Deduction allowed for qualified special assessment taxes

(a) In general Section 164(a) of the Internal Revenue Code of 1986 is amended by inserting after paragraph (4) the following new paragraph: (5) Qualified special assessment taxes.. (b) Qualified special assessment taxes Section 164(b) of such Code is amended— (1) by redesignating paragraphs (6) and (7) as paragraphs (7) and (8), respectively, and (2) by inserting after paragraph (5) the following new paragraph: (6) Qualified special assessment taxes (A) In general The term qualified special assessment tax means a tax which is imposed— (i) by a State, a possession of the United States, or a political subdivision of any of the foregoing, or by the District of Columbia, (ii) on real property located within a geographic area designated as a special assessment district by such State, possession, or political subdivision, or by the District of Columbia, and (iii) for the purpose of funding a community infrastructure project that would directly benefit such real property. (B) Community infrastructure (i) In general For purposes of subparagraph (A), the term community infrastructure means a project or facility described in clause (ii) that is owned by— (I) a State, a possession of the United States, or a political subdivision of any of the foregoing, (II) the District of Columbia, or (III) a not-for-profit, member-owned utility service. (ii) Project described A project or facility described in this clause is any of the following: (I) Any transportation project. (II) A school, hospital, police, fire, emergency response, or other community support facility. (III) A water, waste-water, stormwater, telecommunications, electric, gas, or other utility infrastructure project. (IV) A dam restoration project. (C) Deduction limited to taxes paid or accrued with respect to principal residences The deduction under subsection (a) for qualified special assessment taxes may only be allowed if such taxes are paid or accrued with respect to the taxpayer’s principal residence (within the meaning of section 121).. (c) Application of limitation on amount of deduction Section 164(b)(7)(B) of such Code, as redesignated by subsection (b), is amended by striking and (3) and inserting (3), and (5). (d) Conforming amendment Section 164(c)(1) of such Code is amended by striking Taxes and inserting Except as provided in subsection (a)(5), taxes. (e) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2026.