagraphs (F) and (G) and inserting "(E), or

(J) (in the case of a plan described in subparagraph (B) or (C) of paragraph (1))",

(5) by striking "or (G)" in subparagraph (I) and inserting "(G), or (J) (in the case of a plan described in subparagraph (B) or (C) of paragraph (1))", and

(6) by adding at the end the following: "For purposes of subparagraphs (G) and (I), any asset or interest held by a plan described in subparagraph (B) or (C) of paragraph (1) shall be treated as owned by the individual described in subparagraph (J) with respect to such plan.".

(b) CONFORMING AMENDMENT. — Subparagraph (A) of section 408(e)(2) is amended to read as follows:

"(A) EMPLOYEE ENGAGING IN PROHIBITED TRANSACTION. — If, during any taxable year of the individual for whose benefit any individual retirement account is maintained, that individual engages in any transaction prohibited by section 4975 with respect to such account, such account ceases to be an individual retirement account as of the first day of such taxable year. For purposes of this paragraph, the separate account for the benefit of any individual within an individual retirement account maintained by an employer or association of employees is treated as a separate individual retirement account.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to transactions occurring after December 31, 2021.

PART 4 — FUNDING THE INTERNAL REVENUE SERVICE AND IMPROVING TAXPAYER COMPLIANCE

SEC. 138401. ENHANCEMENT OF INTERNAL REVENUE SERVICE RESOURCES.

(a) APPROPRIATIONS. —

(1) IN GENERAL. — The following sums are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2022:

(A) INTERNAL REVENUE SERVICE. —

(i) IN GENERAL. —

(I) TAXPAYER SERVICES. — For necessary expenses of the Internal Revenue Service to provide taxpayer services, including pre-filing assistance and education, filing and account services, taxpayer advocacy services, and other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, $1,931,500,000, to remain available until September 30, 2031: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.

(II) ENFORCEMENT. — For necessary expenses for tax enforcement activities of the Internal Revenue Service to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations (including investigative technology), to provide digital asset monitoring and compliance activities, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes, to purchase and hire passenger motor vehicles (31 U.S.C. 1343(b)), and to provide other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, $44,887,500,000, to remain available until September 30, 2031: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.

(III) OPERATIONS SUPPORT. — For necessary expenses of the Internal Revenue Service to support taxpayer services and enforcement programs, including rent payments; facilities services; printing; postage; physical security; headquarters and other IRS-wide administration activities; research and statistics of income; telecommunications; information technology development, enhancement, operations, maintenance, and security; the hire of passenger motor vehicles (31 U.S.C. 1343(b)); the operations of the Internal Revenue Service Oversight Board; and other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, $27,376,300,000, to remain available until September 30, 2031: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.

(IV) BUSINESS SYSTEMS MODERNIZATION. — For necessary expenses of the Internal Revenue Service's business systems modernization program, including development of callback technology and other technology to provide a more personalized customer service but not including the operation and maintenance of legacy systems, $4,750,700,000, to remain available until September 30, 2031: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.

(ii) TASK FORCE TO DESIGN AN IRS RUN FREE "DIRECT E-FILE" TAX RETURN SYSTEM. — For necessary expenses of the Internal Revenue Service to deliver to Congress, within nine months following the date of the enactment of this Act, a report on (I) the cost (including options for differential coverage based on taxpayer adjusted gross income and return complexity) of developing and running a free direct e-file tax return system, including costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data; (II) taxpayer opinions, expectations, and level of trust, based on surveys, for such a free direct e-file system; and (III) the opinions of an independent third-party on the overall feasibility, approach, schedule, cost, organizational design, and Internal Revenue Service capacity to deliver such a direct e-file tax return system, $15,000,000, to remain available until September 30, 2022: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.

(B) TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION. — For necessary expenses of the Treasury Inspector General for Tax Administration in carrying out the Inspector General Act of 1978, as amended, including purchase and hire of passenger motor vehicles (31 U.S.C. 1343(b)); and services authorized by 5 U.S.C. 3109, at such rates as may be determined by the Inspector General for Tax Administration, $403,000,000, to remain available until September 30, 2031: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.

(C) OFFICE OF TAX POLICY. — For necessary expenses of the Office of Tax Policy of the Department of the Treasury to carry out functions related to promulgating regulations under the Internal Revenue Code of 1986, $104,533,803, to remain available until September 30, 2031: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.

(D) UNITED STATES TAX COURT. — For necessary expenses of the United States Tax Court, including contract reporting and other services as authorized by 5 U.S.C. 3109; $153,000,000, to remain available until September 30, 2031: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.

(2) MULTI-YEAR OPERATIONAL PLAN. —

(A) IN GENERAL. — Not later than 6 months after the date of the enactment of this Act, the Commissioner of Internal Revenue shall submit to Congress a plan detailing how the funds appropriated under paragraph (1)(A)(i) will be spent over the ten-year period ending with fiscal year 2031.

(B) QUARTERLY UPDATES. —

(i) IN GENERAL. — Not later than the last day of each calendar quarter beginning during the applicable period, the Commissioner of Internal Revenue shall submit to Congress a report on the plan established under subparagraph (A), including —

(I) any updates to the plan;

(II) progress made in implementing the plan; and

(III) any changes in circumstances or challenges in implementing the plan.

(ii) APPLICABLE PERIOD. — For purposes of clause (i), the applicable period is the period beginning 1 year after the date the report under subparagraph (A) is due and ending on September 30, 2031.

(C) REDUCTION IN APPROPRIATION. —

(i) IN GENERAL. — In the case of any failure to submit a plan required under subparagraph (A) or a report required under subparagraph (B) by the required date, the amounts made available under paragraph (1)(A)(i) shall be reduced by $100,000 for each day after such required date that report has not been submitted to Congress.

(ii) REQUIRED DATE. — For purposes of clause (i), the required date is the date that is 60 days after the date the plan or report is required to be submitted under subparagraph (A) or (B), as the case may be.

(3) NO TAX INCREASES ON CERTAIN TAXPAYERS. — Nothing in this subsection is intended to increase taxes on any taxpayer with a taxable income below $400,000.

(b) PERSONNEL FLEXIBILITIES. — The Secretary of the Treasury (or the Secretary's delegate) may use the funds made available under subsection (a)(1)(A), subject to such policies as the Secretary (or the Secretary's delegate) may establish, to take such personnel actions as the Secretary (or the Secretary's delegate) determines necessary to administer the Internal Revenue Code of 1986, including —

(1) utilizing direct hire authority to recruit and appoint qualified applicants, without regard to any notice or preference requirements, directly to positions in the competitive service;

(2) in addition to the authority under section 7812(1) of the Internal Revenue Code of 1986, appointing not more than 200 individuals to positions in the Internal Revenue Service under streamlined critical pay authority, except that —

(A) the authority to offer streamlined critical pay under this paragraph shall expire on September 30, 2031; and

(B) the positions for which streamlined critical pay is authorized under this paragraph may include positions critical to the purposes described in subclauses (I), (II), and (III) of subsection (a)(1)(A)(i); and

(3) appointing, without approval of the Office of Personnel Management, not more than 300 individuals to critical pay positions in the Internal Revenue Service for which —

(A) the rate of basic pay may not exceed the salary set in accordance with section 104 of title 3, United States Code; and

(B) the total annual compensation paid to an employee in such a position, including allowances, differentials, bonuses, awards, and similar cash payments, may not exceed the maximum amount of total annual compensation payable at the salary set in accordance with section 104 of title 3, United States Code.

SEC. 138402. APPLICATION OF BACKUP WITHHOLDING WITH RESPECT TO THIRD PARTY NETWORK TRANSACTIONS.

(a) 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 FOR CALENDAR YEAR IS $600 OR MORE. — 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 —

"(A) the aggregate amount of such payment and all previous such payments made by the third party settlement organization to the participating payee during such calendar year equals or exceeds $600, or

"(B) the third party settlement organization was required under section 6050W to file a return for the preceding calendar year with respect to payments to the participating payee.".

(b) CONFORMING AMENDMENT. — Section 6050W(e) is amended by inserting "equal or" before "exceed $600".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to calendar years beginning after December 31, 2021.

(d) TRANSITIONAL RULE FOR 2022. — In the case of payments made during calendar year 2022, section 3406(b)(8)(A) of the Internal Revenue Code of 1986 (as added by this section) shall be applied by inserting "and the aggregate number of third party network transactions settled by the third party settlement organization with respect to the participating payee during such calendar year exceeds 200" before the comma at the end.

SEC. 138403. MODIFICATION OF PROCEDURAL REQUIREMENTS RELATING TO ASSESSMENT OF PENALTIES.

(a) REPEAL OF APPROVAL REQUIREMENT. — Section 6751 is amended by striking subsection (b).

(b) QUARTERLY CERTIFICATIONS OF COMPLIANCE WITH PROCEDURAL REQUIREMENTS. — Section 6751, as amended by subsection (a) of this section, is amended by inserting after subsection (a) the following new subsection:

"(b) QUARTERLY CERTIFICATIONS OF COMPLIANCE. — Each appropriate supervisor of employees of the Internal Revenue Service shall certify quarterly by letter to the Commissioner of Internal Revenue whether or not the requirements of subsection (a) and administrative policies intended to ensure voluntary compliance have been met with respect to notices of penalty issued by such employees.".

(c) EFFECTIVE DATES. —

(1) REPEAL OF APPROVAL REQUIREMENT. — The amendment made by subsection (a) shall take effect as if included in section 3306 of the Internal Revenue Service Restructuring and Reform Act of 1998.

(2) QUARTERLY CERTIFICATIONS OF COMPLIANCE WITH PROCEDURAL REQUIREMENTS. — The amendment made by subsection (b) shall apply to notices of penalty issued after the date of the enactment of this Act.

PART 5 — OTHER PROVISIONS

SEC. 138501. MODIFICATIONS TO LIMITATION ON DEDUCTION OF EXCESSIVE EMPLOYEE REMUNERATION.

(a) IN GENERAL. — Section 162(m) is amended by adding at the end the following new paragraph:

"(7) SPECIAL RULES RELATED TO LIMITATION ON DEDUCTION OF EXCESSIVE EMPLOYEE REMUNERATION. —

"(A) AGGREGATION RULE. — A rule similar to the rule of paragraph (6)(C)(ii) shall apply for purposes of paragraph (1).

"(B) REGULATIONS. — The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of paragraph (1), including regulations or other guidance to prevent the avoidance of such purposes, including through the performance of services other than as an employee or by providing compensation through a passthrough or other entity.".

(b) APPLICABLE EMPLOYEE REMUNERATION. — Section 162(m)(4)(A) is amended —

(1) by inserting "(including performance-based compensation, commissions, post-termination compensation, and beneficiary payments)" after "remuneration for services", and

(2) by inserting "and whether or not such remuneration is paid directly by the publicly held corporation" after "whether or not during the taxable year".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138502. EXTENSION OF TAX TO FUND BLACK LUNG DISABILITY TRUST FUND.

(a) IN GENERAL. — Section 4121(e)(2)(A) is amended by striking "December 31, 2021" and inserting "December 31, 2025".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to sales after December 31, 2021.

SEC. 138503. PROHIBITED TRANSACTIONS RELATING TO HOLDING DISC OR FSC IN INDIVIDUAL RETIREMENT ACCOUNT.

(a) IN GENERAL. — Section 4975(c)(1) 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) investment, at the direction of a disqualified person, by an individual retirement account in an interest in a DISC or FSC that receives any commission, or other payment, from an entity any stock or interest in which is owned by the individual for whose benefit the account is maintained.".

(b) SPECIAL RULES OF APPLICATION. — Section 4975(c) is amended by adding at the end the following new paragraph:

"(8) SPECIAL RULES OF APPLICATION FOR DISC AND FSC INVESTMENTS. —

"(A) INDIRECT HOLDING OF DISC OR FSC. — For purposes of paragraph (1)(G), investment by an individual retirement account in an interest in an entity that owns (directly or indirectly) an interest in a DISC or FSC shall be treated as investment by such account in an interest in such DISC or FSC.

"(B) CONSTRUCTIVE OWNERSHIP. — For purposes of determining ownership of stock (or any other interest) in an entity under paragraph (1)(G) and ownership of an interest in a DISC or FSC under subparagraph (A), the rules prescribed by section 318 for determining ownership shall apply, except that such section shall be applied by substituting '10 percent' for '50 percent' each place it appears.

"(C) DISC AND FSC. — For purposes of this subsection, the terms 'DISC' and 'FSC' shall have the respective meanings given such terms by section 992(a)(1)) and section 922(a) (as in effect before its repeal by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000).".

(c) APPLICATION OF TAX TO TERMINATED INDIVIDUAL RETIREMENT ACCOUNTS. — Section 4975(c)(3) is amended by adding at the end the following: "The preceding sentence shall not apply in the case of a prohibited transaction described in paragraph (1)(G).".

(d) RELATED RULES FOR INDIVIDUAL RETIREMENT ACCOUNTS. —

(1) IN GENERAL. — Section 408(a) is amended by inserting after paragraph (6) the following new paragraph:

"(7) No part of the trust funds will be invested in any interest in a DISC or a FSC that receives any commission, or other payment, from an entity any stock or interest in which is owned by the individual for whose benefit the trust is maintained. For purposes of the preceding sentence, the definitions and rules of section 4975(c)(8) shall apply.".

(e) LOSS OF EXEMPTION OF ACCOUNT. — Section 408(e)(2), as amended by the preceding provisions of this Act, is amended —

(1) by redesignating subparagraph (B) as subparagraph (C),

(2) by inserting after subparagraph (A) the following new subparagraph:

"(B) PROHIBITED INVESTMENT. — If, during any taxable year of the individual for whose benefit any individual retirement account is maintained, the investment of any part of the funds of such individual retirement account does not comply with subsection (a)(7), such account ceases to be an individual retirement account as of the first day of such taxable year. For purposes of this subparagraph, the separate account for the benefit of any individual within an individual retirement account maintained by an employer or association of employees is treated as a separate individual retirement account.",

(3) by striking "WHERE EMPLOYEE ENGAGES IN PROHIBITED TRANSACTION" in the heading and inserting "IN CASE OF CERTAIN PROHIBITED TRANSACTIONS AND INVESTMENTS",

(4) by striking "(A)" in subparagraph (C), as so redesignated, and inserting "(A) or (B)".

(f) CONFORMING AMENDMENTS. —

(1) Section 408(c)(1) is amended by striking "(1) through (6)" and inserting "(1) through (7)".

(2) Section 4975(c)(3) is amended —

(A) striking "established" and inserting "maintained",

(B) by striking "transaction" both places it appears and inserting "transaction or investment", and

(C) by striking "section 408(e)(2)(A)" and inserting "subparagraph (A) or (B) of section 408(e)(2)".

(g) EFFECTIVE DATE. — The amendments made by this section shall apply to stock and other interests acquired or held on or after December 31, 2021.

SEC. 138504. CLARIFICATION OF TREATMENT OF DISC GAINS AND DISTRIBUTIONS OF CERTAIN FOREIGN SHAREHOLDERS.

(a) IN GENERAL. — Section 996(g) is amended by striking "of such shareholder" and inserting "deemed to be had by such shareholder".

(b) EFFECTIVE DATE. — The amendments made by subsection (a) shall apply to gains and distributions after December 31, 2021.

(c) APPLICATION TO FOREIGN SALES CORPORATIONS. — In the case of any distribution after December 31, 2021, section 926(b)(1) of the Internal Revenue Code of 1986 (prior to its repeal by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000) shall be applied by substituting "deemed to be had by such shareholder" for "of such shareholder".

(d) NO INFERENCE. — This section (and the amendments made by this section) shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to gains and distributions before January 1, 2022.

SEC. 138505. 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) TERMINATION. — Section 181(h) (as redesignated by subsection (e)) is amended by striking "or qualified live theatrical productions" and inserting ", qualified live theatrical productions, or qualified sound recording productions".

(g) BONUS DEPRECIATION. —

(1) QUALIFIED SOUND RECORDING PRODUCTION AS QUALIFIED PROPERTY. — Section 168(k)(2)(A)(i) is amended —

(A) by striking "or" at the end of subclause (IV), by adding "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) 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

(B) in subclauses (IV) and (V) (as 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. 138506. PAYMENT TO CERTAIN INDIVIDUALS WHO DYE FUEL.

(a) IN GENERAL. — Subchapter B of chapter 65 is amended by adding at the end the following new subsection:

"SEC. 6433. DYED FUEL.

"(a) IN GENERAL. — If a person establishes to the satisfaction of the Secretary that such person meets the requirements of subsection (b) with respect to diesel fuel or kerosene, then the Secretary shall pay to such person an amount (without interest) equal to the tax described in subsection (b)(2)(A) with respect to such diesel fuel or kerosene.

"(b) REQUIREMENTS. —

"(1) IN GENERAL. — A person meets the requirements of this subsection with respect to diesel fuel or kerosene if such person removes from a terminal eligible indelibly dyed diesel fuel or kerosene.

"(2) ELIGIBLE INDELIBLY DYED DIESEL FUEL OR KEROSENE DEFINED. — The term 'eligible indelibly dyed diesel fuel or kerosene' means diesel fuel or kerosene —

"(A) with respect to which a tax under section 4081 was previously paid (and not credited or refunded), and

"(B) which is exempt from taxation under section 4082(a).

"(c) CROSS REFERENCE. — For civil penalty for excessive claims under this section, see section 6675.".

(b) CONFORMING AMENDMENTS. —

(1) Section 6206 is amended —

(A) by striking "or 6427" each place it appears and inserting "6427, or 6433", and

(B) by striking "6420 and 6421" and inserting "6420, 6421, and 6433".

(2) Section 6430 is amended —

(A) by striking "or" at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting "or", and by adding at the end the following new paragraph:

"(4) which are removed as eligible indelibly dyed diesel fuel or kerosene under section 6433.".

(3) Section 6675 is amended —

(A) in subsection (a), by striking "or 6427 (relating to fuels not used for taxable purposes)" and inserting "6427 (relating to fuels not used for taxable purposes), or 6433 (relating to eligible indelibly dyed fuel)", and

(B) in subsection (b)(1), by striking "6421, or 6427," and inserting "6421, 6427, or 6433".

(4) The table of sections for subchapter B of chapter 65 is amended by adding at the end the following new item:

"Sec. 6433. Dyed fuel.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to eligible indelibly dyed diesel fuel or kerosene removed on or after the date that is 180 days after the date of the enactment of this section.

SEC. 138507. TREATMENT OF FINANCIAL GUARANTY INSURANCE COMPANIES AS QUALIFYING INSURANCE CORPORATIONS UNDER PASSIVE FOREIGN INVESTMENT COMPANY RULES.

(a) IN GENERAL. — Section 1297(f)(3) is amended by adding at the end the following new subparagraph:

"(C) SPECIAL RULES FOR FINANCIAL GUARANTY INSURANCE COMPANIES. —

"(i) IN GENERAL. — Notwithstanding subparagraphs (A)(ii) and (B), the applicable insurance liabilities of a financial guaranty insurance company shall include its unearned premium reserves if —

"(I) such company is prohibited under generally accepted accounting principles from reporting on its applicable financial statements reserves for losses and loss adjustment expenses with respect to a financial guaranty insurance or reinsurance contract except to the extent that losses and loss adjustment expenses are expected to exceed the unearned premium reserves on the contract,

"(II) the applicable financial statement of such company reports financial guaranty exposure of at least 15-to-1 or State or local bond exposure of at least 9-to-1 (8-to-1 in the case of a taxable year of such company which ends on or before December 31, 2018), and

"(III) such company includes in its insurance liabilities only its unearned premium reserves relating to insurance written or assumed that is within the single risk limits set forth in subsection (D) of section 4 of the Financial Guaranty Insurance Guideline (modified by using total shareholder's equity as reported on the applicable financial statement of the company rather than aggregate of the surplus to policyholders and contingency reserves).

"(ii) APPLICATION OF ALTERNATIVE FACTS AND CIRCUMSTANCES TEST. — A financial guaranty insurance company shall be treated as satisfying the requirements of paragraph (2)(B)(ii).

"(iii) FINANCIAL GUARANTY INSURANCE COMPANY. — For purposes of this subparagraph, the term 'financial guaranty insurance company' means any insurance company the sole business of which is writing or reinsuring financial guaranty insurance (as defined in subsection (A) of section 1 of the Financial Guaranty Insurance Guideline) which is permitted under subsection (B) of section 4 of such Guideline.

"(iv) FINANCIAL GUARANTY EXPOSURE. — For purposes of this subparagraph, the term 'financial guaranty exposure' means the ratio of —

"(I) the net debt service outstanding insured or reinsured by the company that is within the single risk limits set forth in the Financial Guaranty Insurance Guideline (as reported on such company's applicable financial statement), to

"(II) the company's total assets (as so reported).

"(v) STATE OR LOCAL BOND EXPOSURE. — For purposes of this subparagraph, the term 'State or local bond exposure' means the ratio of —

"(I) the net unpaid principal of State or local bonds (as defined in section 103(c)(1)) insured or reinsured by the company that is within the single risk limits set forth in the Financial Guaranty Insurance Guideline (as reported on such company's applicable financial statement), to

"(II) the company's total assets (as so reported)."

"(vi) FINANCIAL GUARANTY INSURANCE GUIDELINE. — For purposes of this subparagraph —

"(I) IN GENERAL. — The term 'Financial Guaranty Insurance Guideline' means the October 2008 model regulation that was adopted by the National Association of Insurance Commissioners on December 4, 2007.

"(II) DETERMINATIONS MADE BY SECRETARY. — The determination of whether any provision of the Financial Guaranty Insurance Guideline has been satisfied shall be made by the Secretary.".

(b) REPORTING OF CERTAIN ITEMS. — Section 1297(f)(4) is amended by adding at the end the following new subparagraph:

"(C) CLARIFICATION THAT CERTAIN ITEMS ON APPLICABLE FINANCIAL STATEMENT BE SEPARATELY REPORTED WITH RESPECT TO CORPORATION. — An amount described in paragraph (1)(B) or clause (i)(II), (i)(III), (iv)(I), (iv)(II), (v)(I), or (v)(II) of paragraph (3)(C) shall be treated as reported on an applicable financial statement for purposes of this section if —

"(i) such amount is separately reported on such statement with respect to the corporation referred to in paragraph (1), or

"(ii) such amount is separately determined for purposes of calculating an amount which is reported on such statement.

"(D) AUTHORITY OF SECRETARY TO REQUIRE REPORTING. —

"(i) IN GENERAL. — Each United States person who owns an interest in a specified non-publicly traded foreign corporation and who takes the position that such corporation is not a passive foreign investment company shall report to the Secretary such information with respect to such corporation as the Secretary may require.

"(ii) SPECIFIED NON-PUBLICLY TRADED FOREIGN CORPORATION. — For purposes of this subparagraph, the term 'specified non-publicly traded foreign corporation' means any foreign corporation —

"(I) which would be a passive foreign investment company if subsection (b)(2)(B) did not apply, and

"(II) no interest in which is traded on an established securities market.".

(c) EFFECTIVE DATE. —

(1) IN GENERAL. — Except as otherwise provided in this subsection, the amendments made by this section shall take effect as if included in section 14501 of Public Law 115-97.

(2) REPORTING. — The amendment made by subsection (b) shall apply to reports made after the date of the enactment of this Act.

SEC. 138508. EXTENSION OF PERIOD OF LIMITATION FOR CERTAIN LEGALLY MARRIED COUPLES.

(a) IN GENERAL. — In the case of an individual first treated as married for purposes of the Internal Revenue Code of 1986 by the application of the holdings of Revenue Ruling 2013-17 —

(1) if such individual filed a return (other than a joint return) for a taxable year ending before September 16, 2013, for which a joint return could have been made by the individual and the individual's spouse but for the fact that such holdings were not effective at the time of filing, such return shall be treated as a separate return within the meaning of section 6013(b) of such Code and the time prescribed by section 6013(b)(2)(A) of such Code for filing a joint return after filing a separate return shall not expire before the date prescribed by law (including extensions) for filing the return of tax for the taxable year that includes the date of the enactment of this Act, and

(2) in the case of a joint return filed pursuant to paragraph (1) —

(A) the period of limitation prescribed by section 6511(a) of such Code for any such taxable year shall be extended until the date prescribed by law (including extensions) for filing the return of tax for the taxable year that includes the date of the enactment of this Act, and

(B) section 6511(b)(2) of such Code shall not apply to any claim of credit or refund with respect to such return.

(b) AMENDMENTS, ETC. RESTRICTED TO CHANGE IN MARITAL STATUS. — Subsection (a) shall apply only with respect to amendments to the return of tax, and claims for credit or refund, relating to a change in the marital status for purposes of the Internal Revenue Code of 1986 of the individual.

SEC. 138514. ALLOWANCE OF DEDUCTION FOR CERTAIN EXPENSES OF THE TRADE OR BUSINESS OF BEING AN EMPLOYEE.

(a) ABOVE-THE-LINE DEDUCTION FOR UNION DUES. — Section 62(a)(2) is amended by adding at the end the following new subparagraph:

"(F) UNION DUES. — In the case of any taxable year beginning after December 31, 2021, and before January 1, 2026, the deductions allowed by section 162 which are both —

"(A) not in excess of $250, and

"(B) attributable to a trade or business consisting of the performance of services by the taxpayer as an employee if such deductions are for dues paid to a labor organization described in section 501(c)(5) and with respect to which such taxpayer remained a member through the end of the taxable year.".

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138515. TEMPORARY INCREASE IN EMPLOYER-PROVIDED CHILD CARE CREDIT.

(a) IN GENERAL. — Section 45F is amended by adding at the end the following new subsection:

"(g) TEMPORARY INCREASE. — In the case of any taxable year beginning after December 31, 2021, and before January 1, 2026 —

"(1) INCREASE IN PERCENTAGE OF CREDIT FOR QUALIFIED CHILD CARE EXPENDITURES. — Subsection (a)(1) shall be applied by substituting '50 percent' for '25 percent'.

"(2) INCREASE IN DOLLAR LIMITATION. — Subsection (b) shall be applied by substituting '$500,000' for '$150,000'.

"(3) PRESERVATION OF DOLLAR LIMITATION ON QUALIFIED CHILD CARE RESOURCE AND REFERRAL EXPENDITURES. — The aggregate amount of qualified child care resource and referral expenditures which may be taken into account under subsection (a)(2) for any taxable year shall not exceed $1,500,000.".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138516. PAYROLL CREDIT FOR COMPENSATION OF LOCAL NEWS JOURNALISTS.

(a) IN GENERAL. — Subchapter D of chapter 21 is amended by adding at the end the following new section:

"SEC. 3135. LOCAL NEWS JOURNALIST COMPENSATION CREDIT.

"(a) IN GENERAL. — In the case of an eligible local news journalist employer, there shall be allowed as a credit against the taxes imposed by section 3111(b) for each calendar quarter an amount equal to the applicable percentage of wages paid by such employer to local news journalists for such calendar quarter.

"(b) LIMITATIONS AND REFUNDABILITY. —

"(1) NUMBER OF LOCAL NEWS JOURNALISTS TAKEN INTO ACCOUNT. — The number of local news journalists which may be taken into account under subsection (a) with respect to any eligible local news journalist employer for any calendar quarter shall not exceed 1,500.

"(2) WAGES TAKEN INTO ACCOUNT. — The amount of wages paid with respect to any individual which may be taken into account under subsection (a) during any calendar quarter by the eligible local news journalist employer shall not exceed $12,500.

"(3) CREDIT LIMITED TO EMPLOYMENT TAXES. — The credit allowed by subsection (a) with respect to any calendar quarter shall not exceed the taxes imposed by section 3111(b) on the wages paid with respect to the employment of all the employees of the eligible local news journalist employer for such calendar quarter.

"(4) REFUNDABILITY OF EXCESS CREDIT. — If the amount of the credit under subsection (a) exceeds the limitation of paragraph (3) for any calendar quarter, such excess shall be treated as an overpayment that shall be refunded under sections 6402(a) and 6413(b).

"(c) ELIGIBLE LOCAL NEWS JOURNALIST EMPLOYER. — For purposes of this section —

"(1) IN GENERAL. — The term 'eligible local news journalist employer' means, with respect to any calendar quarter, any employer which —

"(A) is —

"(i) an eligible local news organization, or

"(ii) a qualifying broadcast station, and

"(B) employs local news journalists.

"(2) ELIGIBLE LOCAL NEWS ORGANIZATION. — The term 'eligible local news organization' means, with respect to any calendar quarter, any employer —

"(A) which publishes one or more qualifying publications during the calendar quarter,

"(B) which is not a disqualified organization, and

"(C) which did not derive more than 50 percent of its gross receipts for such calendar quarter from disqualified organizations.

"(3) QUALIFYING BROADCAST STATION. — The term 'qualifying broadcast station' means, with respect to any calendar quarter, any employer —

"(A) which owns or operates a broadcast station (as defined in section 3 of the Communications Act of 1934),

"(B) which is not a disqualified organization,

"(C) which did not derive more than 50 percent of its gross receipts for such calendar quarter from disqualified organizations, and

"(D) which discloses its ownership to the public at such times and in such manner as identified by the Secretary.

"(d) OTHER DEFINITIONS. — For purposes of this section —

"(1) APPLICABLE PERCENTAGE. — The term 'applicable percentage' means —

"(A) in the case of each of the first 4 calendar quarters to which this section applies, 50 percent, and

"(B) in the case of each calendar quarter thereafter, 30 percent.

"(2) LOCAL NEWS JOURNALIST. —

"(A) IN GENERAL. — The term 'local news journalist' means, with respect to any eligible local news journalist employer for any calendar quarter, any full-time employee (as defined in section 4980H(c)(4)) who —

"(i) provides qualified services for an average of not less than 30 hours per week for each week during which such employee is employed by the eligible local news journalist employer during the calendar quarter, and

"(ii) resides within 50 miles of the local community with respect to the qualifying publication or qualifying broadcast station with respect to which the qualified services are provided.

"(B) QUALIFIED SERVICES. — For purposes of subparagraph (A)(ii), the term 'qualified services' means services —

"(i) which consist of gathering, preparing, directing the recording of, producing, collecting, photographing, recording, writing, editing, reporting, presenting, or publishing original local community news for dissemination to the local community, and

"(ii) which are provided with respect to —

"(I) a qualifying publication of an eligible local news organization, or

"(II) the local community of a qualifying broadcast station.

"(3) QUALIFYING PUBLICATION. — The term 'qualifying publication' means, with respect to any calendar quarter, any print or digital publication —

"(A) the primary purpose of which is to serve a local community by providing local news,

"(B) which —

"(i) is published during the calendar quarter, and

"(ii) has been published during each of the 4 calendar quarters preceding such calendar quarter,

"(C) which is covered by media liability insurance for such calendar quarter,

"(D) which discloses its ownership to the public at such times and in such manner as identified by the Secretary, and

"(E) which receives services from not more than 1,500 persons during such calendar quarter.

"(4) LOCAL COMMUNITY. — The term 'local community' means, with respect to any qualifying broadcast station or qualifying publication, a geographically contiguous area that does not exceed the boundaries of —

"(A) in the case of a qualifying broadcast station, the area for which the qualifying broadcast station is licensed to serve by the Federal Communications Commission under section 307 of the Communications Act of 1934, and

"(B) in the case of a qualifying publication —

"(i) the metropolitan or micropolitan statistical area, as defined by the Office of Management and Budget, in which the qualifying publication is primarily distributed,

"(ii) if such qualifying publication is not primarily distributed in a metropolitan or micropolitan statistical area, political subdivision of the State in which such qualifying publication is primarily distributed, or

"(iii) if such qualifying publication is not primarily distributed in a metropolitan or micropolitan statistical area or a political subdivision of a State, the State in which such qualifying publication is primarily distributed.

For purposes of subparagraph (B), in the case of a qualifying publication which is a digital publication, such qualifying publication shall be considered to be primarily distributed in the area where such publication is primarily consumed.

"(5) DISQUALIFIED ORGANIZATION. — The term 'disqualified organization' means —

"(A) any organization described in section 501(c)(4) and exempt from tax under section 501(a),

"(B) any organization described in section 527, and

"(C) any organization that is owned or controlled (directly or indirectly) by one or more organizations described in subparagraph (A) or (B).

"(6) GROSS RECEIPTS. —

"(A) IN GENERAL. — Except as provided in subparagraph (B), the term 'gross receipts' has the meaning given such term as used in section 448(c).

"(B) TAX-EXEMPT ORGANIZATIONS. — In the case of an organization which is described in section 501(c) and exempt from tax under section 501(a), any reference in this section to gross receipts shall be treated as a reference to gross receipts within the meaning of section 6033.

"(7) OTHER TERMS. — Any term used in this section which is also used in this chapter shall have the same meaning as when used in such chapter.

"(e) AGGREGATION RULE. — All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (m) or (o) of section 414, shall be treated as one employer for purposes of this section.

"(f) CERTAIN RULES TO APPLY. —

"(1) IN GENERAL. — For purposes of this section —

"(A) except as provided in paragraph (2), rules similar to the rules of section 51(i)(1) shall apply, and

"(B) rules similar to the rules of section 280C(a) shall apply.

"(2) EXCEPTION. — Paragraph (1)(A) shall not apply with respect to any local news journalist of an eligible local news journalist employer which employs fewer than 15 local news journalists during the calendar quarter.

"(g) CERTAIN GOVERNMENTAL EMPLOYERS. —

"(1) IN GENERAL. — This credit shall not apply to the Government of the United States, the government of any State or political subdivision thereof, or any agency or instrumentality of any of the foregoing.

"(2) EXCEPTION. — Paragraph (1) shall not apply to any public broadcasting entity (as defined in section 397(11) of the Communications Act of 1934 (47 U.S.C. 397(11))).

"(h) ELECTION TO HAVE SECTION NOT APPLY. — This section shall not apply with respect to any eligible local news journalist employer for any calendar quarter if such employer elects (at such time and in such manner as the Secretary may prescribe) not to have this section apply.

"(i) SPECIAL RULES. —

"(1) EMPLOYEE NOT TAKEN INTO ACCOUNT MORE THAN ONCE. — An employee shall not be included for purposes of this section for any period with respect to any employer if such employer is allowed a credit under section 51 with respect to such employee for such period.

"(2) DENIAL OF DOUBLE BENEFIT. — Any wages taken into account in determining the credit allowed under this section shall not be taken into account for purposes of determining the credit allowed under section 41, 45A, 45P, 45S, or 1396.

"(3) THIRD-PARTY PAYORS. — Any credit allowed under this section shall be treated as a credit described in section 3511(d)(2) of such Code.

"(j) TREATMENT OF DEPOSITS. — The Secretary shall waive any penalty under section 6656 for any failure to make a deposit of any taxes imposed under section 3111(b) if the Secretary determines that such failure was due to the reasonable anticipation of the credit allowed under this section.

"(k) EXTENSION OF LIMITATION ON ASSESSMENT. — 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 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).

"(l) REGULATIONS AND GUIDANCE. — The Secretary shall issue such forms, instructions, regulations, and guidance as are necessary —

"(1) with respect to the application of the credit under subsection (a) to third-party payors (including professional employer organizations, certified professional employer organizations, or agents under section 3504), including regulations or guidance allowing such payors to submit documentation necessary to substantiate the eligible employer status of employers that use such payors, and

"(2) to prevent the avoidance of the purposes of the limitations under this section.

Any forms, instructions, regulations, or other guidance described in paragraph (1) shall require the customer to be responsible for the accounting of the credit and for any liability for improperly claimed credits and shall require the certified professional employer organization or other third-party payor to accurately report such tax credits based on the information provided by the customer.

"(m) APPLICATION. — This section shall only apply to wages paid in calendar quarters beginning after the date of the enactment of this section and beginning before the date that is 5 years after the first day of the first calendar quarter to which this section applies.".

(b) REFUNDS. — Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting "3135," after "3134,".

(c) CLERICAL AMENDMENT. — The table of sections for subchapter D of chapter 21 is amended by adding at the end the following:

"Sec. 3135. Local news journalist compensation credit.".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to calendar quarters beginning after the date of the enactment of this Act.

SEC. 138517. ABOVE-THE-LINE DEDUCTION FOR EMPLOYEE UNIFORMS.

(a) IN GENERAL. — Section 62(a)(2), as amended by the preceding provision of this Act, is amended by adding at the end the following new subparagraph:

"(G) WORK CLOTHES AND UNIFORMS. — In the case of any taxable year beginning after December 31, 2021, and before January 1, 2025, the deductions allowed by section 162, not in excess of $250, which are attributable to a trade or business consisting of the performance of services by the taxpayer as an employee if such deductions are for uniforms or work clothing which are —

"(i) required to be worn as a condition of employment, and

"(ii) not suitable for everyday wear.".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138518. EXPENSES IN CONTINGENCY FEE CASES.

(a) IN GENERAL. — Section 162 is amended by redesignating subsection (s) as subsection (t) and by inserting after subsection (r) the following new subsection:

"(s) EXPENSES IN CONTINGENCY FEE CASES. — In the case of any amount paid or incurred in the ordinary course of the trade or business of practicing law the repayment of which is contingent on a recovery by judgment or settlement in the action to which such amount relates —

"(1) the deduction under subsection (a) shall be determined by disregarding the possibility that such amount will be repaid, and

"(2) income attributable to any related recovery shall not be reduced by such amount.".

(b) EFFECTIVE DATE. — The amendments made by this section shall apply to amounts paid, incurred, or received in taxable years beginning after the date of the enactment of this Act.

SEC. 138519. INCREASE IN RESEARCH CREDIT AGAINST PAYROLL TAX FOR SMALL BUSINESSES.

(a) IN GENERAL. — Clause (i) of section 41(h)(4)(B) is amended —

(1) by striking "AMOUNT. — The amount" and inserting "AMOUNT. —

"(I) IN GENERAL. — The amount", and

(2) by adding at the end the following new subclause:

"(II) INCREASE. — In the case of taxable years beginning after December 31, 2021, the amount in subclause

(I) shall be increased by $250,000.".

(b) ALLOWANCE OF CREDIT. —

(1) IN GENERAL. — Paragraph (1) of section 3111(f) is amended —

(A) by striking "for a taxable year, there shall be allowed" and inserting "for a taxable year —

"(A) there shall be allowed",

(B) by striking "equal to the" and inserting "equal to so much of the",

(C) by striking the period at the end and inserting "as does not exceed the limitation of subclause (I) of section 41(h)(4)(B)(i) (applied without regard to subclause (II) thereof), and", and

(D) by adding at the end the following new subparagraph:

"(B) there shall be allowed as a credit against the tax imposed by subsection (b) for the first calendar quarter which begins after the date on which the taxpayer files the return specified in section 41(h)(4)(A)(ii) an amount equal to so much of the payroll tax credit portion determined under section 41(h)(2) as is not allowed as a credit under subparagraph (A).".

(2) LIMITATION. — Paragraph (2) of section 3111(f) is amended —

(A) by striking "paragraph (1)" and inserting "paragraph (1)(A)", and

(B) by inserting ", and the credit allowed by paragraph (1)(B) shall not exceed the tax imposed by subsection (b) for any calendar quarter," after "calendar quarter".

(3) CARRYOVER. — Paragraph (3) of section 3111(f) is amended by striking "the credit" and inserting "any credit".

(4) DEDUCTION ALLOWED. — Paragraph (4) of section 3111(f) is amended —

(A) by striking "credit" and inserting "credits", and

(B) by striking "subsection (a)" and inserting "subsection (a) or (b)".

(c) AGGREGATION RULES. — Clause (ii) of section 41(h)(5)(B) is amended by striking "the $250,000 amount" and inserting "each of the $250,000 amounts".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2021.

SEC. 138520. IMPOSITION OF TAX ON NICOTINE.

(a) IN GENERAL. — Section 5701 is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection:

"(h) NICOTINE. — On taxable nicotine, manufactured in or imported into the United States, there shall be imposed a tax equal to the dollar amount specified in section 5701(b)(1) (or, if greater, $50.33) per 1,810 milligrams of nicotine (and a proportionate tax at the like rate on any fractional part thereof).".

(b) TAXABLE NICOTINE. — Section 5702 is amended by adding at the end the following new subsection:

"(q) TAXABLE NICOTINE. —

"(1) IN GENERAL. — Except as otherwise provided in this subsection, the term 'taxable nicotine' means any nicotine which has been extracted, concentrated, or synthesized.

"(2) EXCEPTION FOR PRODUCTS APPROVED BY FOOD AND DRUG ADMINISTRATION. — Such term shall not include any nicotine if the manufacturer or importer thereof demonstrates to the satisfaction of the Secretary of Health and Human Services that such nicotine will be used in —

"(A) a drug —

"(i) that is approved under section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of the Public Health Service Act; or

"(ii) for which an investigational use exemption has been authorized under section 505(i) of the Federal Food, Drug, and Cosmetic Act or under section 351(a) of the Public Health Service Act; or

"(B) a combination product (as described in section 503(g) of the Federal Food, Drug, and Cosmetic Act), the constituent parts of which were approved or cleared under section 505, 510(k), or 515 of such Act.

"(3) COORDINATION WITH TAXATION OF OTHER TOBACCO PRODUCTS. — Tobacco products meeting the definition of cigars, cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own tobacco in this section shall be classified and taxed as such despite any concentration of the nicotine inherent in those products or any addition of nicotine to those products during the manufacturing process.

"(4) REGULATIONS. — The Secretary shall prescribe such regulations or other guidance as is necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance for coordinating the taxation of tobacco products and taxable nicotine to protect revenue and prevent double taxation.".

(c) TAXABLE NICOTINE TREATED AS A TOBACCO PRODUCT. — Section 5702(c) is amended by striking "and roll-your-own tobacco" and inserting "roll-your-own tobacco, and taxable nicotine".

(d) MANUFACTURER OF TAXABLE NICOTINE. — Section 5702, as amended by subsection (b), is amended by adding at the end the following new subsection:

"(r) MANUFACTURER OF TAXABLE NICOTINE. —

"(1) IN GENERAL. — Any person who extracts, concentrates, or synthesizes nicotine shall be treated as a manufacturer of taxable nicotine (and as manufacturing such taxable nicotine).

"(2) APPLICATION OF RULES RELATED TO MANUFACTURERS OF TOBACCO PRODUCTS. — Any reference to a manufacturer of tobacco products, or to manufacturing tobacco products, shall be treated as including a reference to a manufacturer of taxable nicotine, or to manufacturing taxable nicotine, respectively.".

(e) EFFECTIVE DATE. —

(1) IN GENERAL. — The amendments made by this section shall apply to articles removed in calendar quarters beginning after the date which is 180 days after the date of the enactment of this Act.

(2) TRANSITION RULE FOR PERMIT AND BOND REQUIREMENTS. — A person which is lawfully engaged in business as a manufacturer or importer of taxable nicotine (within the meaning of subchapter A of chapter 52 of the Internal Revenue Code of 1986, as amended by this section) on the date of the enactment of this Act, first becomes subject to the requirements of subchapter B of chapter 52 of such Code by reason of the amendments made by this section, and submits an application under such subchapter B to engage in such business not later than 90 days after the date of the enactment of this Act, shall not be denied the right to carry on such business by reason of such requirements before final action on such application.

SEC. 138521. TERMINATION OF EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.

Section 45S(i) is amended by striking "December 31, 2025" and inserting "December 31, 2023".

Subtitle I — Drug Pricing

PART 1 — LOWERING PRICES THROUGH DRUG PRICE NEGOTIATION

SEC. 139001. PROVIDING FOR LOWER PRICES FOR CERTAIN HIGH-PRICED SINGLE SOURCE DRUGS.

(a) PROGRAM TO LOWER PRICES FOR CERTAIN HIGH-PRICED SINGLE SOURCE DRUGS. — Title XI of the Social Security Act is amended by adding after section 1184 (42 U.S.C. 1320e-3) the following new part:

"PART E — PRICE NEGOTIATION PROGRAM TO LOWER PRICES FOR CERTAIN HIGH-PRICED SINGLE SOURCE DRUGS

"SEC. 1191. ESTABLISHMENT OF PROGRAM.

"(a) IN GENERAL. — The Secretary shall establish a Drug Price Negotiation Program (in this part referred to as the 'program'). Under the program, with respect to each price applicability period, the Secretary shall —

"(1) publish a list of negotiation-eligible drugs and selected drugs in accordance with section 1192;

"(2) enter into agreements with manufacturers of selected drugs with respect to such period, in accordance with section 1193;

"(3) negotiate and, if applicable, renegotiate maximum fair prices for such selected drugs, in accordance with section 1194; and

"(4) carry out the administrative duties described in section 1196.

"(b) DEFINITIONS RELATING TO TIMING. — For purposes of this part:

"(1) INITIAL PRICE APPLICABILITY YEAR. — The term 'initial price applicability year' means a year (beginning with 2025).

"(2) PRICE APPLICABILITY PERIOD. — The term 'price applicability period' means, with respect to a qualifying single source drug, the period beginning with the first initial price applicability year with respect to which such drug is a selected drug and ending with the last year during which the drug is a selected drug.

"(3) SELECTED DRUG PUBLICATION DATE. — The term 'selected drug publication date' means, with respect to each initial price applicability year, February 1 of the year that begins 2 years prior to such year.

"(4) NEGOTIATION PERIOD. — The term 'negotiation period' means, with respect to an initial price applicability year with respect to a selected drug, the period —

"(A) beginning on the sooner of —

"(i) the date on which the manufacturer of the drug and the Secretary enter into an agreement under section 1193 with respect to such drug; or

"(ii) February 28 following the selected drug publication date with respect to such selected drug; and

"(B) ending on November 1 of the year that begins 2 years prior to the initial price applicability year.

"(c) OTHER DEFINITIONS. — For purposes of this part:

"(1) MAXIMUM FAIR PRICE ELIGIBLE INDIVIDUAL. — The term 'maximum fair price eligible individual' means, with respect to a selected drug —

"(A) in the case such drug is dispensed to the individual at a pharmacy, by a mail order service, or by another dispenser, an individual who is enrolled under a prescription drug plan under part D of title XVIII or an MA-PD plan under part C of such title if coverage is provided under such plan for such selected drug; and

"(B) in the case such drug is furnished or administered to the individual by a hospital, physician, or other provider of services or supplier, an individual who is enrolled under part B of title XVIII, including an individual who is enrolled under an MA plan under part C of such title, if such selected drug is covered under such part.

"(2) MAXIMUM FAIR PRICE. — The term 'maximum fair price' means, with respect to a year during a price applicability period and with respect to a selected drug (as defined in section 1192(c)) with respect to such period, the price published pursuant to section 1195 in the Federal Register for such drug and year.

"(3) UNIT. — The term 'unit' means, with respect to a drug or biological, the lowest identifiable amount (such as a capsule or tablet, milligram of molecules, or grams) of the drug or biological that is dispensed or furnished. The determination of a unit, with respect to a drug or biological, pursuant to this paragraph shall not be subject to administrative or judicial review.

"(4) TOTAL EXPENDITURES. — The term 'total expenditures' includes, in the case of expenditures with respect to part D of title XVIII, ingredient costs, dispensing fees, sales tax, and if applicable, vaccine administration fees. The term 'total expenditures' excludes, in the case of expenditures with respect to part B of such title, expenditures for a drug or biological that are bundled or packaged into the payment for another service.

"SEC. 1192. SELECTION OF NEGOTIATION-ELIGIBLE DRUGS AS SELECTED DRUGS.

"(a) IN GENERAL. — Not later than the selected drug publication date with respect to an initial price applicability year, in accordance with subsection (b), the Secretary shall select and publish in the Federal Register a list of —

"(1)(A) with respect to the initial price applicability year 2025, not more than 10 negotiation-eligible drugs described in subparagraph (A)(i) of subsection (d)(1), but not subparagraph (B) of such subsection, with respect to such year;

"(B) with respect to the initial price applicability year 2026, not more than 15 negotiation-eligible drugs described in subparagraph (A)(i) of subsection (d)(1), but not subparagraph (B) of such subsection, with respect to such year;

"(C) with respect to the initial price applicability year 2027, not more than 15 negotiation-eligible drugs described in subparagraph (A) of subsection (d)(1), but not subparagraph (B) of such subsection, with respect to such year; and

"(D) with respect to the initial price applicability year 2028 or a subsequent year, not more than 20 negotiation-eligible drugs described in subparagraph (A) of subsection (d)(1), but not subparagraph (B) of such subsection, with respect to such year; and

"(2) all negotiation-eligible drugs described in subparagraph (B) of such subsection with respect to such year.

Subject to subsection (c)(2) and section 1194(f)(5), each drug published on the list pursuant to the previous sentence shall be subject to the negotiation process under section 1194 for the negotiation period with respect to such initial price applicability year (and the renegotiation process under such section as applicable for any subsequent year during the applicable price applicability period).

"(b) SELECTION OF DRUGS. —

"(1) IN GENERAL. — In carrying out subsection (a)(1), subject to paragraph (2), the Secretary shall, with respect to an initial price applicability year —

"(A) rank a combined list of negotiation-eligible drugs described in subsection (d)(1)(A) according to the total expenditures for such drugs under parts B and D of title XVIII, as determined by the Secretary, during the most recent period of 12 months prior to the selected drug publication date (but ending not later than October 31 of the year prior to the year of such drug publication date), with respect to such year, for which data are available, with the negotiation-eligible drugs with the highest total expenditures being ranked the highest; and

"(B) select from such ranked combined list for inclusion on the published list described in subsection (a) with respect to such year the negotiation-eligible drugs with the highest such rankings.

"(2) HIGH SPEND PART D DRUGS FOR 2025 AND 2026. — With respect to the initial price applicability year 2025 and with respect to the initial price applicability year 2026, the Secretary shall apply paragraph (1) as if the reference to 'negotiation-eligible drugs described in subsection (d)(1)(A)' were a reference to 'negotiation-eligible drugs described in subsection (d)(1)(A)(i)' and as if the reference to 'total expenditures for such drugs under parts B and D of title XVIII' were a reference to 'total expenditures for such drugs under part D of title XVIII'.

"(c) SELECTED DRUG. —

"(1) IN GENERAL. — For purposes of this part, consistent with subsection (e)(2) and subject to paragraph (2), each negotiation-eligible drug included on the list published under subsection (a) with respect to an initial price applicability year shall be referred to as a 'selected drug' with respect to such year and each subsequent year beginning before the first year that begins after the date on which the Secretary determines at least one drug or biological product —

"(A) is approved or licensed (as applicable) —

"(i) under section 505(j) of the Federal Food, Drug, and Cosmetic Act using such drug as the listed drug; or

"(ii) under section 351(k) of the Public Health Service Act using such drug as the reference product; and

"(B) is marketed pursuant to such approval or licensure.

"(2) CLARIFICATION. — A negotiation-eligible drug —

"(A) that is included on the list published under subsection (a) with respect to an initial price applicability year; and

"(B) for which the Secretary makes a determination described in paragraph (1) before or during the negotiation period with respect to such initial price applicability year, shall not be subject to the negotiation process under section 1194 with respect to such negotiation period and shall continue to be considered a selected drug under this part with respect to the number of negotiation-eligible drugs published on the list under subsection (a) with respect to such initial price applicability year.

"(d) NEGOTIATION-ELIGIBLE DRUG. —

"(1) IN GENERAL. — For purposes of this part, subject to paragraph (2), the term 'negotiation-eligible drug' means, with respect to the selected drug publication date with respect to an initial price applicability year, a qualifying single source drug, as defined in subsection (e), that is described in either of the following subparagraphs (or, with respect to the initial price applicability year 2025 or 2026, that is described in subparagraph (A)(i) or (B)):

"(A) HIGH SPEND DRUGS. — The qualifying single source drug is, determined in accordance with subsection (e)(2) —

"(i) among the 50 qualifying single source drugs with the highest total expenditures under part D of title XVIII, as determined by the Secretary in accordance with paragraph (3), during the most recent period for which data are available of at least 12 months prior to the selected drug publication date (but ending no later than October 31 of the year prior to the year of such drug publication date), with respect to such year; or

"(ii) among the 50 qualifying single source drugs with the highest total expenditures under part B of title XVIII, as determined by the Secretary in accordance with paragraph (3), during such most recent period, as described in clause (i).

"(B) INSULIN. — The qualifying single source drug is described in subsection (e)(1)(C).

"(2) EXCEPTION FOR SMALL BIOTECH DRUGS. —

"(A) IN GENERAL. — Subject to subparagraph (C), the term 'negotiation-eligible drug' shall not include, with respect to the initial price applicability years 2025, 2026, and 2027, a qualifying single source drug that meets either of the following:

"(i) PART D DRUGS. — The total expenditures for the qualifying single source drug under part D of title XVIII, as determined by the Secretary in accordance with paragraph (3), during 2021 —

"(I) are equal to or less than 1 percent of the total expenditures under such part D, as so determined, for all covered part D drugs during such year; and

"(II) are equal to at least 80 percent of the total expenditures under such part D, as so determined, for all covered part D drugs for which the manufacturer of the drug has an agreement in effect under section 1860D-14A during such year.

"(ii) PART B DRUGS. — The total expenditures for the qualifying single source drug under part B of title XVIII, as determined by the Secretary in accordance with paragraph (3), during 2021 —

"(I) are equal to or less than 1 percent of the total expenditures under such part B, as so determined, for all qualifying single source drugs covered under such part B during such year; and

"(II) are equal to at least 80 percent of the total expenditures under such part B, as so determined, for all qualifying single source drugs of the manufacturer that are covered under such part B during such year.

"(B) CLARIFICATIONS RELATING TO MANUFACTURERS. —

"(i) AGGREGATION RULE. — All persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 shall be treated as one manufacturer for purposes of this paragraph.

"(ii) LIMITATION. — A qualifying single source drug described in subparagraph (A) shall not include a qualifying single source drug of a manufacturer if such manufacturer is acquired after 2021 by another manufacturer that does not meet the definition of a specified manufacturer under section 1860D-14C(g)(4)(B)(ii)), effective at the beginning of the plan year immediately following such acquisition or, in the case of an acquisition before 2024, effective January 1, 2024.

"(C) DRUGS NOT INCLUDED AS SMALL BIOTECH DRUGS. — The following shall not be considered a qualifying single source drug described in subparagraph (A):

"(i) A vaccine that is licensed under section 351 of the Public Health Service Act and is marketed pursuant to such section.

"(ii) A new formulation, such as an extended release formulation, of a qualifying single source drug.

"(iii) A qualifying single source drug described in subsection (e)(1)(C).

"(3) CLARIFICATIONS AND DETERMINATIONS. —

"(A) PREVIOUSLY SELECTED DRUGS AND SMALL BIOTECH DRUGS EXCLUDED. — In applying clauses (i) and (ii) of paragraph (1)(A), the Secretary shall not consider or count —

"(i) drugs that are already selected drugs; and

"(ii) for initial price applicability years 2025, 2026, and 2027, qualifying single source drugs described in paragraph (2)(A).

"(B) USE OF DATA. — In determining whether a qualifying single source drug satisfies any of the criteria described in paragraph (1) or (2), the Secretary shall use data that is aggregated across dosage forms and strengths of the drug, including new formulations of the drug, such as an extended release formulation, and not based on the specific formulation or package size or package type of the drug.

"(4) PUBLICATION. — Not later than the selected drug publication date with respect to an initial price applicability year, the Secretary shall publish in the Federal Register a list of negotiation-eligible drugs with respect to such selected drug publication date.

"(e) QUALIFYING SINGLE SOURCE DRUG. —

"(1) IN GENERAL. — For purposes of this part, the term 'qualifying single source drug' means, with respect to an initial price applicability year, subject to paragraphs (2) and (3), a covered part D drug (as defined in section 1860D-2(e)) that is described in any of the following or a drug or biological product covered under part B of title XVIII that is described in any of the following:

"(A) DRUG PRODUCTS. — A drug —

"(i) that is approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act and is marketed pursuant to such approval;

"(ii) for which, as of the selected drug publication date with respect to such initial price applicability year, at least 7 years will have elapsed since the date of such approval; and

"(iii) that is not the listed drug for any drug that is approved and marketed under section 505(j) of such Act.

"(B) BIOLOGICAL PRODUCTS. — A biological product —

"(i) that is licensed under section 351(a) of the Public Health Service Act and is marketed under section 351 of such Act;

"(ii) for which, as of the selected drug publication date with respect to such initial price applicability year, at least 10 years will have elapsed since the date of such licensure; and

"(iii) that is not the reference product for any biological product that is licensed and marketed under section 351(k) of such Act.

"(C) INSULIN PRODUCT. — Any insulin product that is approved under section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of the Public Health Service Act and marketed pursuant to such approval or licensure, including any insulin product that has been deemed to be licensed under section 351 of the Public Health Service Act pursuant to section 7002(e)(4) of the Biologics Price Competition and Innovation Act of 2009 and is marketed pursuant to such section, regardless of whether such insulin product would be described in subparagraph (A) or (B).

"(2) TREATMENT OF AUTHORIZED GENERIC DRUGS. —

"(A) IN GENERAL. — In the case of a qualifying single source drug described in subparagraph (A) or (B) of paragraph (1) that is the listed drug (as such term is used in section 505(j) of the Federal Food, Drug, and Cosmetic Act) or the reference product (as defined in section 351(i) of the Public Health Service Act), with respect to an authorized generic drug, in applying the provisions of this part, such authorized generic drug and such listed drug or reference product shall be treated as the same qualifying single source drug.

"(B) AUTHORIZED GENERIC DRUG DEFINED. — For purposes of this paragraph, the term 'authorized generic drug' means —

"(i) in the case of a drug, an authorized generic drug (as such term is defined in section 505(t)(3) of the Federal Food, Drug, and Cosmetic Act); and

"(ii) in the case of a biological product, a reference product (as such term is defined in section 351(i) of the Public Health Service Act) that —

"(I) has been licensed under section 351(a) of such Act; and

"(II) is marketed, sold, or distributed directly or indirectly to retail class of trade under a different labeling, packaging (other than repackaging as the reference product in blister packs, unit doses, or similar packaging for use in institutions), product code, labeler code, trade name, or trade mark than the reference product.

"(3) EXCLUSIONS. — In this part, the term 'qualifying single source drug' does not include any of the following:

"(A) CERTAIN ORPHAN DRUGS. — A drug that is designated as a drug for only one rare disease or condition under section 526 of the Federal Food, Drug, and Cosmetic Act and for which the only approved indication (or indications) is for such disease or condition.

"(B) LOW SPEND MEDICARE DRUGS. — A drug or biological product (other than an insulin product described in paragraph (1)(C)) with respect to which the total expenditures under parts B and D of title XVIII, as determined by the Secretary, during the most recent period for which data are available of at least 12 months prior to the selected drug publication date (but ending no later than October 31 of the year prior to the year of such drug publication date), with respect to such year is less than —

"(i) with respect to 2021, $200,000,000; or

"(ii) with respect to a subsequent year, the dollar amount specified in this subparagraph for the previous year increased by the annual percentage increase in the consumer price index (all items; U.S. city average) as of December of such previous year.

"(f) NO ADMINISTRATIVE OR JUDICIAL REVIEW OF DETERMINATIONS AND SELECTIONS. — The determination of negotiation-eligible drugs under subsection (d) and the selection of drugs under this section are not subject to administrative or judicial review.

"SEC. 1193. MANUFACTURER AGREEMENTS.

"(a) IN GENERAL. — For purposes of section 1191(a)(2), the Secretary shall enter into agreements with manufacturers of selected drugs with respect to a price applicability period, by not later than February 28 following the selected drug publication date with respect to such selected drug, under which —

"(1) during the negotiation period for the initial price applicability year for the selected drug, the Secretary and manufacturer, in accordance with section 1194, negotiate to determine (and, by not later than the last date of such period, agree to) a maximum fair price for such selected drug of the manufacturer in order for the manufacturer to provide access to such price —

"(A) to maximum fair price eligible individuals who with respect to such drug are described in subparagraph (A) of section 1191(c)(1) and are dispensed such drug (and to pharmacies, mail order services, and other dispensers, with respect to such maximum fair price eligible individuals who are dispensed such drugs) during, subject to subparagraph (2), the price applicability period; and

"(B) to hospitals, physicians, and other providers of services and suppliers with respect to maximum fair price eligible individuals who with respect to such drug are described in subparagraph (B) of such section and are furnished or administered such drug during, subject to subparagraph (2), the price applicability period;

"(2) the Secretary and the manufacturer shall, in accordance with section 1194, renegotiate (and, by not later than the last date of such period, agree to) the maximum fair price for such drug, in order for the manufacturer to provide access to such maximum fair price (as so renegotiated) —

"(A) to maximum fair price eligible individuals who with respect to such drug are described in subparagraph (A) of section 1191(c)(1) and are dispensed such drug (and to pharmacies, mail order services, and other dispensers, with respect to such maximum fair price eligible individuals who are dispensed such drugs) during any year during the price applicability period (beginning after such renegotiation) with respect to such selected drug; and

"(B) to hospitals, physicians, and other providers of services and suppliers with respect to maximum fair price eligible individuals who with respect to such drug are described in subparagraph (B) of such section and are furnished or administered such drug during any year described in subparagraph (A);

"(3) access to the maximum fair price (including as renegotiated pursuant to paragraph (2)), with respect to such a selected drug, shall be provided by the manufacturer to —

"(A) maximum fair price eligible individuals, who with respect to such drug are described in subparagraph (A) of section 1191(c)(1), at the pharmacy, mail order service, or other dispenser at the point-of-sale of such drug (and shall be provided by the manufacturer to the pharmacy, mail order service, or other dispenser, with respect to such maximum fair price eligible individuals who are dispensed such drugs), as described in paragraph (1)(A) or (2)(A), as applicable; and

"(B) hospitals, physicians, and other providers of services and suppliers with respect to maximum fair price eligible individuals who with respect to such drug are described in subparagraph (B) of such section and are furnished or administered such drug, as described in paragraph (1)(B) or (2)(B), as applicable;

"(4) the manufacturer, subject to subsection (d), submits to the Secretary, through an online portal established by the Secretary or other form and manner specified by the Secretary, for the negotiation period for the price applicability period (and, if applicable, before any period of renegotiation pursuant to section 1194(f)) with respect to such drug —

"(A) information on the non-Federal average manufacturer price for the drug for the applicable year or period; and

"(B) all other information that the Secretary requires to carry out the negotiation (or renegotiation process) under this part, including information described in section 1194(e)(1); and

"(5) the manufacturer complies with requirements imposed by the Secretary for purposes of administering the program, including with respect to the duties described in section 1196.

"(b) AGREEMENT IN EFFECT UNTIL DRUG IS NO LONGER A SELECTED DRUG. — An agreement entered into under this section shall be effective, with respect to a selected drug, until such drug is no longer considered a selected drug under section 1192(c).

"(c) CONFIDENTIALITY OF INFORMATION. — Information submitted to the Secretary under this part by a manufacturer of a selected drug that is proprietary information of such manufacturer (as determined by the Secretary) shall be used only by the Secretary or disclosed to and used by the Comptroller General of the United States or the Medicare Payment Advisory Commission for purposes of carrying out this part.

"(d) IMPLEMENTATION FOR 2025 AND 2026. — Notwithstanding any other provision of this part, the Secretary shall implement this section for 2025 and 2026 by program instruction or otherwise.

"SEC. 1194. NEGOTIATION AND RENEGOTIATION PROCESS.

"(a) IN GENERAL. — For purposes of this part, under an agreement under section 1193 between the Secretary and a manufacturer of a selected drug, with respect to the period for which such agreement is in effect and in accordance with subsections (b), (c), and (d), the Secretary and the manufacturer —

"(1) shall during the negotiation period with respect to such drug, in accordance with this section, negotiate a maximum fair price for such drug for the purpose described in section 1193(a)(1); and

"(2) renegotiate, in accordance with the process specified pursuant to subsection (f), such maximum fair price for such drug if such drug is a renegotiation-eligible drug under such subsection.

"(b) NEGOTIATION PROCESS REQUIREMENTS. —

"(1) METHODOLOGY AND PROCESS. — The Secretary shall develop and use a consistent methodology and process, in accordance with paragraph (2), for negotiations under subsection (a) that aims to achieve the lowest maximum fair price for each selected drug.

"(2) SPECIFIC ELEMENTS OF NEGOTIATION PROCESS. — As part of the negotiation process under this section, with respect to a selected drug and the negotiation period with respect to the initial price applicability year with respect to such drug, the following shall apply:

"(A) SUBMISSION OF INFORMATION. — Not later than March 1 of the year of the selected drug publication date, with respect to the selected drug, the manufacturer of the drug shall submit to the Secretary, in accordance with section 1193(a)(4), the information described in such section.

"(B) INITIAL OFFER BY SECRETARY. — Not later than the June 1 following the selected drug publication date, the Secretary shall provide the manufacturer of a selected drug with a written initial offer that contains the Secretary's proposal for the maximum fair price of the drug and a list of the considerations described in section 1194(e) that were used in developing such offer.

"(C) RESPONSE TO INITIAL OFFER. —

"(i) IN GENERAL. — Not later than 30 days after the date of receipt of an initial offer under subparagraph (B), the manufacturer shall either accept such offer or propose a counteroffer to such offer.

"(ii) COUNTEROFFER REQUIREMENTS. — If a manufacturer proposes a counteroffer, such counteroffer —

"(I) shall be in writing; and

"(II) shall be justified based on the factors described in subsection (e).

"(D) RESPONSE TO COUNTEROFFER. — After receiving a counteroffer under subparagraph (C), the Secretary shall respond in writing to such counteroffer.

"(E) DEADLINE. — All negotiations shall end prior to the first day of November following the selected drug publication date, with respect to the initial price applicability year.

"(F) LIMITATIONS ON OFFER AMOUNT. — In negotiating the maximum fair price of a selected drug, with respect to an initial price applicability year for the selected drug, and, as applicable, in renegotiating the maximum fair price for such drug, with respect to a subsequent year during the price applicability period for such drug, the Secretary shall not offer (or agree to a counteroffer for) a maximum fair price for the selected drug that —

"(i) exceeds the ceiling determined under subsection (c) for the selected drug and year; or

"(ii) as applicable, is less than the floor determined under subsection (d) for the selected drug and year.

"(G) TREATMENT OF DETERMINATION. — The establishment of a maximum fair price under this section is not subject to administrative or judicial review.

"(c) CEILING FOR MAXIMUM FAIR PRICE. —

"(1) IN GENERAL. — The maximum fair price negotiated under this section for a selected drug, with respect to the first year of the price applicability period with respect to such drug, shall not exceed the applicable percent described in paragraph (2), with respect to such drug, of the following:

"(A) INITIAL PRICE APPLICABILITY YEAR 2025. — In the case of a selected drug with respect to which such initial price applicability year is 2025, the non-Federal average manufacturer price for such drug for 2020 (or, in the case that there is not a non-Federal average manufacturer price available for such drug for 2020, for the first full year following the market entry for such drug), increased by the percentage increase in the consumer price index for all urban consumers (all items; United States city average) from 2020 (or such first full year following the market entry), as applicable, to the year prior to the selected drug publication date with respect to such initial price applicability year.

"(B) INITIAL PRICE APPLICABILITY YEAR 2026 AND SUBSEQUENT YEARS. — In the case of a selected drug with respect to which such initial price applicability year is 2026 or a subsequent year, the lower of —

"(i) the non-Federal average manufacturer price for such drug for 2020 (or, in the case that there is not a non-Federal average manufacturer price available for such drug for 2020, for the first full year following the market entry for such drug), increased by the percentage increase in the consumer price index for all urban consumers (all items; United States city average) from 2020 (or such first full year following the market entry), as applicable, to the year prior to the selected drug publication date with respect to such initial price applicability year; or

"(ii) the non-Federal average manufacturer price for such drug for the year prior to the selected drug publication date with respect to such initial price applicability year.

"(2) APPLICABLE PERCENT DESCRIBED. — For purposes of paragraph (1), the applicable percent described in this paragraph is the following:

"(A) SHORT-MONOPOLY DRUGS. — With respect to a selected drug (other than a post-exclusivity drug and a long-monopoly drug), 75 percent.

"(B) POST-EXCLUSIVITY DRUGS. — With respect to a post-exclusivity drug, 65 percent.

"(C) LONG-MONOPOLY DRUGS. — With respect to a long-monopoly drug, 40 percent.

"(3) POST-EXCLUSIVITY DRUG DEFINED. —

"(A) IN GENERAL. — In this part, subject to subparagraph (B), the term 'post-exclusivity drug' means, with respect to an initial price applicability year, a selected drug for which at least 12 years, but fewer than 16 years, have elapsed since the date of approval of such drug under section 505(c) of the Federal Food, Drug, and Cosmetic Act or since the date of licensure of such drug under section 351(a) of the Public Health Service Act, as applicable.

"(B) EXCLUSIONS. — The term 'post-exclusivity drug' shall not include any of the following:

"(i) A vaccine that is licensed under section 351 of the Public Health Service Act and marketed pursuant to such section.

"(ii) A selected drug that had an agreement under this part with the Secretary prior to the initial price applicability year 2030.

"(C) CLARIFICATION. — Nothing in subparagraph (B)(ii) shall limit the transition of a selected drug described in paragraph (2)(A) to a long-monopoly drug if the selected drug meets the definition of a long-monopoly drug.

"(4) LONG-MONOPOLY DRUG DEFINED. —

"(A) IN GENERAL. — In this part, subject to subparagraph (B), the term 'long-monopoly drug' means, with respect to an initial price applicability year, a selected drug for which at least 16 years have elapsed since the date of approval of such drug under section 505(c) of the Federal Food, Drug, and Cosmetic Act or since the date of licensure of such drug under section 351(a) of the Public Health Service Act, as applicable.

"(B) EXCLUSION. — The term 'long-monopoly drug' shall not include a vaccine that is licensed under section 351 of the Public Health Service Act and marketed pursuant to such section.

"(5) NON-FEDERAL AVERAGE MANUFACTURER PRICE. — In this part, the term 'non-Federal average manufacturer price' has the meaning given such term in section 8126(h)(5) of title 38, United States Code.

"(d) TEMPORARY FLOOR FOR SMALL BIOTECH DRUGS. — In the case of a selected drug that is a qualifying single source drug described in section 1192(d)(2) and with respect to which the first initial price applicability year of the price applicability period with respect to such drug is 2028 or 2029, the maximum fair price negotiated under this section for such drug for such initial price applicability year may not be less than 66 percent of the non-Federal average manufacturer price for such drug (as defined and applied in subsection (c)(4)) for 2020 (or, in the case that there is not a non-Federal average manufacturer price available for such drug for 2020, for the first full year following the market entry for such drug), increased by the percentage increase in the consumer price index for all urban consumers (all items; United States city average) from 2020 (or such first full year following the market entry), as applicable, to the year prior to the selected drug publication date with respect to the initial price applicability year.

"(e) CONSIDERATIONS. — For purposes of negotiating the maximum fair price of a selected drug under this part with the manufacturer of the drug, the Secretary shall consider the following factors (and, with respect to post-exclusivity drugs and long-monopoly drugs, shall not consider factors other than those described in subparagraphs (B) and (C) of paragraph (1)):

"(1) MANUFACTURER-SPECIFIC INFORMATION. — The following information, with respect to such selected drug, including as submitted by the manufacturer:

"(A) Research and development costs of the manufacturer for the drug and the extent to which the manufacturer has recouped research and development costs.

"(B) Market data for the drug, including the distribution of sales across different programs and purchasers and projected future revenues for the drug.

"(C) Unit costs of production and distribution of the drug.

"(D) Prior Federal financial support for novel therapeutic discovery and development with respect to the drug.

"(E) Data on patents and on existing and pending exclusivity for the drug.

"(F) National sales data for the drug.

"(G) Information on clinical trials for the drug.

"(2) INFORMATION ON UNMET MEDICAL NEEDS AND ALTERNATIVE TREATMENTS. — The following information, with respect to such selected drug:

"(A) The extent to which the drug represents a therapeutic advance as compared to existing therapeutic alternatives and, to the extent such information is available, the costs of such existing therapeutic alternatives.

"(B) Information on approval by the Food and Drug Administration of alternative drug products or biological products.

"(C) Information on comparative effectiveness analysis for such products, taking into consideration the effects of such products on specific populations, such as individuals with disabilities, the elderly, the terminally ill, children, and other patient populations.

"(D) The extent to which the drug addresses unmet medical needs for a condition for which treatment or diagnosis is not addressed adequately by available therapy.

In considering information described in subparagraph (C), the Secretary shall not use evidence or findings from comparative clinical effectiveness research in a manner that treats extending the life of an elderly, disabled, or terminally ill individual as of lower value than extending the life of an individual who is younger, nondisabled, or not terminally ill.

"(3) ADDITIONAL INFORMATION. — Information submitted to the Secretary, in accordance with a process specified by the Secretary, by other parties that are affected by the establishment of a maximum fair price for the selected drug.

"(f) RENEGOTIATION PROCESS. —

"(1) IN GENERAL. — In the case of a renegotiation-eligible drug (as defined in paragraph (2)) that is selected under paragraph (3), the Secretary shall provide for a process of renegotiation (for years (beginning with 2027) during the price applicability period, with respect to such drug) of the maximum fair price for such drug consistent with paragraph (4).

"(2) RENEGOTIATION-ELIGIBLE DRUG DEFINED. — In this section, the term 'renegotiation-eligible drug' means a selected drug that is any of the following:

"(A) ADDITION OF NEW INDICATION. — A selected drug for which a new indication is added to the drug.

"(B) CHANGE OF STATUS TO A POST-EXCLUSIVITY DRUG. — A selected drug that is described in section 1192(d)(1)(A) that —

"(i) is not a post-exclusivity drug or a long-monopoly drug; and

"(ii) for which there is a change in status to that of a post-exclusivity drug.

"(C) CHANGE OF STATUS TO A LONG-MONOPOLY DRUG. — A selected drug that is described in section 1192(d)(1)(A) that —

"(i) is not a long-monopoly drug; and

"(ii) for which there is a change in status to that of a long-monopoly drug.

"(D) MATERIAL CHANGES. — A selected drug for which the Secretary determines there has been a material change of factors described in paragraph (1) or (2) of subsection (e).

"(3) SELECTION OF DRUGS FOR RENEGOTIATION. — Each year the Secretary shall select among renegotiation-eligible drugs for renegotiation as follows:

"(A) ALL POST-EXCLUSIVITY NEGOTIATION-ELIGIBLE DRUGS. — The Secretary shall select all renegotiation-eligible drugs described in paragraph (2)(B).

"(B) ALL LONG-MONOPOLY NEGOTIATION-ELIGIBLE DRUGS. — The Secretary shall select all renegotiation-eligible drugs described in paragraph (2)(C).

"(C) REMAINING DRUGS. — Among the remaining renegotiation-eligible drugs described in subparagraphs (A) and (D) of paragraph (2), the Secretary shall select renegotiation-eligible drugs for which the Secretary expects renegotiation is likely to result in a significant change in the maximum fair price otherwise negotiated.

"(4) RENEGOTIATION PROCESS. — The Secretary shall specify the process for renegotiation of maximum fair prices with the manufacturer of a renegotiation-eligible drug selected for renegotiation under this subsection. Such process shall, to the extent practicable, be consistent with the methodology and process established under subsection (b) and in accordance with subsections (c) and (d), and for purposes of applying subsections (c) and (d), the reference to the first initial price applicability year of the price applicability period with respect to such drug shall be treated as the first initial price applicability year of such period for which the maximum fair price established pursuant to such renegotiation applies, including for applying subsection (c)(2)(B) in the case of renegotiation-eligible drugs described in paragraph (3)(A) of this subsection and subsection (c)(2)(C) in the case of renegotiation-eligible drugs described in paragraph (3)(B) of this subsection.

"(5) CLARIFICATION. — A renegotiation-eligible drug for which the Secretary makes a determination described in section 1192(c)(1) before or during the period of renegotiation shall not be subject to the renegotiation process under this section.

"(6) NO ADMINISTRATIVE OR JUDICIAL REVIEW. — The determination of renegotiation-eligible drugs under paragraph (2) and the selection of renegotiation-eligible drugs under paragraph (3) are not subject to administrative or judicial review.

"(g) REQUEST FOR INFORMATION. — For purposes of negotiating and, as applicable, renegotiating (including for purposes of determining whether to renegotiate) the maximum fair price of a selected drug under this part with the manufacturer of the drug, with respect to a price applicability period, and other relevant data for purposes of this section —

"(1) the Secretary shall, not later than the selected drug publication date with respect to the initial price applicability year of such period, request drug pricing information from the manufacturer of such selected drug, including information described in subsection (e)(1); and

"(2) by not later than March 1 following the selected drug publication date, the manufacturer of such selected drug shall submit to the Secretary such requested information in such form and manner as the Secretary requires.

The Secretary shall request, from the manufacturer or others, all additional information needed to carry out the negotiation and renegotiation process under this section.

"(h) IMPLEMENTATION FOR 2025 AND 2026. — Notwithstanding any other provision of this part, the Secretary shall implement this section for 2025 and 2026 by program instruction or otherwise.

"SEC. 1195. PUBLICATION OF MAXIMUM FAIR PRICES.

"(a) IN GENERAL. — With respect to an initial price applicability year and a selected drug with respect to such year —

"(1) not later than November 15 of the year that is 2 years prior to such initial price applicability year, the Secretary shall publish on CMS.gov the maximum fair price for such drug negotiated under this part with the manufacturer of such drug;

"(2) not later than November 30 of the year that is 2 years prior to such initial price applicability year, the Secretary shall publish in the Federal Register the maximum fair price for such drug described in paragraph (1); and

"(3) not later than March 1 of the year prior to such initial price applicability year, the Secretary shall publish in the Federal Register, subject to section 1193(c) and based on the considerations as described in section 1194(e), the explanation for the maximum fair price for such drug described in paragraphs (1) and (2).

"(b) UPDATES. —

"(1) SUBSEQUENT YEAR MAXIMUM FAIR PRICES. — For a selected drug, for each year subsequent to first initial price applicability year of the price applicability period with respect to such drug, with respect to which an agreement for such drug is in effect under section 1193, not later than November 30 of the year that is 2 years prior to such subsequent year, the Secretary shall publish in the Federal Register the maximum fair price applicable to such drug and year, which shall be —

"(A) subject to subparagraph (B), the amount equal to the maximum fair price published for such drug for the previous year, increased by the annual percentage increase in the consumer price index for all urban consumers (all items; U.S. city average) as of September of such previous year; or

"(B) in the case the maximum fair price for such drug was renegotiated, for the first year for which such price as so renegotiated applies, such renegotiated maximum fair price.

"(2) PRICES NEGOTIATED AFTER DEADLINE. — In the case of a selected drug with respect to an initial price applicability year for which the maximum fair price is determined under this part after the date of publication under this section, the Secretary shall publish such maximum fair price in the Federal Register by not later than 30 days after the date such maximum price is so determined.

"SEC. 1196. ADMINISTRATIVE DUTIES; COORDINATION PROVISIONS.

"(a) ADMINISTRATIVE DUTIES. —

"(1) IN GENERAL. — For purposes of section 1191, the administrative duties described in this section are the following:

"(A) The establishment of procedures to ensure that the maximum fair price for a selected drug is applied before —

"(i) any coverage or financial assistance under other health benefit plans or programs that provide coverage or financial assistance for the purchase or provision of prescription drug coverage on behalf of maximum fair price eligible individuals; and

"(ii) any other discounts.

"(B) The establishment of procedures to compute and apply the maximum fair price across different strengths and dosage forms of a selected drug and not based on the specific formulation or package size or package type of the drug.

"(C) The establishment of procedures to carry out the provisions of this part, as applicable, with respect to —

"(i) maximum fair price eligible individuals who are enrolled under a prescription drug plan under part D of title XVIII or an MA-PD plan under part C of such title; and

"(ii) maximum fair price eligible individuals who are enrolled under part B of such title, including who are enrolled under an MA plan under part C of such title.

"(D) The establishment of a negotiation process and renegotiation process in accordance with section 1194, including a process for acquiring information described in subsection (e) of such section.

"(E) The establishment of an online portal which manufacturers shall be required to use to submit information described in section 1194(b)(2)(A).

"(F) The sharing with the Secretary of the Treasury of such information as is necessary to determine the tax imposed by section 4192 of the Internal Revenue Code of 1986 (relating to enforcement of this part).

"(G) The establishment of an attestation and verification process for purposes of applying section 1192(d)(2)(B).

"(2) MONITORING COMPLIANCE. — The Secretary shall monitor compliance by a manufacturer with the terms of an agreement under section 1193, including by establishing a mechanism through which violations of such terms shall be reported.

"(b) IMPLEMENTATION FOR 2025 AND 2026. — Notwithstanding any other provision of this part, the Secretary shall implement this section for 2025 and 2026 by program instruction or otherwise.

"SEC. 1197. CIVIL MONETARY PENALTY.

"(a) VIOLATIONS RELATING TO OFFERING OF MAXIMUM FAIR PRICE. — Any manufacturer of a selected drug that has entered into an agreement under section 1193, with respect to a year during the price applicability period with respect to such drug, that does not provide access to a price that is not more than the maximum fair price (or a lesser price) for such drug for such year —

"(1) to a maximum fair price eligible individual who with respect to such drug is described in subparagraph (A) of section 1191(c)(1) and who is dispensed such drug during such year (and to pharmacies, mail order services, and other dispensers, with respect to such maximum fair price eligible individuals who are dispensed such drugs); or

"(2) to a hospital, physician, or other provider of services or supplier with respect to maximum fair price eligible individuals who with respect to such drug is described in subparagraph (B) of such section and is furnished or administered such drug by such hospital, physician, or provider or supplier during such year; shall be subject to a civil monetary penalty equal to ten times the amount equal to the product of the number of units of such drug so furnished, dispensed, or administered during such year and the difference between the price for such drug made available for such year by such manufacturer with respect to such individual or hospital, physician, provider of services, or supplier and the maximum fair price for such drug for such year.

"(b) VIOLATIONS OF CERTAIN TERMS OF AGREEMENT. — Any manufacturer of a selected drug that has entered into an agreement under section 1193, with respect to a year during the price applicability period with respect to such drug, that is in violation of a requirement imposed pursuant to section 1193(a)(5), including the requirement to submit information pursuant to section 1193(a)(4), shall be subject to a civil monetary penalty equal to $1,000,000 for each day of such violation.

"(c) FALSE INFORMATION. — Any manufacturer that knowingly provides false information for the attestation process or verification process established pursuant to section 1196(a)(1)(H), shall be subject to a civil monetary penalty equal to $100,000,000 for each item of such false information.

"(d) APPLICATION. — The provisions of section 1128A (other than subsections (a) and (b)) shall apply to a civil monetary penalty under this section in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a).".

(b) APPLICATION OF MAXIMUM FAIR PRICES AND CONFORMING AMENDMENTS. —

(1) UNDER MEDICARE. —

(A) APPLICATION TO PAYMENTS UNDER PART B. — Section 1847A(b)(1)(B) of the Social Security Act (42 U.S.C. 1395w-3a(b)(1)(B)) is amended by inserting "or in the case of such a drug or biological that is a selected drug (as referred to in section 1192(c)), with respect to a price applicability period (as defined in section 1191(b)(2)), 106 percent of the maximum fair price (as defined in section 1191(c)(2)) applicable for such drug and a year during such period" after "paragraph (4)".

(B) APPLICATION UNDER MA OF COST-SHARING FOR PART B DRUGS BASED OFF OF NEGOTIATED PRICE. — Section 1852(a)(1)(B)(iv) of the Social Security Act (42 U.S.C. 1395w-22(a)(1)(B)(iv)) is amended —

(i) by redesignating subclause (VII) as subclause (VIII); and

(ii) by inserting after subclause (VI) the following subclause:

"(VII) A drug or biological that is a selected drug (as referred to in section 1192(c)).".

(C) EXCEPTION TO PART D NON-INTERFERENCE. — Section 1860D-11(i) of the Social Security Act (42 U.S.C. 1395w-111(i)) is amended —

(i) in paragraph (1), by striking "and" at the end;

(ii) in paragraph (2), by striking "or institute a price structure for the reimbursement of covered part D drugs" and inserting "for covered part D drugs; and"; and

(iii) by adding at the end the following:

"(3) may not institute a price structure for the reimbursement of covered part D drugs, except as provided under part E of title XI.".

(D) APPLICATION AS NEGOTIATED PRICE UNDER PART D. — Section 1860D-2(d)(1) of the Social Security Act (42 U.S.C. 1395w-102(d)(1)) is amended —

(i) in subparagraph (B), by inserting ", subject to subparagraph (D)," after "negotiated prices"; and

(ii) by adding at the end the following new subparagraph:

"(D) APPLICATION OF MAXIMUM FAIR PRICE FOR SELECTED DRUGS. — In applying this section, in the case of a covered part D drug that is a selected drug (as referred to in section 1192(c)), with respect to a price applicability period (as defined in section 1191(b)(2)), the negotiated prices used for payment (as described in this subsection) shall be no greater than the maximum fair price (as defined in section 1191(c)(2)) for such drug and for each year during such period plus any dispensing fees for such drug.".

(E) COVERAGE OF SELECTED DRUGS. — Section 1860D-4(b)(3) of the Social Security Act (42 U.S.C. 1395w-104(b)(3)) is amended by adding at the end the following new subparagraph:

"(I) REQUIRED INCLUSION OF SELECTED DRUGS. — For 2025 and each subsequent year, the PDP sponsor offering a prescription drug plan shall include each covered part D drug that is a selected drug under section 1192 for which an agreement for such drug is in effect under section 1193 with respect to the year.".

(F) INFORMATION FROM PRESCRIPTION DRUG PLANS AND MA-PD PLANS REQUIRED. —

(i) PRESCRIPTION DRUG PLANS. — Section 1860D-12(b) of the Social Security Act (42 U.S.C. 1395w-112(b)) is amended by adding at the end the following new paragraph:

"(8) PROVISION OF INFORMATION RELATED TO MAXIMUM FAIR PRICES. — Each contract entered into with a PDP sponsor under this part with respect to a prescription drug plan offered by such sponsor shall require the sponsor to provide information to the Secretary as requested by the Secretary in accordance with section 1194(g).".

(ii) 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:

"(E) PROVISION OF INFORMATION RELATED TO MAXIMUM FAIR PRICES. — Section 1860D-12(b)(8).".

(2) DRUG PRICE NEGOTIATION PROGRAM PRICES INCLUDED IN BEST PRICE. — Section 1927(c)(1)(C) of the Social Security Act (42 U.S.C. 1396r-8(c)(1)(C)) is amended —

(A) in clause (i)(VI), by striking "any prices charged" and inserting "subject to clause (ii)(V), any prices charged"; and

(B) in clause (ii) —

(i) in subclause (III), by striking at the end "; and";

(ii) in subclause (IV), by striking at the end the period and inserting "; and"; and

(iii) by adding at the end the following new subclause:

"(V) in the case of a rebate period and a covered outpatient drug that is a selected drug (as referred to in section 1192(c)) during such rebate period, shall be inclusive of the maximum fair price (as defined in section 1191(c)(2)) for such drug with respect to such period.".

SEC. 139002. SELECTED DRUG MANUFACTURER EXCISE TAX IMPOSED DURING NONCOMPLIANCE PERIODS.

(a) IN GENERAL. — Chapter 32 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:

"Subchapter E — Other Items

"Sec. 4192. Selected drugs during noncompliance periods.

"SEC. 4192. SELECTED DRUGS DURING NONCOMPLIANCE PERIODS.

"(a) IN GENERAL. — There is hereby imposed on the sale by the manufacturer, producer, or importer of any selected drug during a day described in subsection (b) a tax in an amount such that the applicable percentage is equal to the ratio of —

"(1) such tax, divided by

"(2) the sum of such tax and the price for which so sold.

"(b) NONCOMPLIANCE PERIODS. — A day is described in this subsection with respect to a selected drug if it is a day during one of the following periods:

"(1) The period beginning on the March 1st immediately following the selected drug publication date and ending on the first date during which the manufacturer of the drug has in place an agreement described in subsection (a) of section 1193 of the Social Security Act with respect to such drug.

"(2) The period beginning on the November 2nd immediately following the March 1st described in paragraph (1) and ending on the first date during which the manufacturer of the drug and the Secretary have agreed to a maximum fair price under such agreement.

"(3) In the case of a selected drug with respect to which the Secretary of Health and Human Services has specified a renegotiation period under such agreement, the period beginning on the first date after the last date of such renegotiation period and ending on the first date during which the manufacturer of the drug has agreed to a renegotiated maximum fair price under such agreement.

"(4) With respect to information that is required to be submitted to the Secretary of Health and Human Services under such agreement, the period beginning on the date on which such Secretary certifies that such information is overdue and ending on the date that such information is so submitted.

"(c) APPLICABLE PERCENTAGE. — For purposes of this section, the term 'applicable percentage' means —

"(1) in the case of sales of a selected drug during the first 90 days described in subsection (b) with respect to such drug, 65 percent,

"(2) in the case of sales of such drug during the 91st day through the 180th day described in subsection (b) with respect to such drug, 75 percent,

"(3) in the case of sales of such drug during the 181st day through the 270th day described in subsection (b) with respect to such drug, 85 percent, and

"(4) in the case of sales of such drug during any subsequent day, 95 percent.

"(d) SELECTED DRUG. — For purposes of this section —

"(1) IN GENERAL. — The term 'selected drug' means any selected drug (within the meaning of section 1192 of the Social Security Act) which is manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing.

"(2) UNITED STATES. — The term 'United States' has the meaning given such term by section 4612(a)(4).

"(3) COORDINATION WITH RULES FOR POSSESSIONS OF THE UNITED STATES. — Rules similar to the rules of paragraphs (2) and (4) of section 4132(c) shall apply for purposes of this section.

"(e) OTHER DEFINITIONS. — For purposes of this section, the terms 'selected drug publication date' and 'maximum fair price' have the meaning given such terms in section 1191 of the Social Security Act.

"(f) ANTI-ABUSE RULE. — In the case of a sale which was timed for the purpose of avoiding the tax imposed by this section, the Secretary may treat such sale as occurring during a day described in subsection (b).".

(b) NO DEDUCTION FOR EXCISE TAX PAYMENTS. — Section 275(a)(6) of the Internal Revenue Code of 1986 is amended by inserting "or by section 4192" before the period at the end.

(c) CERTAIN EXEMPTIONS FROM TAX NOT APPLICABLE. —

(1) Section 4221(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following: "In the case of the tax imposed by section 4192, paragraphs (3), (4), (5), and (6) shall not apply.".

(2) Section 6416(b)(2) of such Code is amended by adding at the end the following: "In the case of the tax imposed by section 4192, subparagraphs (B), (C), (D), and (E) shall not apply.".

(d) CLERICAL AMENDMENT. — The table of subchapters for chapter 32 of such Code is amended by adding at the end the following new item:

"SUBCHAPTER E. OTHER ITEMS".

(e) EFFECTIVE DATE. — The amendments made by this section shall apply to sales after the date of the enactment of this Act.

SEC. 139003. FUNDING.

In addition to amounts otherwise available, there is appropriated for fiscal year 2022, out of any money in the Treasury not otherwise appropriated, to remain available until expended —

(1) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2022;

(2) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2023;

(3) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2024;

(4) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2025;

(5) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2026;

(6) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2027;

(7) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2028;

(8) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2029;

(9) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2030; and

(10) $300,000,000 to carry out the provisions of, including the amendments made by, this part in fiscal year 2031.

PART 2 — PRESCRIPTION DRUG INFLATION REBATES

SEC. 139101. MEDICARE PART B REBATE BY MANUFACTURERS.

(a) IN GENERAL. — Section 1847A of the Social Security Act (42 U.S.C. 1395w-3a) is amended —

(1) by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following subsection:

"(h) REBATE BY MANUFACTURERS FOR SINGLE SOURCE DRUGS AND BIOLOGICALS WITH PRICES INCREASING FASTER THAN INFLATION. —

"(1) REQUIREMENTS. —

"(A) SECRETARIAL PROVISION OF INFORMATION. — Not later than 6 months after the end of each calendar quarter beginning on or after July 1, 2023, the Secretary shall, for each part B rebatable drug, report to each manufacturer of such part B rebatable drug the following for such calendar quarter:

"(i) Information on the total number of billing units of the billing and payment code described in subparagraph (A)(i) of paragraph (3) with respect to such drug and calendar quarter.

"(ii) Information on the amount (if any) of the excess average sales price increase described in subparagraph (A)(ii) of such paragraph for such drug and calendar quarter.

"(iii) The rebate amount specified under such paragraph for such part B rebatable drug and calendar quarter.

"(B) MANUFACTURER REQUIREMENT. — For each calendar quarter beginning on or after July 1, 2023, the manufacturer of a part B rebatable drug shall, for such drug, not later than 30 days after the date of receipt from the Secretary of the information described in subparagraph (A) for such calendar quarter, provide to the Secretary a rebate that is equal to the amount specified in paragraph (3) for such drug for such calendar quarter.

"(2) PART B REBATABLE DRUG DEFINED. —

"(A) IN GENERAL. — In this subsection, the term 'part B rebatable drug' means a single source drug or biological (as defined in subparagraph (D) of subsection (c)(6)), including a biosimilar biological product (as defined in subparagraph (H) of such subsection) but excluding a qualifying biosimilar biological product (as defined in subsection (b)(8)(B)(iii)), that would be payable under this part if such drug were furnished to an individual enrolled under this part, except such term shall not include such a drug or biological —

"(i) if, as determined by the Secretary, the average total allowed charges for such drug or biological under this part for a year per individual that uses such a drug or biological are less than, subject to subparagraph (B), $100; or

"(ii) that is a vaccine described in subparagraph (A) or (B) of section 1861(s)(10).

"(B) INCREASE. — The dollar amount applied under subparagraph (A)(i) —

"(i) for 2024, shall be the dollar amount specified under such subparagraph for 2023, increased by the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period ending with June of the previous year; and

"(ii) for a subsequent year, shall be the dollar amount specified in this clause (or clause (i)) for the previous year (without application of subparagraph (C)), increased by the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period ending with June of the previous year.

"(C) ROUNDING. — Any dollar amount determined under subparagraph (B) that is not a multiple of $10 shall be rounded to the nearest multiple of $10.

"(3) REBATE AMOUNT. —

"(A) IN GENERAL. — For purposes of paragraph (1), the amount specified in this paragraph for a part B rebatable drug assigned to a billing and payment code for a calendar quarter is, subject to subparagraphs (B) and (G) and paragraph (4), the amount equal to the product of —

"(i) the total number of billing units determined under subparagraph (B) for the billing and payment code of such drug; and

"(ii) the amount (if any) by which —

"(I) the amount equal to —

"(aa) in the case of a part B rebatable drug described in paragraph (1)(B) of section 1847A(b), 106 percent of the amount determined under paragraph (4) of such section for such drug during the calendar quarter; or

"(bb) in the case of a part B rebatable drug described in paragraph (1)(C) of such section, the payment amount under such paragraph for such drug during the calendar quarter; exceeds

"(II) the inflation-adjusted payment amount determined under subparagraph (C) for such part B rebatable drug during the calendar quarter.

"(B) TOTAL NUMBER OF BILLING UNITS. — For purposes of subparagraph (A)(i), the total number of billing units with respect to a part B rebatable drug is determined as follows:

"(i) Determine the total number of units equal to —

"(I) the total number of units, as reported under subsection (c)(1)(B) for each National Drug Code of such drug during the calendar quarter that is two calendar quarters prior to the calendar quarter as described in subparagraph (A), minus

"(II) the total number of units with respect to each National Drug Code of such drug for which payment was made under a State plan under title XIX (or waiver of such plan), as reported by States under section 1927(b)(2)(A) for the rebate period that is the same calendar quarter as described in subclause (I).

"(ii) Convert the units determined under clause (i) to billing units for the billing and payment code of such drug, using a methodology similar to the methodology used under this section, by dividing the units determined under clause (i) for each National Drug Code of such drug by the billing unit for the billing and payment code of such drug.

"(iii) Compute the sum of the billing units for each National Drug Code of such drug in clause (ii).

"(C) DETERMINATION OF INFLATION-ADJUSTED PAYMENT AMOUNT. — The inflation-adjusted payment amount determined under this subparagraph for a part B rebatable drug for a calendar quarter is —

"(i) the payment amount for the billing and payment code for such drug in the payment amount benchmark quarter (as defined in subparagraph (D)); increased by

"(ii) the percentage by which the re bate period CPI-U (as defined in subparagraph (F)) for the calendar quarter exceeds the benchmark period CPI-U (as defined in subparagraph (E)).

"(D) PAYMENT AMOUNT BENCHMARK QUARTER. — The term 'payment amount benchmark quarter' means the calendar quarter beginning October 1, 2021.

"(E) BENCHMARK PERIOD CPI-U. — The term 'benchmark period CPI-U' means the consumer price index for all urban consumers (United States city average) for March 2021.

"(F) REBATE PERIOD CPI-U. — The term 'rebate period CPI-U' means, with respect to a calendar quarter described in subparagraph (C), the greater of the benchmark period CPI-U and the consumer price index for all urban consumers (United States city average) for the first month of the calendar quarter that is two calendar quarters prior to such described calendar quarter.

"(G) EXEMPTION FOR SHORTAGES AND SEVERE SUPPLY CHAIN DISRUPTIONS. — The Secretary shall reduce or waive the amount under subparagraph (A) with respect to a part B rebatable drug that is described as currently in shortage on the shortage list in effect under section 506E of the Federal Food, Drug, and Cosmetic Act or in the case of a biosimilar biological product, when the Secretary determines there are severe supply chain disruptions.

"(4) SPECIAL TREATMENT OF CERTAIN DRUGS AND EXEMPTION. —

"(A) SUBSEQUENTLY APPROVED DRUGS. — In the case of a part B rebatable drug first approved or licensed by the Food and Drug Administration after March 1, 2021, clause (i) of paragraph (3)(C) shall be applied as if the term 'payment amount benchmark quarter' were defined under paragraph (3)(D) as the third full calendar quarter after the day on which the drug was first marketed and clause (ii) of paragraph (3)(C) shall be applied as if the term 'benchmark period CPI-U' were defined under paragraph (3)(E) as if the reference to 'March 2021' under such paragraph were a reference to 'the first month of the first full calendar quarter after the day on which the drug was first marketed'.

"(B) TIMELINE FOR PROVISION OF REBATES FOR SUBSEQUENTLY APPROVED DRUGS. — In the case of a part B rebatable drug first approved or licensed by the Food and Drug Administration after March 1, 2021, paragraph (1)(B) shall be applied as if the reference to 'July 1, 2023' under such paragraph were a reference to the later of the 6th full calendar quarter after the day on which the drug was first marketed or July 1, 2023.

"(D) SELECTED DRUGS. — In the case of a part B rebatable drug that is a selected drug (as defined in section 1192(c)) for a price applicability period (as defined in section 1191(b)(2)), in the case such drug is determined (pursuant to such section 1192(c)) to no longer be a selected drug, beginning the first calendar quarter after the price applicability period with respect to such drug, clause (i) of paragraph (3)(C) shall be applied as if the term 'payment amount benchmark quarter' were defined under paragraph (3)(D) as the calendar quarter beginning January 1 of the last year beginning during such price applicability period with respect to such selected drug and clause (ii) of paragraph (3)(C) shall be applied as if the term 'benchmark period CPI-U' were defined under paragraph (3)(E) as if the reference to 'March 2021' under such paragraph were a reference to the March of the year preceding such last year.

"(5) APPLICATION TO BENEFICIARY COINSURANCE. — In the case of a part B rebatable drug, if the payment amount described in paragraph (3)(A)(ii)(I) (or, in the case of a part B rebatable drug that is a selected drug (as defined in section 1192(c), the payment amount described in subsection (b)(1)(B) for such drug) for a calendar quarter exceeds the inflation adjusted payment for such quarter —

"(A) in computing the amount of any coinsurance applicable under this part to an individual to whom such drug is furnished, the computation of such coinsurance shall be equal to 20 percent of the inflation-adjusted payment amount determined under paragraph (3)(C) for such part B rebatable drug; and

"(B) the amount of such coinsurance for such calendar quarter, as computed under subparagraph (A), shall be applied as a percent, as determined by the Secretary, to the payment amount that would otherwise apply under subparagraphs (B) or (C) of subsection (b)(1).

"(6) REBATE DEPOSITS. — Amounts paid as rebates under paragraph (1)(B) shall be deposited into the Federal Supplementary Medical Insurance Trust Fund established under section 1841.

"(7) CIVIL MONEY PENALTY. — If a manufacturer of a part B rebatable drug has failed to comply with the requirements under paragraph (1)(B) for such drug for a calendar quarter, the manufacturer shall be subject to, in accordance with a process established by the Secretary pursuant to regulations, a civil money penalty in an amount equal to at least 125 percent of the amount specified in paragraph (3) for such drug for such calendar quarter. The provisions of section 1128A (other than subsections (a) (with respect to amounts of penalties or additional assessments) and (b)) shall apply to a civil money penalty under this paragraph in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a)."; and

(2) in subsection (i), as redesignated by paragraph (1) —

(A) in paragraph (4), by striking at the end "and";

(B) in paragraph (5), by striking at the end the period and inserting a semicolon; and

(C) by adding at the end the following new paragraphs:

"(6) the determination of units under subsection (h);

"(7) the determination of whether a drug is a part B rebatable drug under subsection (h);

"(8) the calculation of the rebate amount under subsection (h); and

"(9) the computation of coinsurance under subsection (h)(5); and

"(10) the computation of amounts paid under section 1833(a)(1)(EE).".

(b) AMOUNTS PAYABLE; COST-SHARING. — Section 1833 of the Social Security Act (42 U.S.C. 1395l) is amended —

(1) in subsection (a)(1) —

(A) in subparagraph (G), by inserting ", subject to subsection (i)(9)," after "the amounts paid";

(B) in subparagraph (S), by striking "with respect to" and inserting "subject to subparagraph (EE), with respect to";

(C) by striking "and (DD)" and inserting "(DD)"; and

(D) by inserting before the semicolon at the end the following: ", and (EE) with respect to a part B rebatable drug (as defined in paragraph (2) of section 1847A(h)) for which the payment amount for a calendar quarter under paragraph (3)(A)(ii)(I) of such section (or, in the case of a part B rebatable drug that is a selected drug (as defined in section 1192(c) for which, the payment amount described in section 1847A(b)(1)(B)) for such drug for such quarter exceeds the inflation-adjusted payment under paragraph (3)(A)(ii)(II) of such section for such quarter, the amounts paid shall be equal to the percent of the payment amount under paragraph (3)(A)(ii)(I) of such section or section 1847A(b)(1)(B), as applicable, that equals the difference between (i) 100 percent, and (ii) the percent applied under section 1847A(h)(5)(B)";

(2) in subsection (i), by adding at the end the following new paragraph:

"(9) In the case of a part B rebatable drug (as defined in paragraph (2) of section 1847A(h)) for which payment under this subsection is not packaged into a payment for a service furnished on or after July 1, 2023, under the revised payment system under this subsection, in lieu of calculation of coinsurance and the amount of payment otherwise applicable under this subsection, the provisions of section 1847A(h)(5) and paragraph (1)(EE) of subsection (a), shall, as determined appropriate by the Secretary, apply under this subsection in the same manner as such provisions of section 1847A(h)(5) and subsection

(a) apply under such section and subsection."; and

(3) in subsection (t)(8), by adding at the end the following new subparagraph:

"(F) PART B REBATABLE DRUGS. — In the case of a part B rebatable drug (as defined in paragraph (2) of section 1847A(h), except if such drug does not have a copayment amount as a result of application of subparagraph (E)) for which payment under this part is not packaged into a payment for a covered OPD service (or group of services) furnished on or after July 1, 2023, and the payment for such drug under this subsection is the same as the amount for a calendar quarter under paragraph (3)(A)(ii)(I) of section 1847A(h), under the system under this subsection, in lieu of calculation of the copayment amount and the amount of payment otherwise applicable under this subsection (other than the application of the limitation described in subparagraph (C)), the provisions of section 1847A(h)(5) and paragraph (1)(EE) of subsection (a), shall, as determined appropriate by the Secretary, apply under this subsection in the same manner as such provisions of section 1847A(h)(5) and subsection (a) apply under such section and subsection.".

(c) CONFORMING AMENDMENTS. —

(1) TO PART B ASP CALCULATION. — Section 1847A(c)(3) of the Social Security Act (42 U.S.C. 1395w-3a(c)(3)) is amended by inserting "subsection (h) or" before "section 1927".

(2) EXCLUDING PART B DRUG INFLATION REBATE FROM BEST PRICE. — Section 1927(c)(1)(C)(ii)(I) of the Social Security Act (42 U.S.C. 1396r-8(c)(1)(C)(ii)(I)) is amended by inserting "or section 1847A(h)" after "this section".

(3) COORDINATION WITH MEDICAID REBATE INFORMATION DISCLOSURE. — Section 1927(b)(3)(D)(i) of the Social Security Act (42 U.S.C. 1396r-8(b)(3)(D)(i)) is amended by inserting "and the rebate" after "the payment amount".

(4) EXCLUDING PART B DRUG INFLATION REBATES FROM AVERAGE MANUFACTURER PRICE. — Section 1927(k)(1)(B)(i) of the Social Security Act (42 U.S.C. 1396r-8(k)(1)(B)(i)), as previously amended, is further amended —

(A) in subclause (IV), by striking "and";

(B) in subclause (V), by striking the period at the end and inserting a semicolon; and

(C) by adding at the end the following new subclause:

"(VI) rebates paid by manufacturers under section 1847A(h); and".

(d) FUNDING. — In addition to amounts otherwise available, there are appropriated to the Centers for Medicare & Medicaid Services, out of any money in the Treasury not otherwise appropriated, $12,500,000 for fiscal year 2022 and $7,500,000 for each of fiscal years 2023 through 2031, to remain available until expended, to carry out the provisions of, including the amendments made by, this section.

SEC. 139102. MEDICARE PART D REBATE BY MANUFACTURERS.

(a) IN GENERAL. — Part D of title XVIII of the Social Security Act is amended by inserting after section 1860D-14A (42 U.S.C. 1395w-114a) the following new section:

"SEC. 1860D-14B. MANUFACTURER REBATE FOR CERTAIN DRUGS WITH PRICES INCREASING FASTER THAN INFLATION.

"(a) REQUIREMENTS. —

"(1) SECRETARIAL PROVISION OF INFORMATION. — Not later than 9 months after the end of each applicable year (as defined in subsection (g)(7)), subject to paragraph (3), the Secretary shall, for each part D rebatable drug, report to each manufacturer of such part D rebatable drug the following for such year:

"(A) The amount (if any) of the excess annual manufacturer price increase described in subsection (b)(1)(A)(ii) for each dosage form and strength with respect to such drug and year.

"(B) The rebate amount specified under subsection (b) for each dosage form and strength with respect to such drug and year.

"(2) MANUFACTURER REQUIREMENTS. — For each applicable year, the manufacturer of a part D rebatable drug, for each dosage form and strength with respect to such drug, not later than 30 days after the date of receipt from the Secretary of the information described in paragraph (1) for such year, shall provide to the Secretary a rebate that is equal to the amount specified in subsection (b) for such dosage form and strength with respect to such drug for such year.

"(3) TRANSITION RULE FOR REPORTING. — The Secretary may, for each rebatable covered part D drug, delay the timeframe for reporting the information and rebate amount described in subparagraphs (A) and (B) of such paragraph for the applicable year of 2023 until not later than September 30, 2025.

"(b) REBATE AMOUNT. —

"(1) IN GENERAL. —

"(A) CALCULATION. — For purposes of this section, the amount specified in this subsection for a dosage form and strength with respect to a part D rebatable drug and applicable year is, subject to subparagraph (C), paragraph (5)(B), and paragraph (6), the amount equal to the product of —

"(i) subject to subparagraph (B) of this paragraph, the total number of units that are used to calculate the average manufacturer price of such dosage form and strength with respect to such part D rebatable drug, as reported by the manufacturer of such drug under section 1927 for each month, with respect to such year; and

"(ii) the amount (if any) by which —

"(I) the annual manufacturer price (as determined in paragraph (2)) paid for such dosage form and strength with respect to such part D rebatable drug for the year; exceeds

"(II) the inflation-adjusted payment amount determined under paragraph (3) for such dosage form and strength with respect to such part D rebatable drug for the year.

"(B) EXCLUDED UNITS. — For purposes of subparagraph (A)(i), the Secretary shall exclude from the total number of units for a dosage form and strength with respect to a part D rebatable drug, with respect to an applicable year, the following:

"(i) Units of each dosage form and strength of such part D rebatable drug for which payment was made under a State plan under title XIX (or waiver of such plan), as reported by States under section 1927(b)(2)(A).

"(ii) Units of each dosage form and strength of such part D rebatable drug for which a rebate is paid under section 1847A(h).

"(C) EXEMPTION FOR SHORTAGES AND SEVERE SUPPLY CHAIN DISRUPTIONS. — The Secretary shall reduce or waive the amount under subparagraph (A) with respect to a part D rebatable drug that is described as currently in shortage on the shortage list in effect under section 506E of the Federal Food, Drug, and Cosmetic Act or in the case of a generic drug, when the Secretary determines there are severe supply chain disruptions.

"(2) DETERMINATION OF ANNUAL MANUFACTURER PRICE. — The annual manufacturer price determined under this paragraph for a dosage form and strength, with respect to a part D rebatable drug and an applicable year, is the sum of the products of —

"(A) the average manufacturer price (as defined in subsection (g)(6)) of such dosage form and strength, as calculated for a unit of such drug, with respect to each of the calendar quarters of such year; and

"(B) the ratio of —

"(i) the total number of units of such dosage form and strength reported under section 1927 with respect to each such calendar quarter of such year; to

"(ii) the total number of units of such dosage form and strength reported under section 1927 with respect to such year, as determined by the Secretary.

"(3) DETERMINATION OF INFLATION-ADJUSTED PAYMENT AMOUNT. — The inflation-adjusted payment amount determined under this paragraph for a dosage form and strength with respect to a part D rebatable drug for an applicable year, subject to paragraph (5), is —

"(A) the benchmark year manufacturer price determined under paragraph (4) for such dosage form and strength with respect to such drug and year; increased by

"(B) the percentage by which the applicable year CPI-U (as defined in subsection (g)(5)) for the year exceeds the benchmark period CPI-U (as defined in subsection (g)(4)).

"(4) DETERMINATION OF BENCHMARK YEAR MANUFACTURER PRICE. — The benchmark year manufacturer price determined under this paragraph for a dosage form and strength, with respect to a part D rebatable drug and an applicable year, is the sum of the products of —

"(A) the average manufacturer price (as defined in subsection (g)(6)) of such dosage form and strength, as calculated for a unit of such drug, with respect to each of the calendar quarters of the payment amount benchmark year (as defined in subsection (g)(3)); and

"(B) the ratio of —

"(i) the total number of units reported under section 1927 of such dosage form and strength with respect to each such calendar quarter of such payment amount benchmark year; to

"(ii) the total number of units reported under section 1927 of such dosage form and strength with respect to such payment amount benchmark year.

"(5) SPECIAL TREATMENT OF CERTAIN DRUGS AND EXEMPTION. —

"(A) SUBSEQUENTLY APPROVED DRUGS. — In the case of a part D rebatable drug first approved or licensed by the Food and Drug Administration after October 1, 2021, subparagraphs (A) and (B) of paragraph (4) shall be applied as if the term 'payment amount benchmark year' were defined under subsection (g)(3) as the first calendar year beginning after the day on which the drug was first marketed by any manufacturer and subparagraph (B) of paragraph (3) shall be applied as if the term 'benchmark period CPI-U' were defined under subsection (g)(4) as if the reference to 'October 2021' under such subsection were a reference to 'January of the first year beginning after the date on which the drug was first marketed by any manufacturer'.

"(B) TREATMENT OF NEW FORMULATIONS. —

"(i) IN GENERAL. — In the case of a part D rebatable drug that is a line extension of a part D rebatable drug that is an oral solid dosage form, the Secretary shall establish a formula for determining the rebate amount under paragraph (1) and the inflation adjusted payment amount under paragraph (3) with respect to such part D rebatable drug and an applicable year, consistent with the formula applied under sub-section (c)(2)(C) of section 1927 for determining a rebate obligation for a rebate period under such section.

"(ii) LINE EXTENSION DEFINED. — In this subparagraph, the term 'line extension' means, with respect to a part D rebatable drug, a new formulation of the drug, such as an extended release formulation, but does not include an abuse-deterrent formulation of the drug (as determined by the Secretary), regardless of whether such abuse-deterrent formulation is an extended release formulation.

"(C) SELECTED DRUGS. — In the case of a part D rebatable drug that is a selected drug (as defined in section 1192(c)) for a price applicability period (as defined in section 1191(b)(2)), in the case such drug is determined (pursuant to such section 1192(c)) to no longer be a selected drug, for each applicable year beginning after the price applicability period with respect to such drug, subparagraphs (A) and (B) of paragraph (4) shall be applied as if the term 'payment amount benchmark year' were defined under subsection (g)(3) as the last year beginning during such price applicability period with respect to such selected drug and subparagraph (B) of paragraph (3) shall be applied as if the term 'benchmark period CPI-U' were defined under subsection (g)(4) as if the reference to 'October 2021' under such subsection were a reference to January of the last year beginning during such price applicability period with respect to such drug.

"(6) RECONCILIATION IN CASE OF REVISED AMP REPORTS. — The Secretary shall provide for a method and process under which, in the case of a manufacturer of a part D rebatable drug that submits revisions to information submitted under section 1927 by the manufacturer with respect to such drug, the Secretary determines, pursuant to such revisions, adjustments, if any, to the calculation of the amount specified in this subsection for a dosage form and strength with respect to such part D rebatable drug and an applicable year and reconciles any overpayments or underpayments in amounts paid as rebates under this subsection. Any identified underpayment shall be rectified by the manufacturer not later than 30 days after the date of receipt from the Secretary of information on such underpayment.

"(c) REBATE DEPOSITS. — Amounts paid as rebates under subsection (b) shall be deposited into the Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund established under section 1841.

"(d) INFORMATION. — For purposes of carrying out this section, the Secretary shall use information submitted by manufacturers under section 1927(b)(3) and information submitted by States under section 1927(b)(2)(A).

"(e) CIVIL MONEY PENALTY. — If a manufacturer of a part D rebatable drug has failed to comply with the requirement under subsection (a)(2) with respect to such drug for an applicable year, the manufacturer shall be subject to, in accordance with a process established by the Secretary pursuant to regulations, a civil money penalty in an amount equal to 125 percent of the amount specified in subsection (b) for such drug for such year. The provisions of section 1128A (other than subsections (a) (with respect to amounts of penalties or additional assessments) and (b)) shall apply to a civil money penalty under this subsection in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a).

"(f) NO ADMINISTRATIVE OR JUDICIAL REVIEW. — There shall be no administrative or judicial review of the following:

"(1) The determination of units under this section.

"(2) The determination of whether a drug is a part D rebatable drug under this section.

"(3) The calculation of the rebate amount under this section.

"(g) DEFINITIONS. — In this section:

"(1) PART D REBATABLE DRUG. —

"(A) IN GENERAL. — The term 'part D rebatable drug' means a drug or biological that would (without application of this section) be a covered part D drug, except such term shall, with respect to an applicable year, not include such a drug or biological if the average annual total cost under this part for such year per individual who uses such a drug or biological, as determined by the Secretary, is less than, subject to subparagraph (B), $100, as determined by the Secretary using the most recent data available or, if data is not available, as estimated by the Secretary.

"(B) INCREASE. — The dollar amount applied under subparagraph (A) —

"(i) for 2024, shall be the dollar amount specified under such subparagraph for 2023, increased by the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period beginning with January of 2023; and

"(ii) for a subsequent year, shall be the dollar amount specified in this subparagraph for the previous year, increased by the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12month period beginning with January of the previous year.

Any dollar amount specified under this subparagraph that is not a multiple of $10 shall be rounded to the nearest multiple of $10.

"(2) UNIT. — The term 'unit' means, with respect to a part D rebatable drug, the lowest dispensable amount (such as a capsule or tablet, milligram of molecules, or grams) of the part D rebatable drug, as reported under section 1927.

"(3) PAYMENT AMOUNT BENCHMARK YEAR. — The term 'payment amount benchmark year' means the year beginning October 1, 2021.

"(4) BENCHMARK PERIOD CPI-U. — The term 'benchmark period CPI-U' means the consumer price index for all urban consumers (United States city average) for October 2021.

"(5) APPLICABLE YEAR CPI-U. — The term 'applicable year CPI-U' means, with respect to an applicable year, the consumer price index for all urban consumers (United States city average) for January of such year.

"(6) AVERAGE MANUFACTURER PRICE. — The term 'average manufacturer price' has the meaning, with respect to a part D rebatable drug of a manufacturer, given such term in section 1927(k)(1), with respect to a covered outpatient drug of a manufacturer for a rebate period under section 1927.

"(7) APPLICABLE YEAR. — The term 'applicable year' means a calendar year beginning with 2023.

"(h) IMPLEMENTATION FOR 2023 AND 2024. — Notwithstanding any other provision of this section, the Secretary shall implement this section for 2023 and 2024 by program instruction or otherwise.".

(b) CONFORMING AMENDMENTS. —

(1) TO PART B ASP CALCULATION. — Section 1847A(c)(3) of the Social Security Act (42 U.S.C. 1395w-3a(c)(3)), as amended by section 139101(c)(1), is further amended by striking "subsection (h) or section 1927" and inserting "subsection (h), section 1927, or section 1860D-14B".

(2) EXCLUDING PART D DRUG INFLATION REBATE FROM BEST PRICE. — Section 1927(c)(1)(C)(ii)(I) of the Social Security Act (42 U.S.C. 1396r-8(c)(1)(C)(ii)(I)), as amended by section 139101(c)(2), is further amended by striking "or section 1847A(h)" and inserting ", section 1847A(h), or section 1860D-14B".

(3) COORDINATION WITH MEDICAID REBATE INFORMATION DISCLOSURE. — Section 1927(b)(3)(D)(i) of the Social Security Act (42 U.S.C. 1396r-8(b)(3)(D)(i)), as amended by section 139101(c)(3), is further amended by striking "or to carry out section 1847B" and inserting "or to carry out section 1847B or section 1860D-14B".

(4) EXCLUDING PART D DRUG INFLATION REBATES FROM AVERAGE MANUFACTURER PRICE. — Section 1927(k)(1)(B)(i) of the Social Security Act (42 U.S.C. 1396r-8(k)(1)(B)(i)), as previously amended, is further amended by adding at the end the following new subclause:

"(VII) rebates paid by manufacturers under section 1860D-14B.".

(c) FUNDING. — In addition to amounts otherwise available, there are appropriated to the Centers for Medicare & Medicaid Services, out of any money in the Treasury not otherwise appropriated, $12,500,000 for fiscal year 2022 and $7,500,000 for each of fiscal years 2023 through 2031, to remain available until expended, to carry out the provisions of, including the amendments made by, this section.

PART 3 — PART D IMPROVEMENTS AND MAXIMUM OUT-OF-POCKET CAP FOR MEDICARE BENEFICIARIES

SEC. 139201. MEDICARE PART D BENEFIT REDESIGN.

(a) BENEFIT STRUCTURE REDESIGN. — Section 1860D-2(b) of the Social Security Act (42 U.S.C. 1395w-102(b)) is amended —

(1) in paragraph (2) —

(A) in subparagraph (A), in the matter preceding clause (i), by inserting "for a year preceding 2024 and for costs above the annual deductible specified in paragraph (1) and up to the annual out-of-pocket threshold specified in paragraph (4)(B) for 2024 and each subsequent year" after "paragraph (3)";

(B) in subparagraph (C) —

(i) in clause (i), in the matter preceding subclause (I), by inserting "for a year preceding 2024," after "paragraph (4),"; and

(ii) in clause (ii)(III), by striking "and each subsequent year" and inserting "through 2023"; and

(C) in subparagraph (D) —

(i) in clause (i) —

(I) in the matter preceding subclause (I), by inserting "for a year preceding 2024," after "paragraph (4),"; and

(II) in subclause (I)(bb), by striking "a year after 2018" and inserting "each of years 2019 through 2023"; and

(ii) in clause (ii)(V), by striking "2019 and each subsequent year" and inserting "each of years 2019 through 2023";

(2) in paragraph (3)(A) —

(A) in the matter preceding clause (i), by inserting "for a year preceding 2024," after "and (4),"; and

(B) in clause (ii), by striking "for a subsequent year" and inserting "for each of years 2007 through 2023"; and

(3) in paragraph (4) —

(A) in subparagraph (A) —

(i) in clause (i) —

(I) by redesignating subclauses (I) and (II) as items (aa) and (bb), respectively, and moving the margin of each such redesignated item 2 ems to the right;

(II) in the matter preceding item (aa), as redesignated by subclause (I), by striking "is equal to the greater of — " and inserting "is equal to —

"(I) for a year preceding 2024, the greater of — ";

(III) by striking the period at the end of item (bb), as redesignated by subclause (I), and inserting "; and"; and

(IV) by adding at the end the following:

"(II) for 2024 and each succeeding year, $0."; and

(ii) in clause (ii) —

(I) by striking "clause (i)(I)" and inserting "clause (i)(I)(aa)"; and

(II) by adding at the end the following new sentence: "The Secretary shall continue to calculate the dollar amounts specified in clause (i)(I)(aa), including with the adjustment under this clause, after 2023 for purposes of section 1860D-14(a)(1)(D)(iii).";

(B) in subparagraph (B) —

(i) in clause (i) —

(I) in subclause (V), by striking "or" at the end;

(II) in subclause (VI) —

(aa) by striking "for a subsequent year" and inserting "for each of years 2021 through 2023"; and

(bb) by striking the period at the end and inserting a semicolon; and

(III) by adding at the end the following new subclauses:

"(VII) for 2024, is equal to $2,000; or

"(VIII) for a subsequent year, is equal to the amount specified in this subparagraph for the previous year, increased by the annual percentage increase described in paragraph (6) for the year involved."; and

(ii) in clause (ii), by striking "clause (i)(II)" and inserting "clause (i)";

(C) in subparagraph (C)(i), by striking "and for amounts" and inserting "and, for a year preceding 2024, for amounts"; and

(D) in subparagraph (E), by striking "In applying" and inserting "For each of years 2011 through 2023, in applying".

(b) REINSURANCE PAYMENT AMOUNT. — Section 1860D-15(b) of the Social Security Act (42 U.S.C. 1395w-115(b)) is amended —

(1) in paragraph (1) —

(A) by striking "equal to 80 percent" and inserting "equal to —

"(A) for a year preceding 2024, 80 percent";

(B) in subparagraph (A), as added by subparagraph (A), by striking the period at the end and inserting "; and"; and

(C) by adding at the end the following new subparagraph:

"(B) for 2024 and each subsequent year, the sum of —

"(i) an amount equal to 20 percent of such allowable reinsurance costs attributable to that portion of gross prescription drug costs as specified in paragraph (3) incurred in the coverage year after such individual has incurred costs that exceed the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B) with respect to applicable drugs (as defined in section 1860D-14C(g)(2)); and

"(ii) an amount equal to 40 percent of such allowable reinsurance costs attributable to that portion of gross prescription drug costs as specified in paragraph (3) incurred in the coverage year after such individual has incurred costs that exceed the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B) with respect to covered part D drugs that are not applicable drugs (as so defined).";

(2) in paragraph (2) —

(A) by striking "COSTS. — For purposes" and inserting "COSTS. —

"(A) IN GENERAL. — Subject to subparagraph (B), for purposes"; and

(B) by adding at the end the following new subparagraph:

"(B) INCLUSION OF MANUFACTURER DISCOUNTS ON APPLICABLE DRUGS. — For purposes of applying subparagraph (A), the term 'allowable reinsurance costs' shall include the portion of the negotiated price (as defined in section 1860D-14C(g)(6)) of an applicable drug (as defined in section 1860D-14C(g)(2)) that was paid by a manufacturer under the manufacturer discount program under section 1860D-14C."; and

(3) in paragraph (3) —

(A) in the first sentence, by striking "For purposes" and inserting "Subject to paragraph (2)(B), for purposes"; and

(B) in the second sentence, by inserting "(or, with respect to 2024 and subsequent years, in the case of an applicable drug, as defined in section 1860D-14C(g)(2), by a manufacturer)" after "by the individual or under the plan".

(c) REDUCED COST-SHARING; BENEFICIARY PREMIUM PERCENTAGE. —

(1) COST-SHARING. —

(A) IN GENERAL. — Section 1860D-2(b)(2)(A) of the Social Security Act (42 U.S.C. 1395w-102(b)(2)(A)) is amended —

(i) in the subparagraph header, by striking "25 PERCENT COINSURANCE" and inserting "COINSURANCE";

(ii) in clause (i), by inserting "(or, for 2024 and each subsequent year, 23 percent)" after "25 percent"; and

(iii) in clause (ii), by inserting "(or, for 2024 and each subsequent year, 23 percent)" after "25 percent".

(B) CONFORMING AMENDMENT. — Section 1860D-14(a)(2)(D) of the Social Security Act (42 U.S.C. 1395w-114(a)(2)(D)) is amended by inserting "(or, for 2024 and each subsequent year, instead of coinsurance of '23 percent')" after "instead of coinsurance of '25 percent' ".

(2) BENEFICIARY PREMIUM PERCENTAGE. —

(A) IN GENERAL. — Section 1860D-13(a)(3)(A) of the Social Security Act (42 U.S.C. 1395w-113(a)(3)(A)) is amended by inserting "(or, for 2024 and each subsequent year, 23.5 percent)" after "25.5 percent".

(B) CONFORMING AMENDMENTS. —

(i) Section 1860D-11(g)(6) of the Social Security Act (42 U.S.C. 1395w-111(g)(6)) is amended by inserting "(or, for 2024 and each subsequent year, 23.5 percent)" after "25.5 percent".

(ii) Section 1860D-13(a)(7)(B)(i) of the Social Security Act (42 U.S.C. 1395w-113(a)(7)(B)(i)) is amended —

(I) in subclause (I), by inserting "(or, for 2024 and each subsequent year, 23.5 percent)" after "25.5 percent"; and

(II) in subclause (II), by inserting "(or, for 2024 and each subsequent year, 23.5 percent)" after "25.5 percent".

(iii) Section 1860D-15(a) of the Social Security Act (42 U.S.C. 1395w-115(a)) is amended by inserting "(or, for 2024 and each subsequent year, 76.5 percent)" after "74.5 percent".

(d) MANUFACTURER DISCOUNT PROGRAM. —

(1) IN GENERAL. — Part D of title XVIII of the Social Security Act (42 U.S.C. 1395w-101 through 42 U.S.C. 1395w-153), as amended by section 139102, is further amended by inserting after section 1860D-14B the following new sections:

"SEC. 1860D-14C. MANUFACTURER DISCOUNT PROGRAM.

"(a) ESTABLISHMENT. — The Secretary shall establish a manufacturer discount program (in this section referred to as the 'program'). Under the program, the Secretary shall enter into agreements described in subsection (b) with manufacturers and provide for the performance of the duties described in subsection (c). The Secretary shall establish a model agreement for use under the program by not later than January 1, 2023, in consultation with manufacturers, and allow for comment on such model agreement.

"(b) TERMS OF AGREEMENT. —

"(1) IN GENERAL. —

"(A) AGREEMENT. — An agreement under this section shall require the manufacturer to provide, in accordance with this section, discounted prices for applicable drugs of the manufacturer that are dispensed to applicable beneficiaries on or after January 1, 2024.

"(B) CLARIFICATION. — Nothing in this section shall be construed as affecting —

"(i) the application of a coinsurance of 23 percent of the negotiated price, as applied under paragraph (2)(A) of section 1860D-2(b), for costs described in such paragraph; or

"(ii) the application of the copayment amount described in paragraph (4)(A) of such section, with respect to costs described in such paragraph.

"(C) TIMING OF AGREEMENT. —

"(i) SPECIAL RULE FOR 2024. — In order for an agreement with a manufacturer to be in effect under this section with respect to the period beginning on January 1, 2024, and ending on December 31, 2024, the manufacturer shall enter into such agreement not later than 30 days after the date of the establishment of a model agreement under subsection (a).

"(ii) 2025 AND SUBSEQUENT YEARS. — In order for an agreement with a manufacturer to be in effect under this section with respect to plan year 2025 or a subsequent plan year, the manufacturer shall enter into such agreement not later than a calendar quarter or semi-annual deadline established by the Secretary.

"(2) PROVISION OF APPROPRIATE DATA. — Each manufacturer with an agreement in effect under this section shall collect and have available appropriate data, as determined by the Secretary, to ensure that it can demonstrate to the Secretary compliance with the requirements under the program.

"(3) COMPLIANCE WITH REQUIREMENTS FOR ADMINISTRATION OF PROGRAM. — Each manufacturer with an agreement in effect under this section shall comply with requirements imposed by the Secretary or a third party with a contract under subsection (d)(3), as applicable, for purposes of administering the program, including any determination under subparagraph (A) of subsection (c)(1) or procedures established under such subsection (c)(1).

"(4) LENGTH OF AGREEMENT. —

"(A) IN GENERAL. — An agreement under this section shall be effective for an initial period of not less than 12 months and shall be automatically renewed for a period of not less than 1 year unless terminated under subparagraph (B).

"(B) TERMINATION. —

"(i) BY THE SECRETARY. — The Secretary shall provide for termination of an agreement under this section for a knowing and willful violation of the requirements of the agreement or other good cause shown. Such termination shall not be effective earlier than 30 days after the date of notice to the manufacturer of such termination. The Secretary shall provide, upon request, a manufacturer with a hearing concerning such a termination, and such hearing shall take place prior to the effective date of the termination with sufficient time for such effective date to be repealed if the Secretary determines appropriate.

"(ii) BY A MANUFACTURER. — A manufacturer may terminate an agreement under this section for any reason. Any such termination shall be effective, with respect to a plan year —

"(I) if the termination occurs before January 31 of a plan year, as of the day after the end of the plan year; and

"(II) if the termination occurs on or after January 31 of a plan year, as of the day after the end of the succeeding plan year.

"(iii) EFFECTIVENESS OF TERMINATION. — Any termination under this subparagraph shall not affect discounts for applicable drugs of the manufacturer that are due under the agreement before the effective date of its termination.

"(iv) NOTICE TO THIRD PARTY. — The Secretary shall provide notice of such termination to a third party with a contract under subsection (d)(3) within not less than 30 days before the effective date of such termination.

"(c) DUTIES DESCRIBED. — The duties described in this subsection are the following:

"(1) ADMINISTRATION OF PROGRAM. — Administering the program, including —

"(A) the determination of the amount of the discounted price of an applicable drug of a manufacturer;

"(B) the establishment of procedures to ensure that, not later than the applicable number of calendar days after the dispensing of an applicable drug by a pharmacy or mail order service, the pharmacy or mail order service is reimbursed for an amount equal to the difference between —

"(i) the negotiated price of the applicable drug; and

"(ii) the discounted price of the applicable drug;

"(C) the establishment of procedures to ensure that the discounted price for an applicable drug under this section is applied before any coverage or financial assistance under other health benefit plans or programs that provide coverage or financial assistance for the purchase or provision of prescription drug coverage on behalf of applicable beneficiaries as specified by the Secretary; and

"(D) providing a reasonable dispute resolution mechanism to resolve disagreements between manufacturers, applicable beneficiaries, and the third party with a contract under subsection (d)(3).

"(2) MONITORING COMPLIANCE. —

"(A) IN GENERAL. — The Secretary shall monitor compliance by a manufacturer with the terms of an agreement under this section.

"(B) NOTIFICATION. — If a third party with a contract under subsection (d)(3) determines that the manufacturer is not in compliance with such agreement, the third party shall notify the Secretary of such noncompliance for appropriate enforcement under subsection (e).

"(3) COLLECTION OF DATA FROM PRESCRIPTION DRUG PLANS AND MA-PD PLANS. — The Secretary may collect appropriate data from prescription drug plans and MA-PD plans in a timeframe that allows for discounted prices to be provided for applicable drugs under this section.

"(d) ADMINISTRATION. —

"(1) IN GENERAL. — Subject to paragraph (2), the Secretary shall provide for the implementation of this section, including the performance of the duties described in subsection (c).

"(2) LIMITATION. — In providing for the implementation of this section, the Secretary shall not receive or distribute any funds of a manufacturer under the program.

"(3) CONTRACT WITH THIRD PARTIES. — The Secretary shall enter into a contract with 1 or more third parties to administer the requirements established by the Secretary in order to carry out this section. At a minimum, the contract with a third party under the preceding sentence shall require that the third party —

"(A) receive and transmit information between the Secretary, manufacturers, and other individuals or entities the Secretary determines appropriate;

"(B) receive, distribute, or facilitate the distribution of funds of manufacturers to appropriate individuals or entities in order to meet the obligations of manufacturers under agreements under this section;

"(C) provide adequate and timely information to manufacturers, consistent with the agreement with the manufacturer under this section, as necessary for the manufacturer to fulfill its obligations under this section; and

"(D) permit manufacturers to conduct periodic audits, directly or through contracts, of the data and information used by the third party to determine discounts for applicable drugs of the manufacturer under the program.

"(4) PERFORMANCE REQUIREMENTS. — The Secretary shall establish performance requirements for a third party with a contract under paragraph (3) and safeguards to protect the independence and integrity of the activities carried out by the third party under the program under this section.

"(5) IMPLEMENTATION. — The Secretary shall implement the program under this section for 2024 and 2025 by program instruction or otherwise.

"(e) ENFORCEMENT. —

"(1) AUDITS. — Each manufacturer with an agreement in effect under this section shall be subject to periodic audit by the Secretary.

"(2) CIVIL MONEY PENALTY. —

"(A) IN GENERAL. — A manufacturer that fails to provide discounted prices for applicable drugs of the manufacturer dispensed to applicable beneficiaries in accordance with such agreement shall be subject to a civil money penalty for each such failure in an amount the Secretary determines is equal to the sum of —

"(i) the amount that the manufacturer would have paid with respect to such discounts under the agreement, which will then be used to pay the discounts which the manufacturer had failed to provide; and

"(ii) 25 percent of such amount.

"(B) APPLICATION. — The provisions of section 1128A (other than subsections (a) and (b)) shall apply to a civil money penalty under this paragraph in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a).

"(f) CLARIFICATION REGARDING AVAILABILITY OF OTHER COVERED PART D DRUGS. — Nothing in this section shall prevent an applicable beneficiary from purchasing a covered part D drug that is not an applicable drug (including a generic drug or a drug that is not on the formulary of the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in).

"(g) DEFINITIONS. — In this section:

"(1) APPLICABLE BENEFICIARY. — The term 'applicable beneficiary' means an individual who, on the date of dispensing a covered part D drug —

"(A) is enrolled in a prescription drug plan or an MA-PD plan;

"(B) is not enrolled in a qualified retiree prescription drug plan; and

"(C) has incurred costs, as determined in accordance with section 1860D-2(b)(4)(C) as if clause (iii) of such section included a reference to costs reimbursed through insurance, a group health plan, or certain other third-party payment arrangements, for covered part D drugs in the year that exceed —

"(i) in the case of an individual not described in clause (ii) or (iii), the annual deductible for such year, as specified in section 1860D-2(b)(1);

"(ii) in the case of a subsidy eligible individual described in section 1860D14(a)(1), the annual deductible for such year, as specified in subparagraph (B) of such section; and

"(iii) in the case of a subsidy eligible individual described in section 1860D-14(a)(2), the annual deductible for such year, as specified in subparagraph (B) of such section.

"(2) APPLICABLE DRUG. — The term 'applicable drug', with respect to an applicable beneficiary —

"(A) means a covered part D drug —

"(i) approved under a new drug application under section 505(c) of the Federal Food, Drug, and Cosmetic Act or, in the case of a biologic product, licensed under section 351 of the Public Health Service Act; and

"(ii)(I) if the PDP sponsor of the prescription drug plan or the MA organization offering the MA-PD plan uses a formulary, which is on the formulary of the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in;

"(II) if the PDP sponsor of the prescription drug plan or the MA organization offering the MA-PD plan does not use a formulary, for which benefits are available under the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in; or

"(III) is provided through an exception or appeal; and

"(B) does not include a selected drug (as referred to under section 1192(c)) during a price applicability period (as defined in section 1191(b)(2)) with respect to such drug.

"(3) APPLICABLE NUMBER OF CALENDAR DAYS. — The term 'applicable number of calendar days' means —

"(A) with respect to claims for reimbursement submitted electronically, 14 days; and

"(B) with respect to claims for reimbursement submitted otherwise, 30 days.

"(4) DISCOUNTED PRICE. —

"(A) IN GENERAL. — The term 'discounted price' means, subject to subparagraphs (B) and (C), with respect to an applicable drug of a manufacturer dispensed during a year to an applicable beneficiary —

"(i) who has not incurred costs, as determined in accordance with section 1860D-2(b)(4)(C), for covered part D drugs in the year that are equal to or exceed the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B)(i) for the year, 90 percent of the negotiated price of such drug; and

"(ii) who has incurred such costs, as so determined, in the year that are equal to or exceed such threshold for the year, 80 percent of the negotiated price of such drug.

"(B) PHASE-IN FOR CERTAIN DRUGS DISPENSED TO LIS BENEFICIARIES. —

"(i) IN GENERAL. — In the case of an applicable drug of a specified manufacturer (as defined in clause (ii)) that is marketed as of the date of enactment of this subparagraph and dispensed for an applicable beneficiary who is a subsidy eligible individual (as defined in section 1860D-14(a)(3)), the term 'discounted price' means the specified LIS percent (as defined in clause (iii)) of the negotiated price of the applicable drug of the manufacturer.

"(ii) SPECIFIED MANUFACTURER. —

"(I) IN GENERAL. — In this subparagraph, subject to subclause (II), the term 'specified manufacturer' means a manufacturer of an applicable drug for which, in 2021 —

"(aa) the manufacturer had a coverage gap discount agreement under section 1860D-14A;

"(bb) the total expenditures for all of the specified drugs of the manufacturer covered by such agreement or agreements for such year and covered under this part during such year represented less than 1.0 percent of the total expenditures under this part for all covered Part D drugs during such year; and

"(cc) the total expenditures for all of the specified drugs of the manufacturer that are single source drugs and biological products covered under part B during such year represented less than 1.0 percent of the total expenditures under part B for all drugs or biological products covered under such part during such year.

"(II) SPECIFIED DRUGS. —

"(aa) IN GENERAL. — For purposes of this clause, the term 'specified drug' means, with respect to a specified manufacturer, for 2021, an applicable drug that is produced, prepared, propagated, compounded, converted, or processed by the manufacturer.

"(bb) AGGREGATION RULE. — All persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 shall be treated as one manufacturer for purposes of this subparagraph. For purposes of making a determination pursuant to the previous sentence, an agreement under this section shall require that a manufacturer provide and attest to such information as specified by the Secretary as necessary.

"(III) LIMITATION. — The term 'specified manufacturer' shall not include a manufacturer described in subclause (I) if such manufacturer is acquired after 2021 by another manufacturer that is not a specified manufacturer, effective at the beginning of the plan year immediately following such acquisition or, in the case of an acquisition before 2024, effective January 1, 2024.

"(iii) SPECIFIED LIS PERCENT. — In this subparagraph, the 'specified LIS percent' means, with respect to a year —

"(I) for an applicable drug dispensed for an applicable beneficiary described in clause (i) who has not incurred costs, as determined in accordance with section 1860D-2(b)(4)(C), for covered part D drugs in the year that are equal to or exceed the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B)(i) for the year —

"(aa) for 2024, 99 percent;

"(bb) for 2025, 98 percent;

"(cc) for 2026, 95 percent;

"(dd) for 2027, 92 percent; and

"(ee) for 2028 and each subsequent year, 90 percent; and

"(II) for an applicable drug dispensed for an applicable beneficiary described in clause (i) who has incurred costs, as determined in accordance with section 1860D-2(b)(4)(C), for covered part D drugs in the year that are equal to or exceed the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B)(i) for the year —

"(aa) for 2024, 99 percent;

"(bb) for 2025, 98 percent;

"(cc) for 2026, 95 percent;

"(dd) for 2027, 92 percent;

"(ee) for 2028, 90 percent;

"(ff) for 2029, 85 percent; and

"(gg) for 2030 and each subsequent year, 80 percent.

"(C) PHASE-IN FOR SPECIFIED SMALL MANUFACTURERS. —

"(i) IN GENERAL. — In the case of an applicable drug of a specified small manufacturer (as defined in clause (ii)) that is marketed as of the date of enactment of this subparagraph and dispensed for an applicable beneficiary, the term 'discounted price' means the specified small manufacturer percent (as defined in clause (iii)) of the negotiated price of the applicable drug of the manufacturer.

"(ii) SPECIFIED SMALL MANUFACTURER. —

"(I) IN GENERAL. — In this subparagraph, subject to subclause (III), the term 'specified small manufacturer' means a manufacturer of an applicable drug for which, in 2021 —

"(aa) the manufacturer is a specified manufacturer (as defined in subparagraph (B)(ii)); and

"(bb) the total expenditures under part D for any one of the specified small manufacturer drugs of the manufacturer that are covered by the agreement or agreements under section 1860D-14A of such manufacturer for such year and covered under this part during such year are equal to or more than 80 percent of the total expenditures under this part for all specified small manufacturer drugs of the manufacturer that are covered by such agreement or agreements for such year and covered under this part during such year.

"(II) SPECIFIED SMALL MANUFACTURER DRUGS. —

"(aa) IN GENERAL. — For purposes of this clause, the term 'specified small manufacturer drugs' means, with respect to a specified small manufacturer, for 2021, an applicable drug that is produced, prepared, propagated, compounded, converted, or processed by the manufacturer.

"(bb) AGGREGATION RULE. — All persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 shall be treated as one manufacturer for purposes of this subparagraph. For purposes of making a determination pursuant to the previous sentence, an agreement under this section shall require that a manufacturer provide and attest to such information as specified by the Secretary as necessary.

"(III) LIMITATION. — The term 'specified small manufacturer' shall not include a manufacturer described in subclause (I) if such manufacturer is acquired after 2021 by another manufacturer that is not a specified small manufacturer, effective at the beginning of the plan year immediately following such acquisition or, in the case of an acquisition before 2024, effective January 1, 2024.

"(iii) SPECIFIED SMALL MANUFACTURER PERCENT. — In this subparagraph, the term 'specified small manufacturer percent' means, with respect to a year —

"(I) for an applicable drug dispensed for an applicable beneficiary who has not incurred costs, as determined in accordance with section 1860D-2(b)(4)(C), for covered part D drugs in the year that are equal to or exceed the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B)(i) for the year —

"(aa) for 2024, 99 percent;

"(bb) for 2025, 98 percent;

"(cc) for 2026, 95 percent;

"(dd) for 2027, 92 percent; and

"(ee) for 2028 and each subsequent year, 90 percent; and

"(II) for an applicable drug dispensed for an applicable beneficiary who has incurred costs, as determined in accordance with section 1860D-2(b)(4)(C), for covered part D drugs in the year that are equal to or exceed the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B)(i) for the year —

"(aa) for 2024, 99 percent;

"(bb) for 2025, 98 percent;

"(cc) for 2026, 95 percent;

"(dd) for 2027, 92 percent;

"(ee) for 2028, 90 percent;

"(ff) for 2029, 85 percent; and

"(gg) for 2030 and each subsequent year, 80 percent.

"(D) TOTAL EXPENDITURES. — For purposes of this paragraph, the term 'total expenditures' includes, in the case of expenditures with respect to part D, ingredient costs, dispensing fees, sales tax, and, if applicable, vaccine administration fees. The term 'total expenditures' excludes, in the case of expenditures with respect to part B, expenditures for a drug or biological that are bundled or packaged into the payment for another service.

"(E) SPECIAL CASE FOR CERTAIN CLAIMS. —

"(i) CLAIMS SPANNING DEDUCTIBLE. — In the case where the entire amount of the negotiated price of an individual claim for an applicable drug with respect to an applicable beneficiary does not fall above the annual deductible specified in section 1860D-2(b)(1) for the year, the manufacturer of the applicable drug shall provide the discounted price under this section on only the portion of the negotiated price of the applicable drug that falls above such annual deductible.

"(ii) CLAIMS SPANNING OUT-OF-POCKET THRESHOLD. — In the case where the entire amount of the negotiated price of an individual claim for an applicable drug with respect to an applicable beneficiary does not fall entirely below or entirely above the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B)(i) for the year, the manufacturer of the applicable drug shall provide the discounted price —

"(I) in accordance with subparagraph (A)(i) on the portion of the negotiated price of the applicable drug that falls below such threshold; and

"(II) in accordance with subparagraph (A)(ii) on the portion of such price of such drug that falls at or above such threshold.

"(5) MANUFACTURER. — The term 'manufacturer' means any entity which is engaged in the production, preparation, propagation, compounding, conversion, or processing of prescription drug products, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis. Such term does not include a wholesale distributor of drugs or a retail pharmacy licensed under State law.

"(6) NEGOTIATED PRICE. — The term 'negotiated price' has the meaning given such term in section 423.100 of title 42, Code of Federal Regulations (or any successor regulation) and, with respect to an applicable drug, such negotiated price shall include any dispensing fee and, if applicable, any vaccine administration fee for the applicable drug.

"(7) QUALIFIED RETIREE PRESCRIPTION DRUG PLAN. — The term 'qualified retiree prescription drug plan' has the meaning given such term in section 1860D-22(a)(2).

"SEC. 1860D-14D. SELECTED DRUG SUBSIDY PROGRAM.

"With respect to covered part D drugs that would be applicable drugs (as defined in section 1860D-14C(g)(2) but for the application of subparagraph (B) of such section, the Secretary shall provide a process whereby, in the case of an applicable beneficiary (as defined in section 1860D-14C(g)(1)) who, with respect to a year, is enrolled in a prescription drug plan or is enrolled in an MA-PD plan, has not incurred costs that are equal to or exceed the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B)(i), and is dispensed such a drug the Secretary (periodically and on a timely basis) provides the PDP sponsor or the MA organization offering the plan, a subsidy with respect to such drug that is equal to 10 percent of the negotiated price (as defined in section 1860D-14C(g)(6)) of such drug.".

(2) SUNSET OF MEDICARE COVERAGE GAP DISCOUNT PROGRAM. — Section 1860D-14A of the Social Security Act (42 U.S.C. 1395-114a) is amended —

(A) in subsection (a), in the first sentence, by striking "The Secretary" and inserting "Subject to subsection (h), the Secretary"; and

(B) by adding at the end the following new subsection:

"(h) SUNSET OF PROGRAM. —

"(1) IN GENERAL. — The program shall not apply with respect to applicable drugs dispensed on or after January 1, 2024, and, subject to paragraph (2), agreements under this section shall be terminated as of such date.

"(2) CONTINUED APPLICATION FOR APPLICABLE DRUGS DISPENSED PRIOR TO SUNSET. — The provisions of this section (including all responsibilities and duties) shall continue to apply on and after January 1, 2024, with respect to applicable drugs dispensed prior to such date.".

(3) INCLUSION OF ACTUARIAL VALUE OF MANUFACTURER DISCOUNTS IN BIDS. — Section 1860D-11 of the Social Security Act (42 U.S.C. 1395w-111) is amended —

(A) in subsection (b)(2)(C)(iii) —

(i) by striking "assumptions regarding the reinsurance" and inserting "assumptions regarding —

"(I) the reinsurance"; and

(ii) by adding at the end the following:

"(II) for 2024 and each subsequent year, the manufacturer discounts provided under section 1860D-14C subtracted from the actuarial value to produce such bid; and"; and

(B) in subsection (c)(1)(C) —

(i) by striking "an actuarial valuation of the reinsurance" and inserting "an actuarial valuation of —

"(i) the reinsurance";

(ii) in clause (i), as inserted by clause (i) of this subparagraph, by adding "and" at the end; and

(iii) by adding at the end the following:

"(ii) for 2024 and each subsequent year, the manufacturer discounts provided under section 1860D-14C;".

(e) CONFORMING AMENDMENTS. —

(1) Section 1860D-2 of the Social Security Act (42 U.S.C. 1395w-102) is amended —

(A) in subsection (a)(2)(A)(i)(I), by striking ", or an increase in the initial" and inserting "or, for a year preceding 2024, an increase in the initial";

(B) in subsection (c)(1)(C) —

(i) in the subparagraph heading, by striking "AT INITIAL COVERAGE LIMIT"; and

(ii) by inserting "for a year preceding 2024 or the annual out-of-pocket threshold specified in subsection (b)(4)(B) for the year for 2024 and each subsequent year" after "subsection (b)(3) for the year" each place it appears; and

(C) in subsection (d)(1)(A), by striking "or an initial" and inserting "or, for a year preceding 2024, an initial".

(2) Section 1860D-4(a)(4)(B)(i) of the Social Security Act (42 U.S.C. 1395w-104(a)(4)(B)(i)) is amended by striking "the initial" and inserting "for a year preceding 2024, the initial".

(3) Section 1860D-14(a) of the Social Security Act (42 U.S.C. 1395w-114(a)) is amended —

(A) in paragraph (1) —

(i) in subparagraph (C), by striking "The continuation" and inserting "For a year preceding 2024, the continuation";

(ii) in subparagraph (D)(iii), by striking "1860D-2(b)(4)(A)(i)(I)" and inserting "1860D-2(b)(4)(A)(i)(I)(aa)"; and

(iii) in subparagraph (E), by striking "The elimination" and inserting "For a year preceding 2024, the elimination"; and

(B) in paragraph (2) —

(i) in subparagraph (C), by striking "The continuation" and inserting "For a year preceding 2024, the continuation"; and

(ii) in subparagraph (E), by striking "1860D-2(b)(4)(A)(i)(I)" and inserting "1860D-2(b)(4)(A)(i)(I)(aa)".

(4) Section 1860D-21(d)(7) of the Social Security Act (42 U.S.C. 1395w-131(d)(7)) is amended by striking "section 1860D-2(b)(4)(B)(i)" and inserting "section 1860D-2(b)(4)(C)(i)".

(5) Section 1860D-22(a)(2)(A) of the Social Security Act (42 U.S.C. 1395w-132(a)(2)(A)) is amended —

(A) by striking "the value of any discount" and inserting the following: "the value of —

"(i) for years prior to 2024, any discount";

(B) in clause (i), as inserted by subparagraph (A) of this paragraph, by striking the period at the end and inserting "; and"; and

(C) by adding at the end the following new clause:

"(ii) for 2024 and each subsequent year, any discount provided pursuant to section 1860D-14C.".

(6) Section 1860D-41(a)(6) of the Social Security Act (42 U.S.C. 1395w-151(a)(6)) is amended —

(A) by inserting "for a year before 2024" after "1860D-2(b)(3)"; and

(B) by inserting "for such year" before the period.

(7) Section 1860D-43 of the Social Security Act (42 U.S.C. 1395w-153) is amended —

(A) in subsection (a) —

(i) by striking paragraph (1) and inserting the following:

"(1) participate in —

"(A) for 2011 through 2023, the Medicare coverage gap discount program under section 1860D-14A; and

"(B) for 2024 and each subsequent year, the manufacturer discount program under section 1860D-14C;";

(ii) by striking paragraph (2) and inserting the following:

"(2) have entered into and have in effect —

"(A) for 2011 through 2023, an agreement described in subsection (b) of section 1860D-14A with the Secretary; and

"(B) for 2024 and each subsequent year, an agreement described in subsection (b) of section 1860D-14C with the Secretary; and"; and

(iii) by striking paragraph (3) and inserting the following:

"(3) have entered into and have in effect, under terms and conditions specified by the Secretary —

"(A) for 2011 through 2023, a contract with a third party that the Secretary has entered into a contract with under subsection (d)(3) of section 1860D-14A; and

"(B) for 2024 and each subsequent year, a contract with a third party that the Secretary has entered into a contract with under subsection (d)(3) of section 1860D-14C."; and

(B) by striking subsection (b) and inserting the following:

"(b) EFFECTIVE DATE. — Paragraphs (1)(A), (2)(A), and (3)(A) of subsection (a) shall apply to covered part D drugs dispensed under this part on or after January 1, 2011, and before January 1, 2024, and paragraphs (1)(B), (2)(B), and (3)(B) of such subsection shall apply to covered part D drugs dispensed under this part on or after January 1, 2024.".

(8) Section 1927 of the Social Security Act (42 U.S.C. 1396r-8) is amended —

(A) in subsection (c)(1)(C)(i)(VI), by inserting before the period at the end the following: "or under the manufacturer discount program under section 1860D-14C"; and

(B) in subsection (k)(1)(B)(i)(V), by inserting before the period at the end the following: "or under section 1860D-14C".

(f) IMPLEMENTATION FOR 2024 AND 2025. — Notwithstanding any other provision of this section, the Secretary shall implement this section, including the amendments made by this section, for 2024 and 2025 by program instruction or otherwise.

(g) FUNDING. — In addition to amounts otherwise available, there are appropriated to the Centers for Medicare & Medicaid Services, out of any money in the Treasury not otherwise appropriated, $44,000,000 for fiscal year 2022, $38,000,000 for fiscal year 2023, and $32,000,000 for each of fiscal years 2024 through 2031, to remain available until expended, to carry out the provisions of, including the amendments made by, this section.

SEC. 139202. MAXIMUM MONTHLY CAP ON COST SHARING PAYMENTS UNDER PRESCRIPTION DRUG PLANS AND MA-PD PLANS.

(a) IN GENERAL. — Section 1860D-2(b) of the Social Security Act (42 U.S.C. 1395w-102(b)), as amended by section 139201, is amended —

(1) in paragraph (2) —

(A) in subparagraph (A), by striking "and (D)" and inserting ", (D), and (E)"; and

(B) by adding at the end the following new subparagraph:

"(E) MAXIMUM MONTHLY CAP ON COST SHARING PAYMENTS. —

"(i) IN GENERAL. — For plan years beginning on or after January 1, 2025, each PDP sponsor offering a prescription drug plan and each MA organization offering an MA-PD plan shall provide to any enrollee of such plan, including an enrollee who is a subsidy eligible individual (as defined in paragraph (3) of section 1860D-14(a)), the option to elect with respect to a plan year to pay cost sharing under the plan in monthly amounts that are capped in accordance with this subparagraph.

"(ii) DETERMINATION OF MAXIMUM MONTHLY CAP. — For each month in the plan year for which an enrollee in a prescription drug plan or an MA-PD plan has made an election pursuant to clause (i), the PDP sponsor or MA organization shall determine a maximum monthly cap (as defined in clause (iv)) for such enrollee.

"(iii) BENEFICIARY MONTHLY PAYMENTS. — With respect to an enrollee who has made an election pursuant to clause (i), for each month described in clause (ii), the PDP sponsor or MA organization shall bill such enrollee an amount (not to exceed the maximum monthly cap) for the out-of-pocket costs of such enrollee in such month.

"(iv) MAXIMUM MONTHLY CAP DEFINED. — In this subparagraph, the term 'maximum monthly cap' means, with respect to an enrollee —

"(I) for the first month for which the enrollee has made an election pursuant to clause (i), an amount determined by calculating —

"(aa) the annual out-of-pocket threshold specified in paragraph (4)(B) minus the incurred costs of the enrollee as described in paragraph (4)(C); divided by

"(bb) the number of months remaining in the plan year; and

"(II) for a subsequent month, an amount determined by calculating —

"(aa) the sum of any remaining out-of-pocket costs owed by the enrollee from a previous month that have not yet been billed to the enrollee and any additional out-of-pocket costs incurred by the enrollee; divided by

"(bb) the number of months remaining in the plan year.

"(v) ADDITIONAL REQUIREMENTS. — The following requirements shall apply with respect to the option to make an election pursuant to clause (i) under this subparagraph:

"(I) SECRETARIAL RESPONSIBILITIES. — The Secretary shall provide information to part D eligible individuals on the option to make such election through educational materials, including through the notices provided under section 1804(a).

"(II) TIMING OF ELECTION. — An enrollee in a prescription drug plan or an MA-PD plan may make such an election —

"(aa) prior to the beginning of the plan year; or

"(bb) in any month during the plan year.

"(III) PDP SPONSOR AND MA ORGANIZATION RESPONSIBILITIES. — Each PDP sponsor offering a prescription drug plan or MA organization offering an MA-PD plan —

"(aa) may not limit the option for an enrollee to make such an election to certain covered part D drugs;

"(bb) shall, prior to the plan year, notify prospective enrollees of the option to make such an election in promotional materials;

"(cc) shall include information on such option in enrollee educational materials;

"(dd) shall have in place a mechanism to notify a pharmacy during the plan year when an enrollee incurs out-of-pocket costs with respect to covered part D drugs that make it likely the enrollee may benefit from making such an election;

"(ee) shall provide that a pharmacy, after receiving a notification described in item (dd) with respect to an enrollee, informs the enrollee of such notification;

"(ff) shall ensure that such an election by an enrollee has no effect on the amount paid to pharmacies (or the timing of such payments) with respect to covered part D drugs dispensed to the enrollee; and

"(gg) shall have in place a financial reconciliation process to correct inaccuracies in payments made by an enrollee under this subparagraph with respect to covered part D drugs during the plan year.

"(IV) FAILURE TO PAY AMOUNT BILLED. — If an enrollee fails to pay the amount billed for a month as required under this subparagraph, the election of the enrollee pursuant to clause (i) shall be terminated and the enrollee shall pay the cost sharing otherwise applicable for any covered part D drugs subsequently dispensed to the enrollee up to the annual out-of-pocket threshold specified in paragraph (4)(B).

"(V) CLARIFICATION REGARDING PAST DUE AMOUNTS. — Nothing in this subparagraph shall be construed as prohibiting a PDP sponsor or an MA organization from billing an enrollee for an amount owed under this subparagraph.

"(VI) TREATMENT OF UNSETTLED BALANCES. — Any unsettled balances with respect to amounts owed under this subparagraph shall be treated as plan losses and the Secretary shall not be liable for any such balances outside of those assumed as losses estimated in plan bids."; and

(2) in paragraph (4) —

(A) in subparagraph (C), by striking "in subparagraph (E)" and inserting "in subparagraph (E) and subject to subparagraph (F)"; and

(B) by adding at the end the following new subparagraph:

"(F) INCLUSION OF COSTS PAID UNDER MAXIMUM MONTHLY CAP OPTION. — In applying subparagraph (A), with respect to an enrollee who has made an election pursuant to clause (i) of paragraph (2)(E), costs shall be treated as incurred if such costs are paid by a PDP sponsor or an MA organization under the option provided under such paragraph.".

(b) APPLICATION TO ALTERNATIVE PRESCRIPTION DRUG COVERAGE. — Section 1860D-2(c) of the Social Security Act (42 U.S.C. 1395w-102(c)) is amended by adding at the end the following new paragraph:

"(4) SAME MAXIMUM MONTHLY CAP ON COST SHARING. — For plan years beginning on or after January 1, 2025, the maximum monthly cap on cost sharing payments under the option provided under subsection (b)(2)(E) shall apply to such coverage.".

(c) IMPLEMENTATION FOR 2025. — The Secretary shall implement this section, including the amendments made by this section, for 2025 by program instruction or otherwise.

(d) FUNDING. — In addition to amounts otherwise available, there are appropriated to the Centers for Medicare & Medicaid Services, out of any money in the Treasury not otherwise appropriated, $1,000,000 for each of fiscal years 2022 through 2031, to remain available until expended, to carry out the provisions of, including the amendments made by, this section.

PART 4 — REPEAL OF CERTAIN PRESCRIPTION DRUG REBATE RULE

SEC. 139301. PROHIBITING IMPLEMENTATION OF RULE RELATING TO ELIMINATING THE ANTI-KICKBACK STATUTE SAFE HARBOR PROTECTION FOR PRESCRIPTION DRUG REBATES.

Beginning January 1, 2026, the Secretary of Health and Human Services shall not implement, administer, or enforce the provisions of the final rule published by the Office of the Inspector General of the Department of Health and Human Services on November 30, 2020, and titled "Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees" (85 Fed. Reg. 76666).

PART 5 — MISCELLANEOUS

SEC. 139401. APPROPRIATE COST-SHARING FOR CERTAIN INSULIN PRODUCTS UNDER MEDICARE PART D.

(a) IN GENERAL. — Section 1860D-2 of the Social Security Act (42 U.S.C. 1395w-102) is amended —

(1) in subsection (b) —

(A) in paragraph (1)(A), by striking "The coverage" and inserting "Subject to paragraph (8), the coverage";

(B) in paragraph (2)(A), by striking "and (D)" and inserting "and (D) and paragraph (8)";

(C) in paragraph (3)(A), by striking "and (4)" and inserting "(4), and (8)";

(D) in paragraph (4)(A)(i), by striking "The coverage" and inserting "Subject to paragraph (8), the coverage"; and

(E) by adding at the end the following new paragraph:

"(8) TREATMENT OF COST-SHARING FOR CERTAIN INSULIN PRODUCTS. —

"(A) IN GENERAL. — For plan years beginning on or after January 1, 2023, the following shall apply with respect to insulin products (as defined in subparagraph (B)):

"(i) NO APPLICATION OF DEDUCTIBLE. — The deductible under paragraph (1) shall not apply with respect to such insulin products.

"(ii) APPLICATION OF COST-SHARING. —

"(I) PLAN YEAR 2023. — For plan year 2023, the coverage provides benefits for such insulin products, regardless of whether an individual has reached the initial coverage limit under paragraph (3) or the out-of-pocket threshold under paragraph (4), with cost-sharing that is equal to the applicable copayment amount.

"(II) PLAN YEAR 2024 AND SUBSEQUENT PLAN YEARS. — For plan year 2024 and subsequent plan years, the coverage provides benefits for such insulin products, prior to an individual reaching the out-of-pocket threshold under paragraph (4), with cost-sharing that is equal to the applicable copayment amount.

"(III) APPLICABLE COPAYMENT AMOUNT. — For purposes of this clause, the term 'applicable copayment amount' means, with respect to an insulin product under a prescription drug plan or an MA-PD plan, an amount that is not more than $35.

"(B) INSULIN PRODUCT. — For purposes of this paragraph, the term 'insulin product' means an insulin product that is approved under section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of the Public Health Service Act and marketed pursuant to such approval or licensure, including any insulin product that has been deemed to be licensed under section 351 of the Public Health Service Act pursuant to section 7002(e)(4) of the Biologics Price Competition and Innovation Act of 2009 and marketed pursuant to such section."; and

(2) in subsection (c), by adding at the end the following new paragraph:

"(4) TREATMENT OF COST-SHARING FOR INSULIN PRODUCTS. — The coverage is provided in accordance with subsection (b)(8).".

(b) CONFORMING AMENDMENTS TO COST-SHARING FOR LOW-INCOME INDIVIDUALS. — Section 1860D-14(a) of the Social Security Act (42 U.S.C. 1395w-114(a)) is amended —

(1) in paragraph (1) —

(A) in subparagraph (D)(iii), by adding at the end the following new sentence: "For plan year 2023 and subsequent plan years, the copayment amount applicable under the preceding sentence to an insulin product (as defined in section 1860D-2(b)(8)(B)) furnished to the individual may not exceed the applicable copayment amount for the product under the prescription drug plan or MA-PD plan in which the individual is enrolled."; and

(B) in subparagraph (E), by inserting the following before the period at the end "or under section 1860D-2(b)(8) in the case of an insulin product (as defined in subparagraph (B) of such section)"; and

(2) in paragraph (2) —

(A) in subparagraph (D), by adding at the end the following new sentence: "For plan year 2023 and subsequent plan years, the amount of the coinsurance applicable under the preceding sentence to an insulin product (as defined in section 1860D-2(b)(8)(B)) furnished to the individual may not exceed the applicable copayment amount for the product under the prescription drug plan or MA-PD plan in which the individual is enrolled."; and

(B) in subparagraph (E), by adding at the end the following new sentence: "For plan year 2023, the amount of the copayment or coinsurance applicable under the preceding sentence to an insulin product (as defined in section 1860D-2(b)(8)(B)) furnished to the individual may not exceed the applicable copayment amount for the product under the prescription drug plan or MA-PD plan in which the individual is enrolled."

(c) IMPLEMENTATION. — The Secretary shall implement this section for plan years 2023 and 2024 by program instruction or otherwise.

SEC. 139402. COVERAGE OF ADULT VACCINES RECOMMENDED BY THE ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES UNDER MEDICARE PART D.

(a) ENSURING TREATMENT OF COST SHARING IS CONSISTENT WITH TREATMENT OF VACCINES UNDER MEDICARE PART B. — Section 1860D-2 of the Social Security Act (42 U.S.C. 1395w-102), as amended by section 139401, is further amended —

(1) in subsection (b) —

(A) in paragraph (1)(A), by striking "paragraph (8)" and inserting "paragraphs (8) and (9)";

(B) in paragraph (2)(A), by striking "paragraph (8)" and inserting "paragraphs (8) and (9)";

(C) in paragraph (3)(A), by striking "and (8)" and inserting "(8), and (9)";

(D) in paragraph (4)(A)(i), by striking "paragraph (8)" and inserting "paragraphs (8) and (9)"; and

(E) by adding at the end the following new paragraph:

"(9) TREATMENT OF COST SHARING FOR ADULT VACCINES RECOMMENDED BY THE ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES CONSISTENT WITH TREATMENT OF VACCINES UNDER PART B. —

"(A) IN GENERAL. — For plan years beginning on or after January 1, 2024, the following shall apply with respect to an adult vaccine recommended by the Advisory Committee on Immunization Practices (as defined in subparagraph (B)):

"(i) NO APPLICATION OF DEDUCTIBLE. — The deductible under paragraph (1) shall not apply with respect to such vaccine.

"(ii) NO APPLICATION OF COINSURANCE OR ANY OTHER COST-SHARING. — There shall be no coinsurance or other cost-sharing under this part with respect to such vaccine, regardless of whether for costs below, at, or above the initial coverage limit under paragraph (3) or the out-of-pocket threshold under paragraph (4).

"(B) ADULT VACCINES RECOMMENDED BY THE ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES. — For purposes of this paragraph, the term 'adult vaccine recommended by the Advisory Committee on Immunization Practices' means a covered part D drug that is a vaccine licensed under section 351 of the Public Health Service Act for use by adult populations and administered in accordance with recommendations of the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention."; and

(2) in subsection (c), by adding at the end the following new paragraph:

"(5) TREATMENT OF COST SHARING FOR ADULT VACCINES RECOMMENDED BY THE ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES. — The coverage is in accordance with subsection (b)(9).".

(b) CONFORMING AMENDMENTS TO COST SHARING FOR LOW-INCOME INDIVIDUALS. — Section 1860D-14(a) of the Social Security Act (42 U.S.C. 1395w-114(a)), as amended by section 139401, is further amended —

(1) in paragraph (1)(D), in each of clauses (ii) and (iii), by striking "In the case" and inserting "Subject to paragraph (6), in the case";

(2) in paragraph (2) —

(A) in subparagraph (B), by striking "A reduction" and inserting "Subject to paragraph (6), a reduction"

(B) in subparagraph (D), by striking "The substitution" and inserting "Subject to paragraph (6), the substitution"; and

(C) in subparagraph (E), by striking "subsection (c)" and inserting "paragraph (6) and subsection (c)"; and

(3) by adding at the end the following new paragraph:

"(6) NO APPLICATION OF COST SHARING FOR ADULT VACCINES RECOMMENDED BY THE ADVISORY COMMITTEE ON IMMUNIZATION PRACTICES. — For plan years beginning on or after January 1, 2024, there shall be no cost sharing under this section, including no annual deductible applicable under this section, with respect to an adult vaccine recommended by the Advisory Committee on Immunization Practices (as defined in subparagraph (B) of such section).".

(c) RULE OF CONSTRUCTION. — Nothing in this section shall be construed as limiting coverage under part D of title XVIII of the Social Security Act for vaccines that are not recommended by the Advisory Committee on Immunization Practices.

(d) IMPLEMENTATION FOR 2024. — The Secretary shall implement this section, including the amendments made by this section, for 2024 by program instruction or otherwise.

SEC. 139403. PAYMENT FOR BIOSIMILAR BIOLOGICAL PRODUCTS DURING INITIAL PERIOD.

Section 1847A(c)(4) of the Social Security Act (42 U.S.C. 1395w-3a(c)(4)) is amended —

(1) in each of subparagraphs (A) and (B), by redesignating clauses (i) and (ii) as subclauses (I) and (II), respectively, and moving such subclauses 2 ems to the right;

(2) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii) and moving such clauses 2 ems to the right;

(3) by striking "UNAVAILABLE. — In the case" and inserting "UNAVAILABLE. —

"(A) IN GENERAL. — Subject to subparagraph (B), in the case"; and

(4) by adding at the end the following new subparagraph:

"(B) LIMITATION ON PAYMENT AMOUNT FOR BIOSIMILAR BIOLOGICAL PRODUCTS DURING INITIAL PERIOD. — In the case of a biosimilar biological product furnished on or after July 1, 2023, during the initial period described in subparagraph (A) with respect to the biosimilar biological product, the amount payable under this section for the biosimilar biological product is the lesser of the following:

"(i) The amount determined under clause (ii) of such subparagraph for the biosimilar biological product.

"(ii) The amount determined under subsection (b)(1)(B) for the reference biological product.".

SEC. 139404. TEMPORARY INCREASE IN MEDICARE PART B PAYMENT FOR CERTAIN BIOSIMILAR BIOLOGICAL PRODUCTS.

Section 1847A(b)(8) of the Social Security Act (42 U.S.C. 1395w-3a(b)(8)) is amended —

(1) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively, and moving the margin of each such redesignated clause 2 ems to the right;

(2) by striking "PRODUCT. — The amount" and inserting the following: "PRODUCT. —

"(A) IN GENERAL. — Subject to subparagraph (B), the amount"; and

(3) by adding at the end the following new subparagraph:

"(B) TEMPORARY PAYMENT INCREASE. —

"(i) IN GENERAL. — In the case of a qualifying biosimilar biological product that is furnished during the applicable 5year period for such product, the amount specified in this paragraph for such product with respect to such period is the sum determined under subparagraph (A), except that clause (ii) of such subparagraph shall be applied by substituting '8 percent' for '6 percent'.

"(ii) APPLICABLE 5-YEAR PERIOD. — For purposes of clause (i), the applicable 5-year period for a qualifying biosimilar biological product is —

"(I) in the case of such a product for which payment was made under this paragraph as of March 31, 2022, the 5-year period beginning on April 1, 2022; and

"(II) in the case of such a product for which payment is first made under this paragraph during a calendar quarter during the period beginning April 1, 2022, and ending March 31, 2027, the 5-year period beginning on the first day of such calendar quarter during which such payment is first made.

"(iii) QUALIFYING BIOSIMILAR BIOLOGICAL PRODUCT DEFINED. — For purposes of this subparagraph, the term 'qualifying biosimilar biological product' means a biosimilar biological product described in paragraph (1)(C) with respect to which —

"(I) in the case of a product described in clause (ii)(I), the average sales price under paragraph (8)(A)(i) for a calendar quarter during the 5-year period described in such clause is not more than the average sales price under paragraph (4)(A) for such quarter for the reference biological product; and

"(II) in the case of a product described in clause (ii)(II), the average sales price under paragraph (8)(A)(i) for a calendar quarter during the 5year period described in such clause is not more than the average sales price under paragraph (4)(A) for such quarter for the reference biological product.".

SEC. 139405. IMPROVING ACCESS TO ADULT VACCINES UNDER MEDICAID AND CHIP.

(a) MEDICAID. —

(1) REQUIRING COVERAGE OF ADULT VACCINATIONS. —

(A) IN GENERAL. — Section 1902(a)(10)(A) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)) is amended in the matter preceding clause (i) by inserting "(13)(B)," after "(5),".

(B) MEDICALLY NEEDY. — Section 1902(a)(10)(C)(iv) of such Act (42 U.S.C. 1396a(a)(10)(C)(iv)) is amended by inserting ", (13)(B)," after "(5)".

(2) NO COST SHARING FOR VACCINATIONS. —

(A) GENERAL COST-SHARING LIMITATIONS. — Section 1916 of the Social Security Act (42 U.S.C. 1396o) is amended —

(i) in subsection (a)(2) —

(I) in subparagraph (G), by inserting a comma after "State plan";

(II) in subparagraph (H), by striking "; or" and inserting a comma;

(III) in subparagraph (I), by striking "; and" and inserting ", or"; and

(IV) by adding at the end the following new subparagraph:

"(J) vaccines described in section 1905(a)(13)(B) and the administration of such vaccines; and"; and

(ii) in subsection (b)(2) —

(I) in subparagraph (G), by inserting a comma after "State plan";

(II) in subparagraph (H), by striking "; or" and inserting a comma;

(III) in subparagraph (I), by striking "; and" and inserting ", or"; and

(IV) by adding at the end the following new subparagraph:

"(J) vaccines described in section 1905(a)(13)(B) and the administration of such vaccines; and".

(B) APPLICATION TO ALTERNATIVE COST SHARING. — Section 1916A(b)(3)(B) of the Social Security Act (42 U.S.C. 1396o-1(b)(3)(B)) is amended by adding at the end the following new clause:

"(xiv) Vaccines described in section 1905(a)(13)(B) and the administration of such vaccines.".

(3) INCREASED FMAP FOR ADULT VACCINES. — Section 1905(b) of the Social Security Act (42 U.S.C. 1396d(b)) is amended —

(A) by striking "and (5)" and inserting "(5)";

(B) by striking "services and vaccines described in subparagraphs (A) and (B) of subsection (a)(13), and prohibits cost-sharing for such services and vaccines" and inserting "services described in subsection (a)(13)(A), and prohibits cost-sharing for such services";

(C) by striking "medical assistance for such services and vaccines" and inserting "medical assistance for such services"; and

(D) by inserting ", and (6) during the first 8 fiscal quarters beginning on or after the effective date of this clause, in the case of a State which, as of the date of enactment of the Act titled 'An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14', provides medical assistance for vaccines described in subsection (a)(13)(B) and their administration and prohibits cost-sharing for such vaccines, the Federal medical assistance percentage, as determined under this subsection and subsection (y), shall be increased by 1 percentage point with respect to medical assistance for such vaccines" before the first period.

(b) CHIP. —

(1) REQUIRING COVERAGE OF ADULT VACCINATIONS. — Section 2103(c) of the Social Security Act (42 U.S.C. 1397cc(c)) is amended by adding at the end the following paragraph:

"(12) REQUIRED COVERAGE OF APPROVED, RECOMMENDED ADULT VACCINES AND THEIR ADMINISTRATION. — Regardless of the type of coverage elected by a State under subsection (a), if the State child health plan or a waiver of such plan provides child health assistance or pregnancy-related assistance (as defined in section 2112) to an individual who is 19 years of age or older, such assistance shall include coverage of vaccines described in section 1905(a)(13)(B) and their administration.".

(2) NO COST-SHARING FOR VACCINATIONS. — Section 2103(e)(2) of such Act (42 U.S.C. 1397cc(e)(2)) is amended by inserting "vaccines described in subsection (c)(12) (and the administration of such vaccines)," after "in vitro diagnostic products described in subsection (c)(10) (and administration of such products),".

(c) EFFECTIVE DATE. — The amendments made by this section take effect on the 1st day of the 1st fiscal quarter that begins on or after the date that is 1 year after the date of enactment of this Act and shall apply to expenditures made under a State plan or waiver of such plan under title XIX of the Social Security Act (42 U.S.C. 1396 through 1396w-6) or under a State child health plan or waiver of such plan under title XXI of such Act (42 U.S.C. 1397aa through 1397mm) on or after such effective date.

Subtitle J — Supplemental Security Income for the Territories

SECTION 131001. EXTENSION OF THE SUPPLEMENTAL SECURITY INCOME PROGRAM TO PUERTO RICO, THE UNITED STATES VIRGIN ISLANDS, GUAM, AND AMERICAN SAMOA.

(a) IN GENERAL. — Section 303 of the Social Security Amendments of 1972 (86 Stat. 1484) is amended by striking subsection (b).

(b) CONFORMING AMENDMENTS. —

(1) DEFINITION OF STATE. — Section 1101(a)(1) of the Social Security Act (42 U.S.C. 1301(a)(1)) is amended by striking the 5th sentence and inserting the following: "Such term when used in title XVI includes Puerto Rico, the United States Virgin Islands, Guam, and American Samoa.".

(2) EXEMPTION OF SSI PAYMENTS FROM LIMIT ON TOTAL PAYMENTS TO THE TERRITORIES. — Section 1108(a)(1) of such Act (42 U.S.C. 1308(a)(1)) is amended by striking "under titles I, X, XIV, and XVI".

(3) UNITED STATES NATIONALS TREATED THE SAME AS CITIZENS. — Section 1614(a)(1)(B) of such Act (42 U.S.C. 1382c(a)(1)(B)) is amended —

(A) in clause (i)(I), by inserting "or national of the United States," after "citizen";

(B) in clause (i)(II), by adding "; or" at the end; and

(C) in clause (ii), by inserting "or national" after "citizen".

(4) TERRITORIES INCLUDED IN GEOGRAPHIC MEANING OF UNITED STATES. — Section 1614(e) of such Act (42 U.S.C. 1382c(e)) is amended by striking "and the District of Columbia" and inserting ", the District of Columbia, Puerto Rico, the United States Virgin Islands, Guam, and American Samoa".

(c) WAIVER AUTHORITY. — The Commissioner of Social Security may waive or modify any statutory requirement relating to the provision of benefits under the Supplemental Security Income Program under title XVI of the Social Security Act in Puerto Rico, the United States Virgin Islands, Guam, or American Samoa, to the extent that the Commissioner deems it necessary in order to adapt the program to the needs of the territory involved.

(d) EFFECTIVE DATE. — This section and the amendments made by this section shall take effect on January 1, 2024.