Directs the Secretary to adjust to permanent resident status an alien (principal alien) who satisfies the following: (1) files an application and pays a $2,000 fine (not applicable to minors) and other applicable fees; (2) was physically present in the United States on or before the date that is five years before April 5, 2006, was not legally present in the United States on April 5, 2006, under any nonimmigrant classification, and did not depart from the United States during the five-year period ending on April 5, 2006, except for brief and innocent departures; (3) was not inadmissible under specified grounds; (4) has been employed in the United States for at least three years during the five-year period ending on April 5, 2006, and at least six years after the date of enactment of this subtitle (with specified exceptions for persons under 20 or over 65 years old, the disabled, pregnant women, and post-secondary students); (5) submission of specified employment-verifying documents; (6) federal income tax payment or agreement to make such payments; (7) demonstration of basic citizenship skills (exceptions for persons 65 years or older or persons who are disabled); (8) security and law enforcement clearances; and (9) Selective Service registration requirements. Prohibits an alien's status adjustment until the Secretary determines that the priority dates have become current for the class of aliens whose family-based or employment-based petitions for permanent residence were pending on the date of enactment of this Act. Provides permanent resident adjustment for: (1) the spouse, or child who was under 21 years of age on the date of enactment of this subtitle of a principal alien; or (2) an alien who, within five years preceding the date of enactment of this subtitle, was the spouse or child of a principal alien if the termination of the qualifying relationship was connected to domestic violence, or the spouse or child has been battered or subjected to extreme cruelty. Subjects the spouse and children to the same rules of inadmissibility as apply to a principal alien. Makes immigrant visa limits inapplicable to aliens adjusted under this subtitle. Authorizes waiver of grounds of inadmissibility based upon humanitarian, family unity, or public interest grounds, except for inadmissibility relating to: (1) health; (2) criminal activity; (3) security and related grounds; and (4) polygamists and child abductors. Makes an alien ineligible for adjustment to permanent resident status if the alien: (1) has been removed from the United States for overstaying the period of authorized admission, for removal upon arrival, or for expedited removal for criminal activity; (2) failed to leave under voluntary departure; (3) has illegally reentered the United States; (4) has been convicted of a felony or three or more misdemeanors; or (5) constitutes a criminal or security danger. Authorizes specified waiver grounds. Directs DHS to provide applicants with a document of authorization. States that an alien in removal proceedings who establishes prima facie eligibility for status adjustment shall be entitled to termination of the proceedings pending the outcome of the alien's application, unless the removal proceedings are based on criminal or national security grounds. States that an alien (and spouse and children) who files for status adjustment shall: (1) subject to security and law enforcement clearance, be granted temporary work authorization and be permitted to travel abroad; (2) not be detained or removed pending final adjudication; and (3) not be considered an unauthorized alien. Provides for confidentiality of application information, including a fine of up to $10,000 for misuse of such information. Makes it unlawful to make false statements or create a false document with respect to status adjustment applications. (Exempts incorrect employment data submitted by an alien, employer, or union to obtain work from such provision.) Provides that a person who violates such provision shall be: (1) fined or imprisoned not more than five years, or both; and (2) considered to be inadmissible to the United States. Makes an adjusted alien ineligible for federal means-tested public benefits unless the alien meets specified criteria under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Sets forth limited administrative and judicial review of status adjustment applications, including a single level of DHS appellate review. Provides that: (1) after denial of administrative or appellate appeal a case may be reviewed in federal district court and then federal appellate court; and (2) removal may not take place until a final decision is rendered establishing ineligibility, unless removal is based on criminal or security grounds. Provides employers with protection from: (1) civil and criminal tax liability relating to the employment of adjusting aliens; and (2) civil and criminal liability relating to the provision of application-related employment records. Authorizes appropriations for application processing. Requires an alien who files an application for adjustment to pay: (1) a $2,000 fine (waived if under 18 years old); and (2) a $750 state impact assistance fee ($100 for spouse and child). Provides that an alien present in the United States on January 7, 2004, who seeks to adjust but does not meet the employment or continuous physical presence tests shall be eligible to depart and seek readmission. Authorizes the Secretary to grant Deferred Mandatory Departure (DMD) status (three-year maximum) to illegal aliens to allow such aliens time to depart the United States and seek admission as a nonimmigrant or immigrant alien. Requires the alien to meet the following requirements: (1) continuous illegal nonimmigrant U.S. presence beginning as of January 7, 2004, (with permitted temporary departures); (2) U.S. employment, whether full time, part time, seasonal, or self-employed before January 7, 2004, and continuous subsequent U.S. employment except for unemployment periods of not longer than 60 days; and (3) a showing of admissibility and that such alien has not assisted in racial, religious, or political or social persecution. States that an alien may be required to undergo a medical exam. Requires evidence of employment, including Social Security, tax, or other government records. Exempts an alien who is 65 years or older on the date of enactment of this Act from such employment requirements. Makes an alien ineligible for DMD if the alien: (1) has been removed from the United States for overstaying the period of authorized admission, for removal upon arrival, or for expedited removal for criminal activity; (2) failed to leave under voluntary departure; (3) has illegally reentered the United States; (4) has been convicted of a felony or three or more misdemeanors; or (5) constitutes a criminal or security danger. Authorizes specified waiver grounds. Authorizes the Secretary to terminate DMD status if an alien: (1) was ineligible; or (2) commits a removable act. Requires the Secretary to create a DMD application form. Sets forth application process provisions, including mandatory security and law enforcement background checks. Requires a alien granted DMD status to: (1) depart prior to DMD expiration; and (2) register with DHS at the time of departure. Provides that an alien may apply for readmission from inside or outside the United States, but may not be granted readmission until U.S. departure. Authorizes the Secretary to waive the departure requirement if the alien is granted an immigrant or nonimmigrant visa and can show that departure would create a substantial family hardship. Provides that the spouse or child of a principal alien granted an immigrant or nonimmigrant visa before departure does not have to depart. Makes an alien who fails to depart prior to DMD status expiration ineligible for immigration benefits (exceptions for asylum or related benefits) for ten years and subject to fines of up to $3,000. Directs DHS to issue DMD aliens with machine-readable documents with biometric identifiers that may be used for employment, entry, and travel purposes. States that DMD aliens shall not be: (1) considered to be permanently residing in the United States and shall be treated as nonimmigrants; and (2) eligible to adjust to immigrant status until the earlier of eight years after enactment of this section, or consideration of all specified immigration applications filed prior to enactment of this section. Establishes a $1,000 DMD application fee ($500 spouse or child fee) and a $750 state impact assistance fee ($100 spouse or child fee). Authorizes DMD alien employment, and requires continuous U.S. employment during such status. Makes it unlawful to make false statements or create a false document with respect to DMD applications. Provides that a person who violates such provision shall be: (1) fined or imprisoned not more than five years, or both; and (2) considered to be inadmissible to the United States. Sets forth limited judicial review provisions. Establishes in the Treasury the State Impact Assistance Account. Directs the Secretary of Health and Human Services to establish the state impact assistance grant program for state health and education services to noncitizens.