Category: OBBBA Text

(a) In general.—

(1) IN GENERAL.—Paragraph (1) of section 170(b) is amended by adding at the end the following new subparagraph:

“(I) 0.5-PERCENT FLOOR.—Any charitable contribution otherwise allowable (without regard to this subparagraph) as a deduction under this section shall be allowed only to the extent that the aggregate of such contributions exceeds 0.5 percent of the taxpayer’s contribution base for the taxable year. The preceding sentence shall be applied—

“(i) first, by taking into account charitable contributions to which subparagraph (D) applies to the extent thereof,

“(ii) second, by taking into account charitable contributions to which subparagraph (C) applies to the extent thereof,

“(iii) third, by taking into account charitable contributions to which subparagraph (B) applies to the extent thereof,

“(iv) fourth, by taking into account charitable contributions to which subparagraph (E) applies to the extent thereof,

“(v) fifth, by taking into account charitable contributions to which subparagraph (A) applies to the extent thereof, and

“(vi) sixth, by taking into account charitable contributions to which subparagraph (G) applies to the extent thereof.”.

(2) APPLICATION OF CARRYFORWARD.—Paragraph (1) of section 170(d) is amended by adding at the end the following new subparagraph:

“(C) CONTRIBUTIONS DISALLOWED BY 0.5-PERCENT FLOOR CARRIED FORWARD ONLY FROM YEARS IN WHICH LIMITATION IS EXCEEDED.—

“(i) IN GENERAL.—In the case of any taxable year from which an excess is carried forward (determined without regard to this subparagraph) under any carryover rule, the applicable carryover rule shall be applied by increasing the excess determined under such applicable carryover rule for the contribution year (before the application of subparagraph (B)) by the amount attributable to the charitable contributions to which such rule applies which is not allowed as a deduction for the contribution year by reason of subsection (b)(1)(I).

“(ii) CARRYOVER RULE.—For purposes of this subparagraph, the term ‘carryover rule’ means—

“(I) subparagraph (A) of this paragraph,

“(II) subparagraphs (C)(ii), (D)(ii), (E)(ii), and (G)(ii) of subsection (b)(1), and

“(III) the second sentence of subsection (b)(1)(B).

“(iii) APPLICABLE CARRYOVER RULE.—For purposes of this subparagraph, the term ‘applicable carryover rule’ means any carryover rule applicable to charitable contributions which were (in whole or in part) not allowed as a deduction for the contribution year by reason of subsection (b)(1)(I).”.

(3) COORDINATION WITH DEDUCTION FOR NONITEMIZERS.—Section 170(p), as amended by this Act, is further amended by inserting “, (b)(1)(I),” after “subsections (b)(1)(G)(ii)”.

(b) Modification of limitation for cash contributions.—

(1) IN GENERAL.—Clause (i) of section 170(b)(1)(G) is amended to read as follows:

“(i) IN GENERAL.—For taxable years beginning after December 31, 2017, any contribution of cash to an organization described in subparagraph (A) shall be allowed as a deduction under subsection (a) to the extent that the aggregate of such contributions does not exceed the excess of—

“(I) 60 percent of the taxpayer’s contribution base for the taxable year, over

“(II) the aggregate amount of contributions taken into account under subparagraph (A) for such taxable year.”.

(2) COORDINATION WITH OTHER LIMITATIONS.—

(A) IN GENERAL.—Clause (iii) of section 170(b)(1)(G) is amended—

(i) by striking “subparagraphs (A) and (B)” in the heading and inserting “subparagraph (A)”, and

(ii) in subclause (II), by striking “, and subparagraph (B)” and all that follows through “this subparagraph”.

(B) OTHER CONTRIBUTIONS.—Subparagraph (B) of section 170(b)(1) is amended—

(i) by striking “to which subparagraph (A)” both places it appears and inserting “to which subparagraph (A) or (G)”, and

(ii) in clause (ii), by striking “over the amount” and all that follows through “subparagraph (C)).” and inserting “over—

“(I) the amount of charitable contributions allowable under subparagraph (A) (determined without regard to subparagraph (C)) and subparagraph (G), reduced by

“(II) so much of the contributions taken into account under subparagraph (G) as does not exceed 10 percent of the taxpayer’s contribution base.”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

(a) Permanent State housing credit ceiling increase for low-income housing credit.—

(1) IN GENERAL.—Section 42(h)(3)(I) is amended—

(A) by striking “2018, 2019, 2020, and 2021,” and inserting “beginning after December 31, 2025,”,

(B) by striking “1.125” and inserting “1.12”, and

(C) by striking “2018, 2019, 2020, and 2021” in the heading and inserting “calendar years after 2025”.

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to calendar years beginning after December 31, 2025.

(b) Tax-exempt bond financing requirement.—

(1) IN GENERAL.—Section 42(h)(4) is amended by striking subparagraph (B) and inserting the following:

“(B) SPECIAL RULE WHERE MINIMUM PERCENT OF BUILDINGS IS FINANCED WITH TAX-EXEMPT BONDS SUBJECT TO VOLUME CAP.—For purposes of subparagraph (A), paragraph (1) shall not apply to any portion of the credit allowable under subsection (a) with respect to a building if—

“(i) 50 percent or more of the aggregate basis of such building and the land on which the building is located is financed by 1 or more obligations described in subparagraph (A), or

“(ii) (I) 25 percent or more of the aggregate basis of such building and the land on which the building is located is financed by 1 or more obligations described in subparagraph (A), and

“(II) 1 or more of such obligations—

“(aa) are part of an issue the issue date of which is after December 31, 2025, and

“(bb) provide the financing for not less than 5 percent of the aggregate basis of such building and the land on which the building is located.”.

(2) EFFECTIVE DATE.—

(A) IN GENERAL.—The amendment made by this subsection shall apply to buildings placed in service in taxable years beginning after December 31, 2025.

(B) REHABILITATION EXPENDITURES TREATED AS SEPARATE NEW BUILDING.—In the case of any building with respect to which any expenditures are treated as a separate new building under section 42(e) of the Internal Revenue Code of 1986, for purposes of subparagraph (A), both the existing building and the separate new building shall be treated as having been placed in service on the date such expenditures are treated as placed in service under section 42(e)(4) of such Code.

(a) In general.—Section 45D(f)(1)(H) is amended by striking “for for each of calendar years 2020 through 2025” and inserting “ for each calendar year after 2019”.

(b) Carryover of unused limitation.—Section 45D(f)(3) is amended—

(1) by striking “If the” and inserting the following:

“(A) IN GENERAL.—If the”, and

(2) by striking the second sentence and inserting the following:

“(B) LIMITATION.—No amount may be carried under subparagraph (A) to any calendar year afer the fifth calendar year after the calendar year in which the excess described in such subparagraph occurred. For purposes of this subparagraph, any excess described in subparagraph (A) with respect to any calendar year before 2026 shall be treated as occurring in calendar year 2025.”.

(c) Effective date.—The amendments made by this section shall apply to calendar years beginning after December 31, 2025.

(a) Decennial designations.—

(1) DETERMINATION PERIOD.—Section 1400Z-1(c)(2)(B) is amended by striking “beginning on the date of the enactment of the Tax Cuts and Jobs Act” and inserting “beginning on the decennial determination date”.

(2) DECENNIAL DETERMINATION DATE.—Section 1400Z-1(c)(2) is amended by adding at the end the following new subparagraph:

“(C) DECENNIAL DETERMINATION DATE.—The term ‘decennial determination date’ means—

“(i) July 1, 2026, and

“(ii) each July 1 of the year that is 10 years after the preceding decennial determination date under this subparagraph.”.

(3) REPEAL OF SPECIAL RULE FOR PUERTO RICO.—Section 1400Z-1(b) is amended by striking paragraph (3).

(4) LIMITATION ON NUMBER OF DESIGNATIONS.—Section 1400Z-1(d)(1) is amended—

(A) in paragraph (1)—

(i) by striking “and subsection (b)(3)”, and

(ii) by inserting “during any period” after “the number of population census tracts in a State that may be designated as qualified opportunity zones under this section”, and

(B) in paragraph (2), by inserting “during any period” before the period at the end.

(5) EFFECTIVE DATES.—

(A) IN GENERAL.—Except as provided in subparagraph (B), the amendments made by this subsection shall take effect on the date of the enactment of this Act.

(B) PUERTO RICO.—The amendment made by paragraph (3) shall take effect on December 31, 2026.

(b) Qualification for designations.—

(1) DETERMINATION OF LOW-INCOME COMMUNITIES.—Section 1400Z-1(c) is amended by striking all that precedes paragraph (2) and inserting the following:

“(c) Other definitions.—For purposes of this section—

“(1) LOW-INCOME COMMUNITIES.—The term ‘low-income community’ means any population census tract if—

“(A) such population census tract has a median family income that—

“(i) in the case of a population census tract not located within a metropolitan area, does not exceed 70 percent of the statewide median family income, or

“(ii) in the case of a population census tract located within a metropolitan area, does not exceed 70 percent of the metropolitan area median family income, or

“(B) such population census tract—

“(i) has a poverty rate of at least 20 percent, and

“(ii) has a median family income that—

“(I) in the case of a population census tract not located within a metropolitan area, does not exceed 125 percent of the statewide median family income, or

“(II) in the case of a population census tract located within a metropolitan area, does not exceed 125 percent of the metropolitan area median family income.”.

(2) REPEAL OF RULE FOR CONTIGUOUS CENSUS TRACTS.—Section 1400Z-1 is amended by striking subsection (e) and by redesignating subsection (f) as subsection (e).

(3) PERIOD FOR WHICH DESIGNATION IS IN EFFECT.—Section 1400Z-1(e), as redesignated by paragraph (2), is amended to read as follows:

“(e) Period for which designation is in effect.—

“(1) IN GENERAL.—A designation as a qualified opportunity zone shall remain in effect for the period beginning on the applicable start date and ending on the day before the date that is 10 years after the applicable start date.

“(2) APPLICABLE START DATE.—For purposes of this section, the term ‘applicable start date’ means, with respect to any qualified opportunity zone designated under this section, the January 1 following the date on which such qualified opportunity zone was certified and designated by the Secretary under subsection (b)(1)(B).”.

(4) EFFECTIVE DATE.—The amendments made by this subsection shall apply to areas designated under section 1400Z-1 of the Internal Revenue Code of 1986 after the date of the enactment of this Act.

(c) Application of special rules for capital gains.—

(1) REPEAL OF SUNSET ON ELECTION.—Section 1400Z-2(a)(2) is amended to read as follows:

“(2) ELECTION.—No election may be made under paragraph (1) with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect.”.

(2) MODIFICATION OF RULES FOR DEFERRAL OF GAIN.—Section 1400Z-2(b) is amended to read as follows:

“(b) Deferral of gain invested in opportunity zone property.—

“(1) YEAR OF INCLUSION.—Gain to which subsection (a)(1)(B) applies shall be included in gross income in the taxable year which includes the earlier of—

“(A) the date on which such investment is sold or exchanged, or

“(B) the date which is 5 years after the date the investment in the qualified opportunity fund was made.

“(2) AMOUNT INCLUDIBLE.—

“(A) IN GENERAL.—The amount of gain included in gross income under subsection (a)(1)(B) shall be the excess of—

“(i) the lesser of the amount of gain excluded under subsection (a)(1)(A) or the fair market value of the investment as determined as of the date described in paragraph (1), over

“(ii) the taxpayer’s basis in the investment.

“(B) DETERMINATION OF BASIS.—

“(i) IN GENERAL.—Except as otherwise provided in this subparagraph or subsection (c), the taxpayer’s basis in the investment shall be zero.

“(ii) INCREASE FOR GAIN RECOGNIZED UNDER SUBSECTION (a)(1)(B).—The basis in the investment shall be increased by the amount of gain recognized by reason of subsection (a)(1)(B) with respect to such investment.

“(iii) INVESTMENTS HELD FOR 5 YEARS.—

“(I) IN GENERAL.—In the case of any investment held for at least 5 years, the basis of such investment shall be increased by an amount equal to 10 percent (30 percent in the case of any investment in a qualified rural opportunity fund) of the amount of gain deferred by reason of subsection (a)(1)(A).

“(II) APPLICATION OF INCREASE.—For purposes of this subsection, any increase in basis under this clause shall be treated as occurring before the date described in paragraph (1)(B).

“(C) QUALIFIED RURAL OPPORTUNITY FUND.—For purposes of subparagraph (B)(iii)—

“(i) QUALIFIED RURAL OPPORTUNITY FUND.—The term ‘qualified rural opportunity fund’ means a qualified opportunity fund that holds at least 90 percent of its assets in qualified opportunity zone property which—

“(I) is qualified opportunity zone business property substantially all of the use of which, during substantially all of the fund’s holding period for such property, was in a qualified opportunity zone comprised entirely of a rural area, or

“(II) is qualified opportunity zone stock, or a qualified opportunity zone partnership interest, in a qualified opportunity zone business in which substantially all of the tangible property owned or leased is qualified opportunity zone business property described in subsection (d)(3)(A)(i) and substantially all the use of which is in a qualified opportunity zone comprised entirely of a rural area.

For purposes of the preceding sentence, property held in the fund shall be measured under rules similar to the rules of subsection (d)(1).

“(ii) RURAL AREA.—The term ‘rural area’ means any area other than—

“(I) a city or town that has a population of greater than 50,000 inhabitants, and

“(II) any urbanized area contiguous and adjacent to a city or town described in subclause (I).”.

(3) SPECIAL RULE FOR INVESTMENTS HELD AT LEAST 10 YEARS.—Section 1400Z-2(c) is amended by striking “makes an election under this clause” and all that follows and inserting “makes an election under this subsection, the basis of such investment shall be equal to—

“(A) in the case of an investment sold before the date that is 30 years after the date of the investment, the fair market value of such investment on the date such investment is sold or exchanged, or

“(B) in any other case, the fair market value of such investment on the date that is 30 years after the date of the investment.”.

(4) DETERMINATION OF QUALIFIED OPPORTUNITY ZONE PROPERTY.—

(A) QUALIFIED OPPORTUNITY ZONE BUSINESS PROPERTY.—Section 1400Z-2(d)(2)(D)(i)(I) is amended by striking “December 31, 2017” and inserting “the applicable start date (as defined in section 1400Z-1(e)(2)) with respect to the qualified opportunity zone described in subclause (III)”.

(B) QUALIFIED OPPORTUNITY ZONE STOCK AND PARTNERSHIP INTERESTS.—Section 1400Z-2(d)(2) is amended—

(i) by striking “December 31, 2017,” each place it appears in subparagraphs (B)(i)(I) and (C)(i) and inserting “the applicable date”, and

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

“(E) APPLICABLE DATE.—For purposes of this subparagraph, the term ‘applicable date’ means, with respect to any corporation or partnership which is a qualified opportunity zone business, the earliest date described in subparagraph (D)(i)(I) with respect to the qualified opportunity zone business property held by such qualified opportunity zone business.”.

(C) SPECIAL RULE FOR IMPROVEMENT OF EXISTING STRUCTURES IN RURAL AREAS.—Section 1400Z–2(d)(2)(D)(ii) is amended by inserting “(50 percent of such adjusted basis in the case of property in a qualified opportunity zone comprised entirely of a rural area (as defined in subsection (b)(2)(C)(ii))” after “the adjusted basis of such property”.

(5) EFFECTIVE DATES.—

(A) IN GENERAL.—Except as otherwise provided in this paragraph, the amendments made by this subsection shall apply to amounts invested in qualified opportunity funds after December 31, 2026.

(B) ACQUISITION OF QUALIFIED OPPORTUNITY ZONE PROPERTY.—The amendments made by subparagraphs (A) and (B) of paragraph (4) shall apply to property acquired after December 31, 2026.

(C) SUBSTANTIAL IMPROVEMENT.—The amendment made by paragraph (4)(C) shall take effect on the date of the enactment of this Act.

(d) Information reporting on qualified opportunity funds and qualified rural opportunity funds.—

(1) FILING REQUIREMENTS FOR FUNDS AND INVESTORS.—Subpart A of part III of subchapter A of chapter 61 is amended by inserting after section 6039J the following new sections:

“SEC. 6039K. Returns with respect to qualified opportunity funds and qualified rural opportunity funds.

“(a) In general.—Every qualified opportunity fund shall file an annual return (at such time and in such manner as the Secretary may prescribe) containing the information described in subsection (b).

“(b) Information from qualified opportunity funds.—The information described in this subsection is—

“(1) the name, address, and taxpayer identification number of the qualified opportunity fund,

“(2) whether the qualified opportunity fund is organized as a corporation or a partnership,

“(3) the value of the total assets held by the qualified opportunity fund as of each date described in section 1400Z–2(d)(1),

“(4) the value of all qualified opportunity zone property held by the qualified opportunity fund on each such date,

“(5) with respect to each investment held by the qualified opportunity fund in qualified opportunity zone stock or a qualified opportunity zone partnership interest—

“(A) the name, address, and taxpayer identification number of the corporation in which such stock is held or the partnership in which such interest is held, as the case may be,

“(B) each North American Industry Classification System (NAICS) code that applies to the trades or businesses conducted by such corporation or partnership,

“(C) the population census tract or population census tracts in which the qualified opportunity zone business property of such corporation or partnership is located,

“(D) the amount of the investment in such stock or partnership interest as of each date described in section 1400Z–2(d)(1),

“(E) the value of tangible property held by such corporation or partnership on each such date which is owned by such corporation or partnership,

“(F) the value of tangible property held by such corporation or partnership on each such date which is leased by such corporation or partnership,

“(G) the approximate number of residential units (if any) for any real property held by such corporation or partnership, and

“(H) the approximate average monthly number of full-time equivalent employees of such corporation or partnership for the year (within numerical ranges identified by the Secretary) or such other indication of the employment impact of such corporation or partnership as determined appropriate by the Secretary,

“(6) with respect to the items of qualified opportunity zone business property held by the qualified opportunity fund—

“(A) the North American Industry Classification System (NAICS) code that applies to the trades or businesses in which such property is held,

“(B) the population census tract in which the property is located,

“(C) whether the property is owned or leased,

“(D) the aggregate value of the items of qualified opportunity zone property held by the qualified opportunity fund as of each date described in section 1400Z–2(d)(1), and

“(E) in the case of real property, the number of residential units (if any),

“(7) the approximate average monthly number of full-time equivalent employees for the year of the trades or businesses of the qualified opportunity fund in which qualified opportunity zone business property is held (within numerical ranges identified by the Secretary) or such other indication of the employment impact of such trades or businesses as determined appropriate by the Secretary,

“(8) with respect to each person who disposed of an investment in the qualified opportunity fund during the year—

“(A) the name, address, and taxpayer identification number of such person,

“(B) the date or dates on which the investment disposed was acquired, and

“(C) the date or dates on which any such investment was disposed and the amount of the investment disposed, and

“(9) such other information as the Secretary may require.

“(c) Statement required to be furnished to investors.—Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return by reason of subsection (b)(8) (at such time and in such manner as the Secretary may prescribe) a written statement showing—

“(1) the name, address, and phone number of the information contact of the person required to make such return, and

“(2) the information required to be shown on such return by reason of subsection (b)(8) with respect to the person whose name is required to be so set forth.

“(d) Definitions.—For purposes of this section—

“(1) IN GENERAL.—Any term used in this section which is also used in subchapter Z of chapter 1 shall have the meaning given such term under such subchapter.

“(2) FULL-TIME EQUIVALENT EMPLOYEES.—The term ‘full-time equivalent employees’ means, with respect to any month, the sum of—

“(A) the number of full-time employees (as defined in section 4980H(c)(4)) for the month, plus

“(B) the number of employees determined (under rules similar to the rules of section 4980H(c)(2)(E)) by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120.

“(e) Application to qualified rural opportunity funds.—Every qualified rural opportunity fund (as defined in section 1400Z–2(b)(2)(C)) shall file the annual return required under subsection (a), and the statements required under subsection (c), applied—

“(1) by substituting ‘qualified rural opportunity’ for ‘qualified opportunity’ each place it appears,

“(2) by substituting ‘section 1400Z–2(b)(2)(C)’ for ‘section 1400Z–2(d)(1)’ each place it appears, and

“(3) by treating any reference (after the application of paragraph (1)) to qualified rural opportunity zone stock, a qualified rural opportunity zone partnership interest, a qualified rural opportunity zone business, or qualified opportunity zone business property as stock, an interest, a business, or property, respectively, described in subclause (I) or (II), as the case may be, of section 1400Z–2(b)(2)(C)(i).

“SEC. 6039L. Information required from qualified opportunity zone businesses and qualified rural opportunity zone businesses.

“(a) In general.—Every applicable qualified opportunity zone business shall furnish to the qualified opportunity fund described in subsection (b) a written statement at such time, in such manner, and setting forth such information as the Secretary may by regulations prescribe for purposes of enabling such qualified opportunity fund to meet the requirements of section 6039K(b)(5).

“(b) Applicable qualified opportunity zone business.—For purposes of subsection (a), the term ‘applicable qualified opportunity zone business’ means any qualified opportunity zone business—

“(1) which is a trade or business of a qualified opportunity fund,

“(2) in which a qualified opportunity fund holds qualified opportunity zone stock, or

“(3) in which a qualified opportunity fund holds a qualified opportunity zone partnership interest.

“(c) Other terms.—Any term used in this section which is also used in subchapter Z of chapter 1 shall have the meaning given such term under such subchapter.

“(d) Application to qualified rural opportunity businesses.—Every applicable qualified rural opportunity zone business (as defined in subsection (b) determined after application of the substitutions described in this sentence) shall furnish the written statement required under subsection (a), applied—

“(1) by substituting ‘qualified rural opportunity’ for ‘qualified opportunity’ each place it appears, and

“(2) by treating any reference (after the application of paragraph (1)) to qualified rural opportunity zone stock, a qualified rural opportunity zone partnership interest, or a qualified rural opportunity zone business as stock, an interest, or a business, respectively, described in subclause (I) or (II), as the case may be, of section 1400Z–2(b)(2)(C)(i).”.

(2) PENALTIES.—

(A) IN GENERAL.—Part II of subchapter B of chapter 68 is amended by inserting after section 6725 the following new section:

“SEC. 6726. Failure to comply with information reporting requirements relating to qualified opportunity funds and qualified rural opportunity funds.

“(a) In general.—If any person required to file a return under section 6039K fails to file a complete and correct return under such section in the time and in the manner prescribed therefor, such person shall pay a penalty of $500 for each day during which such failure continues.

“(b) Limitation.—

“(1) IN GENERAL.—The maximum penalty under this section on failures with respect to any 1 return shall not exceed $10,000.

“(2) LARGE QUALIFIED OPPORTUNITY FUNDS.—In the case of any failure described in subsection (a) with respect to a fund the gross assets of which (determined on the last day of the taxable year) are in excess of $10,000,000, paragraph (1) shall be applied by substituting ‘$50,000’ for ‘$10,000’.

“(c) Penalty in cases of intentional disregard.—If a failure described in subsection (a) is due to intentional disregard, then—

“(1) subsection (a) shall be applied by substituting ‘$2,500’ for ‘$500’,

“(2) subsection (b)(1) shall be applied by substituting ‘$50,000’ for ‘$10,000’, and

“(3) subsection (b)(2) shall be applied by substituting ‘$250,000’ for ‘$50,000’.

“(d) Inflation adjustment.—

“(1) IN GENERAL.—In the case of any failure relating to a return required to be filed in a calendar year beginning after 2025, each of the dollar amounts in subsections (a), (b), and (c) shall be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year determined by substituting ‘calendar year 2024’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.

“(2) ROUNDING.—

“(A) IN GENERAL.—If the $500 dollar amount in subsection (a) and (c)(1) or the $2,500 amount in subsection (c)(1), after being increased under paragraph (1), is not a multiple of $10, such dollar amount shall be rounded to the next lowest multiple of $10.

“(B) ASSET THRESHOLD.—If the $10,000,000 dollar amount in subsection (b)(2), after being increased under paragraph (1), is not a multiple of $10,000, such dollar amount shall be rounded to the next lowest multiple of $10,000.

“(C) OTHER DOLLAR AMOUNTS.—If any dollar amount in subsection (b) or (c) (other than any amount to which subparagraph (A) or (B) applies), after being increased under paragraph (1), is not a multiple of $1,000, such dollar amount shall be rounded to the next lowest multiple of $1,000.”.

(B) INFORMATION REQUIRED TO BE SENT TO OTHER TAXPAYERS.—Section 6724(d)(2), as amended by the preceding provisions of this Act, is amended—

(i) by striking “or” at the end of subparagraph (LL),

(ii) by striking the period at the end of subparagraph (MM) and inserting a comma, and

(iii) by inserting after subparagraph (MM) the following new subparagraphs:

“(NN) section 6039K(c) (relating to disposition of qualified opportunity fund investments), or

“(OO) section 6039L (relating to information required from certain qualified opportunity zone businesses and qualified rural opportunity zone businesses).”.

(3) ELECTRONIC FILING.—Section 6011(e) is amended by adding at the end the following new paragraph:

“(8) QUALIFIED OPPORTUNITY FUNDS AND QUALIFIED RURAL OPPORTUNITY FUNDS.—Notwithstanding paragraphs (1) and (2), any return filed by a qualified opportunity fund or qualified rural opportunity fund under section 6039K shall be filed on magnetic media or other machine-readable form.”.

(4) CLERICAL AMENDMENTS.—

(A) The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6039J the following new items:

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

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

“Sec. 6726. Failure to comply with information reporting requirements relating to qualified opportunity funds and qualified rural opportunity funds.”.

(5) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after the date of the enactment of this Act.

(e) Secretary reporting of data on opportunity zone and rural opportunity zone tax incentives.—

(1) IN GENERAL.—In addition to amounts otherwise available, there is appropriated, out of any money in the Treasury not otherwise appropriated, $15,000,000, to remain available until September 30, 2028, for necessary expenses of the Internal Revenue Service to make the reports described in paragraph (2).

(2) REPORTS.—As soon as practical after the date of the enactment of this Act, and annually thereafter, the Secretary of the Treasury, or the Secretary’s delegate (referred to in this section as the “Secretary”) shall make publicly available a report on qualified opportunity funds.

(3) INFORMATION INCLUDED.—The report required under paragraph (2) shall include, to the extent available, the following information:

(A) The number of qualified opportunity funds.

(B) The aggregate dollar amount of assets held in qualified opportunity funds.

(C) The aggregate dollar amount of investments made by qualified opportunity funds in qualified opportunity fund property, stated separately for each North American Industry Classification System (NAICS) code.

(D) The percentage of population census tracts designated as qualified opportunity zones that have received qualified opportunity fund investments.

(E) For each population census tract designated as a qualified opportunity zone, the approximate average monthly number of full-time equivalent employees of the qualified opportunity zone businesses in such qualified opportunity zone for the preceding 12-month period (within numerical ranges identified by the Secretary) or such other indication of the employment impact of such qualified opportunity fund businesses as determined appropriate by the Secretary.

(F) The percentage of the total amount of investments made by qualified opportunity funds in—

(i) qualified opportunity zone property which is real property; and

(ii) other qualified opportunity zone property.

(G) For each population census tract, the aggregate approximate number of residential units resulting from investments made by qualified opportunity funds in real property.

(H) The aggregate dollar amount of investments made by qualified opportunity funds in each population census tract.

(4) ADDITIONAL INFORMATION.—

(A) IN GENERAL.—Beginning with the report submitted under paragraph (2) for the 6th year after the date of the enactment of this Act, the Secretary shall include in such report the impacts and outcomes of a designation of a population census tract as a qualified opportunity zone as measured by economic indicators, such as job creation, poverty reduction, new business starts, and other metrics as determined by the Secretary.

(B) SEMI-DECENNIAL INFORMATION.—

(i) IN GENERAL.—In the case of any report submitted under paragraph (2) in the 6th year or the 11th year after the date of the enactment of this Act, the Secretary shall include the following information:

(I) For population census tracts designated as a qualified opportunity zone, a comparison (based on aggregate information) of the factors listed in clause (iii) between the 5-year period ending on the date of the enactment of Public Law 115–97 and the most recent 5-year period for which data is available.

(II) For population census tracts designated as a qualified opportunity zone, a comparison (based on aggregate information) of the factors listed in clause (iii) for the most recent 5-year period for which data is available between such population census tracts and similar population census tracts that were not designated as a qualified opportunity zone.

(ii) CONTROL GROUPS.—For purposes of clause (i), the Secretary may combine population census tracts into such groups as the Secretary determines appropriate for purposes of making comparisons.

(iii) FACTORS LISTED.—The factors listed in this clause are the following:

(I) The unemployment rate.

(II) The number of persons working in the population census tract, including the percentage of such persons who were not residents in the population census tract in the preceding year.

(III) Individual, family, and household poverty rates.

(IV) Median family income of residents of the population census tract.

(V) Demographic information on residents of the population census tract, including age, income, education, race, and employment.

(VI) The average percentage of income of residents of the population census tract spent on rent annually.

(VII) The number of residences in the population census tract.

(VIII) The rate of home ownership in the population census tract.

(IX) The average value of residential property in the population census tract.

(X) The number of affordable housing units in the population census tract.

(XI) The number of new business starts in the population census tract.

(XII) The distribution of employees in the population census tract by North American Industry Classification System (NAICS) code.

(5) PROTECTION OF IDENTIFIABLE RETURN INFORMATION.—In making reports required under this subsection, the Secretary—

(A) shall establish appropriate procedures to ensure that any amounts reported do not disclose taxpayer return information that can be associated with any particular taxpayer or competitive or proprietary information, and

(B) if necessary to protect taxpayer return information, may combine information required with respect to individual population census tracts into larger geographic areas.

(6) DEFINITIONS.—Any term used in this subsection which is also used in subchapter Z of chapter 1 of the Internal Revenue Code of 1986 shall have the meaning given such term under such subchapter.

(7) REPORTS ON QUALIFIED RURAL OPPORTUNITY FUNDS.—The Secretary shall make publicly available, with respect to qualified rural opportunity funds, separate reports as required under this subsection, applied—

(A) by substituting “qualified rural opportunity” for “qualified opportunity” each place it appears,

(B) by substituting a reference to this Act for “Public Law 115–97”, and

(C) by treating any reference (after the application of subparagraph (A)) to qualified rural opportunity zone stock, qualified rural opportunity zone partnership interest, qualified rural opportunity zone business, or qualified opportunity zone business property as stock, interest, business, or property, respectively, described in subclause (I) or (II), as the case may be, of section 1400Z–2(b)(2)(C)(i) of the Internal Revenue Code of 1986.

SEC. 70411. Tax credit for contributions of individuals to scholarship granting organizations.

(a) Allowance of credit for contributions of individuals to scholarship granting organizations.—

(1) IN GENERAL.—Subpart A of part IV of subchapter A of chapter 1 is amended by inserting after section 25E the following new section:

“SEC. 25F. Qualified elementary and secondary education scholarships.

“(a) Allowance of credit.—In the case of an individual who is a citizen or resident of the United States (within the meaning of section 7701(a)(9)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the aggregate amount of qualified contributions made by the taxpayer during the taxable year.

“(b) Limitations.—

“(1) IN GENERAL.—The credit allowed under subsection (a) to any taxpayer for any taxable year shall not exceed $1,700.

“(2) REDUCTION BASED ON STATE CREDIT.—The amount allowed as a credit under subsection (a) for a taxable year shall be reduced by the amount allowed as a credit on any State tax return of the taxpayer for qualified contributions made by the taxpayer during the taxable year.

“(c) Definitions.—For purposes of this section—

“(1) COVERED STATE.—The term ‘covered State’ means one of the States, or the District of Columbia, that, for a calendar year, voluntarily elects to participate under this section and to identify scholarship granting organizations in the State, in accordance with subsection (g).

“(2) ELIGIBLE STUDENT.—The term ‘eligible student’ means an individual who—

“(A) is a member of a household with an income which, for the calendar year prior to the date of the application for a scholarship, is not greater than 300 percent of the area median gross income (as such term is used in section 42), and

“(B) is eligible to enroll in a public elementary or secondary school.

“(3) QUALIFIED CONTRIBUTION.—The term ‘qualified contribution’ means a charitable contribution of cash to a scholarship granting organization that uses the contribution to fund scholarships for eligible students solely within the State in which the organization is listed pursuant to subsection (g).

“(4) QUALIFIED ELEMENTARY OR SECONDARY EDUCATION EXPENSE.—The term ‘qualified elementary or secondary education expense’ means any expense of an eligible student which is described in section 530(b)(3)(A).

“(5) SCHOLARSHIP GRANTING ORGANIZATION.—The term ‘scholarship granting organization’ means any organization—

“(A) which—

“(i) is described in section 501(c)(3) and exempt from tax under section 501(a), and

“(ii) is not a private foundation,

“(B) which prevents the co-mingling of qualified contributions with other amounts by maintaining one or more separate accounts exclusively for qualified contributions,

“(C) which satisfies the requirements of subsection (d), and

“(D) which is included on the list submitted for the applicable covered State under subsection (g) for the applicable year.

“(d) Requirements for scholarship granting organizations.—

“(1) IN GENERAL.—An organization meets the requirements of this subsection if—

“(A) such organization provides scholarships to 10 or more students who do not all attend the same school,

“(B) such organization spends not less than 90 percent of the income of the organization on scholarships for eligible students,

“(C) such organization does not provide scholarships for any expenses other than qualified elementary or secondary education expenses,

“(D) such organization provides a scholarship to eligible students with a priority for—

“(i) students awarded a scholarship the previous school year, and

“(ii) after application of clause (i), any eligible students who have a sibling who was awarded a scholarship from such organization,

“(E) such organization does not earmark or set aside contributions for scholarships on behalf of any particular student, and

“(F) such organization—

“(i) verifies the annual household income and family size of eligible students who apply for scholarships to ensure such students meet the requirement of subsection (c)(2)(A), and

“(ii) limits the awarding of scholarships to eligible students who are a member of a household for which the income does not exceed the amount established under subsection (c)(2)(A).

“(2) PROHIBITION ON SELF-DEALING.—

“(A) IN GENERAL.—A scholarship granting organization may not award a scholarship to any disqualified person.

“(B) DISQUALIFIED PERSON.—For purposes of this paragraph, a disqualified person shall be determined pursuant to rules similar to the rules of section 4946.

“(e) Denial of double benefit.—Any qualified contribution for which a credit is allowed under this section shall not be taken into account as a charitable contribution for purposes of section 170.

“(f) Carryforward of unused credit.—

“(1) IN GENERAL.—If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section, section 23, and section 25D), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

“(2) LIMITATION.—No credit may be carried forward under this subsection to any taxable year following the fifth taxable year after the taxable year in which the credit arose. For purposes of the preceding sentence, credits shall be treated as used on a first-in first-out basis.

“(g) State list of scholarship granting organizations.—

“(1) LIST.—

“(A) IN GENERAL.—Not later than January 1 of each calendar year (or, with respect to the first calendar year for which this section applies, as early as practicable), a State that voluntarily elects to participate under this section shall provide to the Secretary a list of the scholarship granting organizations that meet the requirements described in subsection (c)(5) and are located in the State.

“(B) PROCESS.—The election under this paragraph shall be made by the Governor of the State or by such other individual, agency, or entity as is designated under State law to make such elections on behalf of the State with respect to Federal tax benefits.

“(2) CERTIFICATION.—Each list submitted under paragraph (1) shall include a certification that the individual, agency, or entity submitting such list on behalf of the State has the authority to perform this function.

“(h) Regulations and guidance.—The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this section, including regulations or other guidance—

“(1) providing for enforcement of the requirements under subsections (d) and (g), and

“(2) with respect to recordkeeping or information reporting for purposes of administering the requirements of this section.”.

(2) CONFORMING AMENDMENTS.—

(A) Section 25(e)(1)(C) is amended by striking “and 25D” and inserting “25D, and 25F”.

(B) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25E the following new item:

“Sec. 25F. Qualified elementary and secondary education scholarships. ”.

(b) Exclusion from gross income for scholarships for qualified elementary or secondary education expenses of eligible students.—

(1) IN GENERAL.—Part III of subchapter B of chapter 1 is amended by inserting before section 140 the following new section:

“SEC. 139K. Scholarships for qualified elementary or secondary education expenses of eligible students.

“(a) In general.—In the case of an individual, gross income shall not include any amounts provided to such individual or any dependent of such individual pursuant to a scholarship for qualified elementary or secondary education expenses of an eligible student which is provided by a scholarship granting organization.

“(b) Definitions.—In this section, the terms ‘qualified elementary or secondary education expense’, ‘eligible student’, and ‘scholarship granting organization’ have the same meaning given such terms under section 25F(c).”.

(2) CONFORMING AMENDMENT.—The table of sections for part III of subchapter B of chapter 1 is amended by inserting before the item relating to section 140 the following new item:

“Sec. 139K. Scholarships for qualified elementary or secondary education expenses of eligible students. ”.

(c) Effective date.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years ending after December 31, 2026.

(2) EXCLUSION FROM GROSS INCOME.—The amendments made by subsection (b) shall apply to amounts received after December 31, 2026, in taxable years ending after such date.

SEC. 70412. Exclusion for employer payments of student loans.

(a) In general.—Section 127(c)(1)(B) is amended by striking “in the case of payments made before January 1, 2026,”.

(b) Inflation adjustment.—Section 127 is amended—

(1) by redesignating subsection (d) as subsection (e), and

(2) by inserting after subsection (c) the following new subsection:

“(d) Inflation adjustment.—

“(1) IN GENERAL.—In the case of any taxable year beginning after 2026, both of the $5,250 amounts in subsection (a)(2) shall each be increased by an amount equal to—

“(A) such dollar amount, multiplied by

“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2025’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.

“(2) ROUNDING.—If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.”.

(c) Effective date.—The amendment made by this section shall apply to payments made after December 31, 2025.

SEC. 70413. Additional expenses treated as qualified higher education expenses for purposes of 529 accounts.

(a) In general.—

(1) IN GENERAL.—Section 529(c)(7) is amended to read as follows:

“(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this section to the term ‘qualified higher education expense’ shall include a reference to the following expenses in connection with enrollment or attendance at, or for students enrolled at or attending, an elementary or secondary public, private, or religious school:

“(A) Tuition.

“(B) Curriculum and curricular materials.

“(C) Books or other instructional materials.

“(D) Online educational materials.

“(E) Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—

“(i) is licensed as a teacher in any State,

“(ii) has taught at an eligible educational institution, or

“(iii) is a subject matter expert in the relevant subject.

“(F) Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission.

“(G) Fees for dual enrollment in an institution of higher education.

“(H) Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies.”.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to distributions made after the date of the enactment of this Act.

(b) Increase in limitation.—

(1) IN GENERAL.—The last sentence of section 529(e)(3) is amended by striking “$10,000” and inserting “$20,000”.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to taxable years beginning after December 31, 2025.

SEC. 70414. Certain postsecondary credentialing expenses treated as qualified higher education expenses for purposes of 529 accounts.

(a) In general.—Section 529(e)(3) is amended by adding at the end the following new subparagraph:

“(C) CERTAIN POSTSECONDARY CREDENTIALING EXPENSES.—The term ‘qualified higher education expenses’ includes qualified postsecondary credentialing expenses (as defined in subsection (f)).”.

(b) Qualified postsecondary credentialing expenses.—Section 529 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

“(f) Qualified postsecondary credentialing expenses.—For purposes of this section—

“(1) IN GENERAL.—The term ‘qualified postsecondary credentialing expenses’ means—

“(A) tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary in a recognized postsecondary credential program, or any other expense incurred in connection with enrollment in or attendance at a recognized postsecondary credential program if such expense would, if incurred in connection with enrollment or attendance at an eligible educational institution, be covered under subsection (e)(3)(A),

“(B) fees for testing if such testing is required to obtain or maintain a recognized postsecondary credential, and

“(C) fees for continuing education if such education is required to maintain a recognized postsecondary credential.

“(2) RECOGNIZED POSTSECONDARY CREDENTIAL PROGRAM.—The term ‘recognized postsecondary credential program’ means any program to obtain a recognized postsecondary credential if—

“(A) such program is included on a State list prepared under section 122(d) of the Workforce Innovation and Opportunity Act (29 U.S.C. 3152(d)),

“(B) such program is listed in the public directory of the Web Enabled Approval Management System (WEAMS) of the Veterans Benefits Administration, or successor directory such program,

“(C) an examination (developed or administered by an organization widely recognized as providing reputable credentials in the occupation) is required to obtain or maintain such credential and such organization recognizes such program as providing training or education which prepares individuals to take such examination, or

“(D) such program is identified by the Secretary, after consultation with the Secretary of Labor, as being a reputable program for obtaining a recognized postsecondary credential for purposes of this subparagraph.

“(3) RECOGNIZED POSTSECONDARY CREDENTIAL.—The term ‘recognized postsecondary credential’ means—

“(A) any postsecondary employment credential that is industry recognized and is—

“(i) any postsecondary employment credential issued by a program that is accredited by the Institute for Credentialing Excellence, the National Commission on Certifying Agencies, or the American National Standards Institute,

“(ii) any postsecondary employment credential that is included in the Credentialing Opportunities On-Line (COOL) directory of credentialing programs (or successor directory) maintained by the Department of Defense or by any branch of the Armed Forces, or

“(iii) any postsecondary employment credential identified for purposes of this clause by the Secretary, after consultation with the Secretary of Labor, as being industry recognized,

“(B) any certificate of completion of an apprenticeship that is registered and certified with the Secretary of Labor under the Act of August 16, 1937 (commonly known as the ‘National Apprenticeship Act’; 50 Stat. 664, chapter 663; 29 U.S.C. 50 et seq.),

“(C) any occupational or professional license issued or recognized by a State or the Federal Government (and any certification that satisfies a condition for obtaining such a license), and

“(D) any recognized postsecondary credential as defined in section 3(52) of the Workforce Innovation and Opportunity Act (29 U.S.C. 3102(52)), provided through a program described in paragraph (2)(A).”.

(c) Effective date.—The amendments made by this section shall apply to distributions made after the date of the enactment of this Act.

SEC. 70415. Modification of excise tax on investment income of certain private colleges and universities.

(a) In general.—Section 4968 is amended to read as follows:

“SEC. 4968. Excise tax based on investment income of private colleges and universities.

“(a) Tax imposed.—There is hereby imposed on each applicable educational institution for the taxable year a tax equal to the applicable percentage of the net investment income of such institution for the taxable year.

“(b) Applicable percentage.—For purposes of this section, the term ‘applicable percentage’ means—

“(1) 1.4 percent in the case of an institution with a student adjusted endowment of at least $500,000, and not in excess of $750,000,

“(2) 4 percent in the case of an institution with a student adjusted endowment in excess of $750,000, and not in excess of $2,000,000, and

“(3) 8 percent in the case of an institution with a student adjusted endowment in excess of $2,000,000.

“(c) Applicable educational institution.—For purposes of this subchapter, the term ‘applicable educational institution’ means an eligible educational institution (as defined in section 25A(f)(2))—

“(1) which had at least 3,000 tuition-paying students during the preceding taxable year,

“(2) more than 50 percent of the tuition-paying students of which are located in the United States,

“(3) the student adjusted endowment of which is at least $500,000, and

“(4) which is not described in the first sentence of section 511(a)(2)(B) (relating to State colleges and universities).

“(d) Student adjusted endowment.—For purposes of this section, the term ‘student adjusted endowment’ means, with respect to any institution for any taxable year—

“(1) the aggregate fair market value of the assets of such institution (determined as of the end of the preceding taxable year), other than those assets which are used directly in carrying out the institution’s exempt purpose, divided by

“(2) the number of students of such institution.

“(e) Determination of number of students.—For purposes of subsections (c) and (d), the number of students of an institution (including for purposes of determining the number of students at a particular location) shall be based on the daily average number of full-time students attending such institution (with part-time students taken into account on a full-time student equivalent basis).

“(f) Net investment income.—For purposes of this section—

“(1) IN GENERAL.—Net investment income shall be determined under rules similar to the rules of section 4940(c).

“(2) OVERRIDE OF CERTAIN REGULATORY EXCEPTIONS.—

“(A) STUDENT LOAN INTEREST.—Net investment income shall be determined by taking into account any interest income from a student loan made by the applicable educational institution (or any related organization) as gross investment income.

“(B) FEDERALLY-SUBSIDIZED ROYALTY INCOME.—

“(i) IN GENERAL.—Net investment income shall be determined by taking into account any Federally-subsidized royalty income as gross investment income.

“(ii) FEDERALLY-SUBSIDIZED ROYALTY INCOME.—For purposes of this subparagraph—

“(I) IN GENERAL.—The term ‘Federally-subsidized royalty income’ means any otherwise-regulatory-exempt royalty income if any Federal funds were used in the research, development, or creation of the patent, copyright, or other intellectual or intangible property from which such royalty income is derived.

“(II) OTHERWISE-REGULATORY-EXEMPT ROYALTY INCOME.—For purposes of this subparagraph, the term ‘otherwise-regulatory-exempt royalty income’ means royalty income which (but for this subparagraph) would not be taken into account as gross investment income by reason of being derived from patents, copyrights, or other intellectual or intangible property which resulted from the work of students or faculty members in their capacities as such with the applicable educational institution.

“(III) FEDERAL FUNDS.—The term ‘Federal funds’ includes any grant made by, and any payment made under any contract with, any Federal agency to the applicable educational institution, any related organization, or any student or faculty member referred to in subclause (II).

“(g) Assets and net investment income of related organizations.—

“(1) IN GENERAL.—For purposes of subsections (d) and (f), assets and net investment income of any related organization with respect to an educational institution shall be treated as assets and net investment income, respectively, of the educational institution, except that—

“(A) no such amount shall be taken into account with respect to more than 1 educational institution, and

“(B) unless such organization is controlled by such institution or is described in section 509(a)(3) with respect to such institution for the taxable year, assets and net investment income which are not intended or available for the use or benefit of the educational institution shall not be taken into account.

“(2) RELATED ORGANIZATION.—For purposes of this subsection, the term ‘related organization’ means, with respect to an educational institution, any organization which—

“(A) controls, or is controlled by, such institution,

“(B) is controlled by 1 or more persons which also control such institution, or

“(C) is a supported organization (as defined in section 509(f)(3)), or an organization described in section 509(a)(3), during the taxable year with respect to such institution.

“(h) Regulations.—The Secretary shall prescribe such regulations or other guidance as may be necessary to prevent avoidance of the tax under this section, including regulations or other guidance to prevent avoidance of such tax through the restructuring of endowment funds or other arrangements designed to reduce or eliminate the value of net investment income or assets subject to the tax imposed by this section.”.

(b) Requirement to report certain information with respect to application of excise tax based on investment income of private colleges and universities.—Section 6033 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

“(o) Requirement to report certain information with respect to excise tax based on investment income of private colleges and universities.—Each applicable educational institution described in section 4968(c) which is subject to the requirements of subsection (a) shall include on the return required under subsection (a)—

“(1) the number of tuition-paying students taken into account under section 4968(c), and

“(2) the number of students of such institution (determined under the rules of section 4968(e)).”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

SEC. 70416. Expanding application of tax on excess compensation within tax-exempt organizations.

(a) In general.—Section 4960(c)(2) is amended to read as follows:

“(2) COVERED EMPLOYEE.—For purposes of this section, the term ‘covered employee’ means any employee of an applicable tax-exempt organization (or any predecessor of such an organization) and any former employee of such an organization (or predecessor) who was such an employee during any taxable year beginning after December 31, 2016.”.

(b) Effective date.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2025.

(a) In general.—Section 4960(c)(2) is amended to read as follows:

“(2) COVERED EMPLOYEE.—For purposes of this section, the term ‘covered employee’ means any employee of an applicable tax-exempt organization (or any predecessor of such an organization) and any former employee of such an organization (or predecessor) who was such an employee during any taxable year beginning after December 31, 2016.”.

(b) Effective date.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2025.

(a) In general.—Section 4968 is amended to read as follows:

“SEC. 4968. Excise tax based on investment income of private colleges and universities.

“(a) Tax imposed.—There is hereby imposed on each applicable educational institution for the taxable year a tax equal to the applicable percentage of the net investment income of such institution for the taxable year.

“(b) Applicable percentage.—For purposes of this section, the term ‘applicable percentage’ means—

“(1) 1.4 percent in the case of an institution with a student adjusted endowment of at least $500,000, and not in excess of $750,000,

“(2) 4 percent in the case of an institution with a student adjusted endowment in excess of $750,000, and not in excess of $2,000,000, and

“(3) 8 percent in the case of an institution with a student adjusted endowment in excess of $2,000,000.

“(c) Applicable educational institution.—For purposes of this subchapter, the term ‘applicable educational institution’ means an eligible educational institution (as defined in section 25A(f)(2))—

“(1) which had at least 3,000 tuition-paying students during the preceding taxable year,

“(2) more than 50 percent of the tuition-paying students of which are located in the United States,

“(3) the student adjusted endowment of which is at least $500,000, and

“(4) which is not described in the first sentence of section 511(a)(2)(B) (relating to State colleges and universities).

“(d) Student adjusted endowment.—For purposes of this section, the term ‘student adjusted endowment’ means, with respect to any institution for any taxable year—

“(1) the aggregate fair market value of the assets of such institution (determined as of the end of the preceding taxable year), other than those assets which are used directly in carrying out the institution’s exempt purpose, divided by

“(2) the number of students of such institution.

“(e) Determination of number of students.—For purposes of subsections (c) and (d), the number of students of an institution (including for purposes of determining the number of students at a particular location) shall be based on the daily average number of full-time students attending such institution (with part-time students taken into account on a full-time student equivalent basis).

“(f) Net investment income.—For purposes of this section—

“(1) IN GENERAL.—Net investment income shall be determined under rules similar to the rules of section 4940(c).

“(2) OVERRIDE OF CERTAIN REGULATORY EXCEPTIONS.—

“(A) STUDENT LOAN INTEREST.—Net investment income shall be determined by taking into account any interest income from a student loan made by the applicable educational institution (or any related organization) as gross investment income.

“(B) FEDERALLY-SUBSIDIZED ROYALTY INCOME.—

“(i) IN GENERAL.—Net investment income shall be determined by taking into account any Federally-subsidized royalty income as gross investment income.

“(ii) FEDERALLY-SUBSIDIZED ROYALTY INCOME.—For purposes of this subparagraph—

“(I) IN GENERAL.—The term ‘Federally-subsidized royalty income’ means any otherwise-regulatory-exempt royalty income if any Federal funds were used in the research, development, or creation of the patent, copyright, or other intellectual or intangible property from which such royalty income is derived.

“(II) OTHERWISE-REGULATORY-EXEMPT ROYALTY INCOME.—For purposes of this subparagraph, the term ‘otherwise-regulatory-exempt royalty income’ means royalty income which (but for this subparagraph) would not be taken into account as gross investment income by reason of being derived from patents, copyrights, or other intellectual or intangible property which resulted from the work of students or faculty members in their capacities as such with the applicable educational institution.

“(III) FEDERAL FUNDS.—The term ‘Federal funds’ includes any grant made by, and any payment made under any contract with, any Federal agency to the applicable educational institution, any related organization, or any student or faculty member referred to in subclause (II).

“(g) Assets and net investment income of related organizations.—

“(1) IN GENERAL.—For purposes of subsections (d) and (f), assets and net investment income of any related organization with respect to an educational institution shall be treated as assets and net investment income, respectively, of the educational institution, except that—

“(A) no such amount shall be taken into account with respect to more than 1 educational institution, and

“(B) unless such organization is controlled by such institution or is described in section 509(a)(3) with respect to such institution for the taxable year, assets and net investment income which are not intended or available for the use or benefit of the educational institution shall not be taken into account.

“(2) RELATED ORGANIZATION.—For purposes of this subsection, the term ‘related organization’ means, with respect to an educational institution, any organization which—

“(A) controls, or is controlled by, such institution,

“(B) is controlled by 1 or more persons which also control such institution, or

“(C) is a supported organization (as defined in section 509(f)(3)), or an organization described in section 509(a)(3), during the taxable year with respect to such institution.

“(h) Regulations.—The Secretary shall prescribe such regulations or other guidance as may be necessary to prevent avoidance of the tax under this section, including regulations or other guidance to prevent avoidance of such tax through the restructuring of endowment funds or other arrangements designed to reduce or eliminate the value of net investment income or assets subject to the tax imposed by this section.”.

(b) Requirement to report certain information with respect to application of excise tax based on investment income of private colleges and universities.—Section 6033 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

“(o) Requirement to report certain information with respect to excise tax based on investment income of private colleges and universities.—Each applicable educational institution described in section 4968(c) which is subject to the requirements of subsection (a) shall include on the return required under subsection (a)—

“(1) the number of tuition-paying students taken into account under section 4968(c), and

“(2) the number of students of such institution (determined under the rules of section 4968(e)).”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

(a) In general.—

(1) IN GENERAL.—Section 529(c)(7) is amended to read as follows:

“(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this section to the term ‘qualified higher education expense’ shall include a reference to the following expenses in connection with enrollment or attendance at, or for students enrolled at or attending, an elementary or secondary public, private, or religious school:

“(A) Tuition.

“(B) Curriculum and curricular materials.

“(C) Books or other instructional materials.

“(D) Online educational materials.

“(E) Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—

“(i) is licensed as a teacher in any State,

“(ii) has taught at an eligible educational institution, or

“(iii) is a subject matter expert in the relevant subject.

“(F) Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission.

“(G) Fees for dual enrollment in an institution of higher education.

“(H) Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies.”.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to distributions made after the date of the enactment of this Act.

(b) Increase in limitation.—

(1) IN GENERAL.—The last sentence of section 529(e)(3) is amended by striking “$10,000” and inserting “$20,000”.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to taxable years beginning after December 31, 2025.

(a) In general.—Section 529(e)(3) is amended by adding at the end the following new subparagraph:

“(C) CERTAIN POSTSECONDARY CREDENTIALING EXPENSES.—The term ‘qualified higher education expenses’ includes qualified postsecondary credentialing expenses (as defined in subsection (f)).”.

(b) Qualified postsecondary credentialing expenses.—Section 529 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

“(f) Qualified postsecondary credentialing expenses.—For purposes of this section—

“(1) IN GENERAL.—The term ‘qualified postsecondary credentialing expenses’ means—

“(A) tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary in a recognized postsecondary credential program, or any other expense incurred in connection with enrollment in or attendance at a recognized postsecondary credential program if such expense would, if incurred in connection with enrollment or attendance at an eligible educational institution, be covered under subsection (e)(3)(A),

“(B) fees for testing if such testing is required to obtain or maintain a recognized postsecondary credential, and

“(C) fees for continuing education if such education is required to maintain a recognized postsecondary credential.

“(2) RECOGNIZED POSTSECONDARY CREDENTIAL PROGRAM.—The term ‘recognized postsecondary credential program’ means any program to obtain a recognized postsecondary credential if—

“(A) such program is included on a State list prepared under section 122(d) of the Workforce Innovation and Opportunity Act (29 U.S.C. 3152(d)),

“(B) such program is listed in the public directory of the Web Enabled Approval Management System (WEAMS) of the Veterans Benefits Administration, or successor directory such program,

“(C) an examination (developed or administered by an organization widely recognized as providing reputable credentials in the occupation) is required to obtain or maintain such credential and such organization recognizes such program as providing training or education which prepares individuals to take such examination, or

“(D) such program is identified by the Secretary, after consultation with the Secretary of Labor, as being a reputable program for obtaining a recognized postsecondary credential for purposes of this subparagraph.

“(3) RECOGNIZED POSTSECONDARY CREDENTIAL.—The term ‘recognized postsecondary credential’ means—

“(A) any postsecondary employment credential that is industry recognized and is—

“(i) any postsecondary employment credential issued by a program that is accredited by the Institute for Credentialing Excellence, the National Commission on Certifying Agencies, or the American National Standards Institute,

“(ii) any postsecondary employment credential that is included in the Credentialing Opportunities On-Line (COOL) directory of credentialing programs (or successor directory) maintained by the Department of Defense or by any branch of the Armed Forces, or

“(iii) any postsecondary employment credential identified for purposes of this clause by the Secretary, after consultation with the Secretary of Labor, as being industry recognized,

“(B) any certificate of completion of an apprenticeship that is registered and certified with the Secretary of Labor under the Act of August 16, 1937 (commonly known as the ‘National Apprenticeship Act’; 50 Stat. 664, chapter 663; 29 U.S.C. 50 et seq.),

“(C) any occupational or professional license issued or recognized by a State or the Federal Government (and any certification that satisfies a condition for obtaining such a license), and

“(D) any recognized postsecondary credential as defined in section 3(52) of the Workforce Innovation and Opportunity Act (29 U.S.C. 3102(52)), provided through a program described in paragraph (2)(A).”.

(c) Effective date.—The amendments made by this section shall apply to distributions made after the date of the enactment of this Act.

(a) Allowance of credit for contributions of individuals to scholarship granting organizations.—

(1) IN GENERAL.—Subpart A of part IV of subchapter A of chapter 1 is amended by inserting after section 25E the following new section:

“SEC. 25F. Qualified elementary and secondary education scholarships.

“(a) Allowance of credit.—In the case of an individual who is a citizen or resident of the United States (within the meaning of section 7701(a)(9)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the aggregate amount of qualified contributions made by the taxpayer during the taxable year.

“(b) Limitations.—

“(1) IN GENERAL.—The credit allowed under subsection (a) to any taxpayer for any taxable year shall not exceed $1,700.

“(2) REDUCTION BASED ON STATE CREDIT.—The amount allowed as a credit under subsection (a) for a taxable year shall be reduced by the amount allowed as a credit on any State tax return of the taxpayer for qualified contributions made by the taxpayer during the taxable year.

“(c) Definitions.—For purposes of this section—

“(1) COVERED STATE.—The term ‘covered State’ means one of the States, or the District of Columbia, that, for a calendar year, voluntarily elects to participate under this section and to identify scholarship granting organizations in the State, in accordance with subsection (g).

“(2) ELIGIBLE STUDENT.—The term ‘eligible student’ means an individual who—

“(A) is a member of a household with an income which, for the calendar year prior to the date of the application for a scholarship, is not greater than 300 percent of the area median gross income (as such term is used in section 42), and

“(B) is eligible to enroll in a public elementary or secondary school.

“(3) QUALIFIED CONTRIBUTION.—The term ‘qualified contribution’ means a charitable contribution of cash to a scholarship granting organization that uses the contribution to fund scholarships for eligible students solely within the State in which the organization is listed pursuant to subsection (g).

“(4) QUALIFIED ELEMENTARY OR SECONDARY EDUCATION EXPENSE.—The term ‘qualified elementary or secondary education expense’ means any expense of an eligible student which is described in section 530(b)(3)(A).

“(5) SCHOLARSHIP GRANTING ORGANIZATION.—The term ‘scholarship granting organization’ means any organization—

“(A) which—

“(i) is described in section 501(c)(3) and exempt from tax under section 501(a), and

“(ii) is not a private foundation,

“(B) which prevents the co-mingling of qualified contributions with other amounts by maintaining one or more separate accounts exclusively for qualified contributions,

“(C) which satisfies the requirements of subsection (d), and

“(D) which is included on the list submitted for the applicable covered State under subsection (g) for the applicable year.

“(d) Requirements for scholarship granting organizations.—

“(1) IN GENERAL.—An organization meets the requirements of this subsection if—

“(A) such organization provides scholarships to 10 or more students who do not all attend the same school,

“(B) such organization spends not less than 90 percent of the income of the organization on scholarships for eligible students,

“(C) such organization does not provide scholarships for any expenses other than qualified elementary or secondary education expenses,

“(D) such organization provides a scholarship to eligible students with a priority for—

“(i) students awarded a scholarship the previous school year, and

“(ii) after application of clause (i), any eligible students who have a sibling who was awarded a scholarship from such organization,

“(E) such organization does not earmark or set aside contributions for scholarships on behalf of any particular student, and

“(F) such organization—

“(i) verifies the annual household income and family size of eligible students who apply for scholarships to ensure such students meet the requirement of subsection (c)(2)(A), and

“(ii) limits the awarding of scholarships to eligible students who are a member of a household for which the income does not exceed the amount established under subsection (c)(2)(A).

“(2) PROHIBITION ON SELF-DEALING.—

“(A) IN GENERAL.—A scholarship granting organization may not award a scholarship to any disqualified person.

“(B) DISQUALIFIED PERSON.—For purposes of this paragraph, a disqualified person shall be determined pursuant to rules similar to the rules of section 4946.

“(e) Denial of double benefit.—Any qualified contribution for which a credit is allowed under this section shall not be taken into account as a charitable contribution for purposes of section 170.

“(f) Carryforward of unused credit.—

“(1) IN GENERAL.—If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section, section 23, and section 25D), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

“(2) LIMITATION.—No credit may be carried forward under this subsection to any taxable year following the fifth taxable year after the taxable year in which the credit arose. For purposes of the preceding sentence, credits shall be treated as used on a first-in first-out basis.

“(g) State list of scholarship granting organizations.—

“(1) LIST.—

“(A) IN GENERAL.—Not later than January 1 of each calendar year (or, with respect to the first calendar year for which this section applies, as early as practicable), a State that voluntarily elects to participate under this section shall provide to the Secretary a list of the scholarship granting organizations that meet the requirements described in subsection (c)(5) and are located in the State.

“(B) PROCESS.—The election under this paragraph shall be made by the Governor of the State or by such other individual, agency, or entity as is designated under State law to make such elections on behalf of the State with respect to Federal tax benefits.

“(2) CERTIFICATION.—Each list submitted under paragraph (1) shall include a certification that the individual, agency, or entity submitting such list on behalf of the State has the authority to perform this function.

“(h) Regulations and guidance.—The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this section, including regulations or other guidance—

“(1) providing for enforcement of the requirements under subsections (d) and (g), and

“(2) with respect to recordkeeping or information reporting for purposes of administering the requirements of this section.”.

(2) CONFORMING AMENDMENTS.—

(A) Section 25(e)(1)(C) is amended by striking “and 25D” and inserting “25D, and 25F”.

(B) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25E the following new item:

“Sec. 25F. Qualified elementary and secondary education scholarships. ”.

(b) Exclusion from gross income for scholarships for qualified elementary or secondary education expenses of eligible students.—

(1) IN GENERAL.—Part III of subchapter B of chapter 1 is amended by inserting before section 140 the following new section:

“SEC. 139K. Scholarships for qualified elementary or secondary education expenses of eligible students.

“(a) In general.—In the case of an individual, gross income shall not include any amounts provided to such individual or any dependent of such individual pursuant to a scholarship for qualified elementary or secondary education expenses of an eligible student which is provided by a scholarship granting organization.

“(b) Definitions.—In this section, the terms ‘qualified elementary or secondary education expense’, ‘eligible student’, and ‘scholarship granting organization’ have the same meaning given such terms under section 25F(c).”.

(2) CONFORMING AMENDMENT.—The table of sections for part III of subchapter B of chapter 1 is amended by inserting before the item relating to section 140 the following new item:

“Sec. 139K. Scholarships for qualified elementary or secondary education expenses of eligible students. ”.

(c) Effective date.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years ending after December 31, 2026.

(2) EXCLUSION FROM GROSS INCOME.—The amendments made by subsection (b) shall apply to amounts received after December 31, 2026, in taxable years ending after such date.