The Clean Water Allotment Modernization Act of 2026 significantly amends the Federal Water Pollution Control Act by updating the formula for distributing federal clean water funds. Before allotting funds to states, the Administrator must set aside specific percentages for Buy American oversight , Indian tribes , and United States territories , ensuring these entities receive dedicated funding. The core change involves a new formula for state allotments, which will be implemented after the publication of an initial formula. This new formula allocates 60 percent of funds based on a state's proportion of identified clean watersheds needs, 20 percent on its total population, and another 20 percent on its share of the population at or below 200 percent of the federal poverty level. This aims to create a more equitable and needs-based distribution system. To mitigate drastic changes, a transition period is established for the first four fiscal years, limiting annual increases to 200 percent and decreases to 25 percent compared to the prior year. The Administrator is required to publish the initial formula and provide annual updates based on the latest demographic and needs data. Furthermore, the bill allows states to utilize up to 0.5 percent of their capitalization grants to conduct activities related to clean watersheds needs surveys , which are crucial for the new allotment formula. The legislation also clarifies that these changes do not impact funds or allocations made available under the Infrastructure Investment and Jobs Act, ensuring existing infrastructure funding remains unaffected.