[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5193 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 5193

To amend the Internal Revenue Code of 1986 to reform the earned income 
                              tax credit.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 5, 1994

  Mr. Petri introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to reform the earned income 
                              tax credit.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. MODIFICATIONS TO EARNED INCOME TAX CREDIT.

    (a) Modifications in Computation of Credit; Supplemental Child 
Credit.--
            (1) Percentages.--Subsection (b) of section 32 of the 
        Internal Revenue Code of 1986 (relating to earned income tax 
        credit) is amended to read as follows:
    ``(b) Percentages.--
            ``(1) In general.--For purposes of subsection (a), the 
        credit percentage and the phaseout percentage shall be 
        determined as follows:

      

                                                                                                                
                 In the case of an eligible                                                                     
                      individual with:            The credit percentage is:        The phaseout percentage is:  
                                                                                                                
                1 qualifying child..........  30..............................                 17               
                2 or more qualifying                                                                            
                 children...................  42..............................                 21               
                                                                                                                

      
            ``(2) Supplemental child credit.--In the case of a taxpayer 
        with a qualifying child who has not attained 6 as of the close 
        of the calendar year in which or with which the taxable year of 
        the taxpayer ends--
                    ``(A) the credit percentage shall be increased by 5 
                percentage points for each such child, and
                    ``(B) the phaseout percentage shall be increased by 
                2 percentage points for each such child.
        Not more than 4 children may be taken into account under this 
        paragraph.''
            (2) Uniform Earned Income Amounts and Phaseout Amounts.--
        Subsection (a) of section 32 of such Code is amended--
                    (A) by striking ``the earned income amount'' each 
                place it appears and inserting ``$8,500'', and
                    (B) by striking ``the phaseout amount'' in 
                paragraph (2)(B) and inserting ``$10,000''.
    (b) Repeal of Credit for Individuals Without Children.--
Subparagraph (A) of section 32(c)(1) of such Code is amended to read as 
follows:
                    ``(A) In general.--The term `eligible individual' 
                means any individual who has a qualifying child for the 
                taxable year.''
    (c) Qualifying Children Must Be Under 18 Years of Age or 
Disabled.--Subparagraph (C) of section 32(c)(3) of such Code is amended 
by striking ``19'' in paragraph (1) and inserting ``18'', by adding 
``and'' at the end of paragraph (1), by striking paragraph (2), and by 
redesignating paragraph (3) as paragraph (2).
    (d) Advance Payment Provisions.--
            (1) Subsection (b) of section 3507 of such Code is amended 
        by striking ``and'' at the end of paragraph (3), by striking 
        the period at the end of paragraph (4) and inserting ``, and'', 
        and by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) states the number and ages of qualifying children (as 
        defined in section 32(c)) of the employee for the taxable 
        year.''
            (2) Paragraph (2) of section 3507(c) of such Code is 
        amended--
                    (A) by striking clauses (i) and (ii) of 
                subparagraph (B) and inserting the following:
                            ``(i) of not more than the credit 
                        percentage of earned income not in excess of 
                        $8,500, which
                            ``(ii) phases out at the phaseout 
                        percentage between $10,000 and the amount of 
                        earned income at which the credit under section 
                        32(a) phases out for such employee, or'', and
                    (B) by adding at the end the following new 
                sentence:
        ``For purposes of this paragraph, the credit percentage and the 
        phaseout percentage shall be determined under section 32(b) on 
        the basis of the number and ages of qualifying children 
        specified in the earned income eligibility certificate of the 
        employee.''
            (3) Clause (i) of section 3507(e)(3)(A) of such Code is 
        amended by inserting before ``, or'' the following: ``(or 
        changing the percentages applicable to the employee under 
        section 32(b) for the taxable year)''.
    (e) Verification of Taxpayer Identification Numbers.--Section 32 of 
such Code is amended by adding at the end the following new subsection:
    ``(k) Verification of Taxpayer Identification Numbers.--No credit 
shall be allowed under this section to any taxpayer until the Secretary 
has verified that the numbers set forth on the return claiming the 
credit as--
            ``(1) the taxpayer identification number of the taxpayer, 
        and
            ``(2) the taxpayer identification numbers of all qualifying 
        children,
are valid.''
    (f) Conforming Amendment.--Subsection (i) of section 32 of such 
Code is amended to read as follows:
    ``(i) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 1996, each credit percentage used for purposes 
        of subsection (a) shall be increased by an amount equal to--
                    ``(A) such percentage, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins by substituting `1995' for 
                `1992' in subparagraph (B) thereof.
            ``(2) Rounding.--If any percentage after being increased 
        under paragraph (1) is not a multiple of 0.01 percentage point, 
        such percentage shall be rounded to the nearest 0.01 percentage 
        point.''
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995; except that 
the amendments made by subsection (d) shall take effect on January 1, 
1996.
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