[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 939 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 939

 To amend the Internal Revenue Code of 1986 to simplify the definition 
 of dependent, to provide a uniform definition of child, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                May 12 (legislative day, April 19), 1993

 Mr. Moynihan (for himself and Mr. Packwood) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to simplify the definition 
 of dependent, to provide a uniform definition of child, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Tax Simplification 
for Families Act of 1993''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

                    TITLE I--DEFINITION OF DEPENDENT

SEC. 101. DEDUCTION FOR PERSONAL EXEMPTION FOR DEPENDENTS.

    (a) In General.--Section 152 (defining dependent) is amended to 
read as follows:

``SEC. 152. DEPENDENT DEFINED.

    ``(a) In General.--For purposes of this subtitle, the term 
`dependent' means--
            ``(1) a qualifying child, or
            ``(2) a qualifying relative.
    ``(b) Exceptions.--For purposes of this section--
            ``(1) Dependents ineligible.--If an individual is a 
        dependent of a taxpayer for any taxable year of such taxpayer 
        beginning in a calendar year, such individual shall be treated 
        as having no dependents for any taxable year of such individual 
        beginning in such calendar year.
            ``(2) Dependents of 2 or more taxpayers.--If, after 
        application of all provisions of this section other than this 
        paragraph, an individual would be treated as a dependent of 2 
        or more taxpayers for taxable years beginning in the same 
        calendar year, such individual shall be treated as the 
        dependent of the taxpayer with the highest adjusted gross 
        income.
            ``(3) Married dependents.--An individual shall not be 
        treated as a dependent of a taxpayer under subsection (a) if 
        such individual has made a joint return with the individual's 
        spouse under section 6013 for the taxable year beginning in the 
        calendar year in which the taxable year of the taxpayer begins.
            ``(4) Nonresident aliens.--
                    ``(A) In general.--A nonresident alien shall not be 
                treated as a dependent under subsection (a).
                    ``(B) Exception for adopted child.--Subparagraph 
                (A) shall not apply to any legally adopted child of a 
                taxpayer if--
                            ``(i) for the taxable year of the taxpayer, 
                        the child's principal place of abode is the 
                        home of the taxpayer, and
                            ``(ii) the taxpayer is a citizen of the 
                        United States.
    ``(c) Qualifying Child.--For purposes of this section--
            ``(1) In general.--The term `qualifying child' means, with 
        respect to any taxpayer for any taxable year, an individual--
                    ``(A) who is a child of the taxpayer or a 
                descendant of a child of the taxpayer,
                    ``(B) who has the same principal place of abode as 
                the taxpayer for more than one-half of such taxable 
                year, and
                    ``(C) who meets the age requirements of paragraph 
                (2).
            ``(2) Age requirements.--An individual meets the 
        requirements of this paragraph if such individual--
                    ``(A) has not attained the age of 19 as of the 
                close of the calendar year in which the taxable year of 
                the taxpayer begins, or
                    ``(B) is a student who has not attained the age of 
                24 as of the close of such taxable year.
            ``(3) Special rules for disabled children.--In the case of 
        an individual who is permanently and totally disabled (as 
        defined in section 22(e)(3)) at any time during the calendar 
        year described in paragraph (2)--
                    ``(A) the requirements of paragraph (2) shall be 
                treated as met with respect to such individual, and
                    ``(B) if the requirement of paragraph (1)(B) is not 
                met, such requirement shall be treated as met if the 
                taxpayer provided over half of the individual's support 
                for such calendar year.
    ``(d) Qualifying Relative.--For purposes of this section--
            ``(1) In general.--The term `qualifying relative' means, 
        with respect to any taxpayer for any taxable year, an 
        individual--
                    ``(A) who bears a relationship to the taxpayer 
                described in paragraph (2),
                    ``(B) whose modified adjusted gross income for the 
                calendar year in which such taxable year begins is less 
                than the exemption amount,
                    ``(C) with respect to whom either--
                            ``(i) the principal place of abode of the 
                        individual is the same as the taxpayer for more 
                        than one-half of such taxable year, or
                            ``(ii) if clause (i) does not apply, the 
                        taxpayer provides over half of the individual's 
                        support for the calendar year in which such 
                        taxable year begins, and
                    ``(D) who is not a qualifying child of such 
                taxpayer or any other taxpayer for any taxable year 
                beginning in the calendar year in which such taxable 
                year begins.
            ``(2) Relationship.--An individual bears a relationship to 
        the taxpayer described in this paragraph if the individual is 
        any of the following with respect to the taxpayer:
                    ``(A) A child or a descendant of a child.
                    ``(B) A brother, sister, stepbrother, or 
                stepsister.
                    ``(C) The father or mother, or an ancestor of 
                either.
                    ``(D) A stepfather or stepmother.
                    ``(E) A son or daughter of a brother or sister of 
                the taxpayer.
                    ``(F) A brother or sister of the father or mother 
                of the taxpayer.
                    ``(G) A son-in-law, daughter-in-law, father-in-law, 
                mother-in-law, brother-in-law, or sister-in-law.
            ``(3) Multiple support agreements.--For purposes of 
        paragraph (1)(C)(ii) and subsection (c)(3)(B), over half of the 
        support of an individual for a calendar year shall be treated 
        as received from the taxpayer if--
                    ``(A) no one person contributed over half of such 
                support,
                    ``(B) over half of such support was received from 2 
                or more persons each of whom, but for the fact that any 
                such person alone did not contribute over half of such 
                support, would have been entitled to claim such 
                individual as a dependent for a taxable year beginning 
                in such calendar year,
                    ``(C) the taxpayer contributed to the support of 
                the individual in an amount equal to or greater than 
                the exemption amount, and
                    ``(D) each person described in both subparagraphs 
                (B) and (C) (other than the taxpayer) files a written 
                declaration (in such manner and form as the Secretary 
                may by regulations prescribe) that such person will not 
                claim such individual as a dependent for any taxable 
                year beginning in such calendar year.
            ``(4) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(5) Certain income of handicapped dependents not taken 
        into account.--
                    ``(A) In general.--For purposes of paragraph 
                (1)(B), the gross income of an individual who is 
                permanently and totally disabled (as defined in section 
                22(e)(3)) at any time during the taxable year shall not 
                include income attributable to services performed by 
                the individual at a sheltered workshop if--
                            ``(i) the availability of medical care at 
                        such workshop is the principal reason for the 
                        individual's presence there, and
                            ``(ii) the income arises solely from 
                        activities at such workshop which are incident 
                        to such medical care.
                    ``(B) Sheltered workshop defined.--For purposes of 
                subparagraph (A), the term `sheltered workshop' means a 
                school--
                            ``(i) which provides special instruction or 
                        training designed to alleviate the disability 
                        of the individual, and
                            ``(ii) which is operated by an organization 
                        described in section 501(c)(3) and exempt from 
                        tax under section 501(a), or by a State, a 
                        possession of the United States, any political 
                        subdivision of any of the foregoing, the United 
                        States, or the District of Columbia.
    ``(e) Special Rules for Divorced Parents, Etc.--
            ``(1) Special rule where child lives with both parents for 
        required period.--Notwithstanding subsection (b)(2), if a child 
        has parents--
                    ``(A) who--
                            ``(i) are divorced or legally separated 
                        under a decree of divorce or separate 
                        maintenance,
                            ``(ii) are separated under a written 
                        separation agreement,
                            ``(iii) live apart at all times during the 
                        last 6 months of the calendar year, or
                            ``(iv) are married individuals filing 
                        separate returns for any taxable year beginning 
                        in the calendar year, and
                    ``(B) who each satisfy the requirements of 
                subsection (c)(1)(B) or subsection (d)(1)(C)(i),
        then such child shall be treated as the qualifying child or 
        qualifying relative, whichever is applicable, of the parent 
        with whom such child shared the same principal place of abode 
        for the greater portion of the calendar year (hereafter in this 
        subsection referred to as the `custodial parent').
            ``(2) Exception where custodial parent releases claim to 
        exemption for the year.--A child of parents described in 
        paragraph (1) shall be treated as being the qualifying child or 
        qualifying relative of the noncustodial parent for a calendar 
        year if--
                    ``(A) the noncustodial parent provides support for 
                such calendar year in an amount equal to or greater 
                than the exemption amount,
                    ``(B) as of the time the noncustodial parent files 
                the return for any taxable year beginning in such 
                calendar year, the noncustodial parent has paid all 
                child support payments required to be paid for such 
                calendar year, and
                    ``(C) the custodial parent signs a written 
                declaration (in such manner and form as the Secretary 
                may by regulations prescribe) that such custodial 
                parent will not claim such child as a dependent for any 
                taxable year beginning in such calendar year, and the 
                noncustodial parent attaches such written declaration 
                to the noncustodial parent's return for the taxable 
                year beginning during such calendar year.
        For purposes of this subsection, the term `noncustodial parent' 
        means the parent who is not the custodial parent.
            ``(3) Exception for certain pre-1994 instruments.--
                    ``(A) In general.--A child of parents described in 
                paragraph (1)(A) shall be treated as being the 
                qualifying child or qualifying relative of the 
                noncustodial parent for a calendar year if a qualified 
                pre-1994 instrument between the parents applicable to 
                the taxable year beginning in such calendar year 
                provides that--
                            ``(i) the noncustodial parent shall be 
                        entitled to any deduction allowable under 
                        section 151 for such child, or
                            ``(ii) the custodial parent will sign a 
                        written declaration that such parent will not 
                        claim such child as a dependent for such 
                        taxable year.
                    ``(B) Qualified pre-1994 instrument.--For purposes 
                of this paragraph, the term `qualified pre-1994 
                instrument' means any instrument described in 
                subparagraph (A) or (B) of section 71(b)(2)--
                            ``(i) which is executed before January 1, 
                        1994,
                            ``(ii) which on such date contains either 
                        of the provisions described in subparagraph 
                        (A)(i), and
                            ``(iii) which is not modified on or after 
                        such date in a modification which expressly 
                        provides that this paragraph shall not apply to 
                        such decree or agreement.
    ``(f) Other Definitions and Rules.--For purposes of this section--
            ``(1) Student defined.--The term `student' means an 
        individual who during each of 5 calendar months during the 
        calendar year in which the taxable year of the taxpayer 
        begins--
                    ``(A) is a full-time student at an educational 
                organization described in section 170(b)(1)(A)(ii), or
                    ``(B) is pursuing a full-time course of 
                institutional on-farm training under the supervision of 
                an accredited agent of an educational organization 
                described in section 170(b)(1)(A)(ii) or of a State or 
                political subdivision of a State.
            ``(2) Place of abode.--An individual shall not be treated 
        as having the same principal place of abode of the taxpayer if 
        at any time during the taxable year of the taxpayer the 
        relationship between the individual and the taxpayer is in 
        violation of local law.
            ``(3) Special rules for support.--For purposes of this 
        section--
                    ``(A) payments to a spouse (or former spouse) which 
                are includible in the gross income of such spouse under 
                section 71 or 682 shall not be treated as a payment by 
                the payor spouse for the support of any individual,
                    ``(B) amounts expended for the support of a child 
                or children shall be treated as received from the 
                noncustodial parent to the extent that such parent 
                provided amounts for such support, and
                    ``(C) in the case of the remarriage of a parent, 
                support of a child received from the parent's spouse 
                shall be treated as received from the parent.
            ``(4) Cross references.--

                                ``For provision treating a child as 
dependent of both parents for purposes of certain provisions, see 
sections 105(b), 132(f)(2)(B), and 213(d)(5).''
    (b) Modifications of Deduction.--Section 151(c) (relating to 
additional exemption for dependents) is amended to read as follows:
    ``(c) Additional Exemptions for Dependents.--An exemption of the 
exemption amount for each individual who is a dependent (as defined in 
section 152) of the taxpayer for the taxable year.''
    (c) Modifications of Certain Credits.--
            (1) Dependent care credit.--
                    (A) In general.--Section 21(a) is amended by 
                striking ``who maintains a household which includes as 
                a member one or more qualifying individuals (as defined 
                in subsection (b)(1))'' and inserting ``who has one or 
                more qualifying individuals (as defined in subsection 
                (b)(1)) who have the same principal place of abode as 
                the taxpayer for more than one-half of the taxable 
                year''.
                    (B) Conforming amendment.--Section 21(e)(1) is 
                repealed.
            (2) Earned income credit.--
                    (A) In general.--Paragraph (3) of section 32(c) is 
                amended to read as follows:
            ``(3) Qualifying child.--
                    ``(A) In general.--The term `qualifying child' 
                means a qualifying child of the taxpayer (as defined in 
                section 152(c)) with respect to whom the taxpayer is 
                entitled to a deduction under section 151(c) for the 
                taxable year (determined without regard to section 152 
                (d)(3) or (e)(2)).
                    ``(B) Place of abode.--For purposes of subparagraph 
                (A), the requirements of section 152(c)(1)(B) shall be 
                met only if the principal place of abode is in the 
                United States. The preceding sentence shall not apply 
                during any period during which the taxpayer is 
                stationed outside the United States while serving on 
                extended active duty (as defined in section 1034(h)(3)) 
                with the Armed Forces of the United States.''
                    (B) Reporting requirements on certain excludable 
                income.--
                            (i) In general.--Subsection (a) of section 
                        6051 (relating to receipts for employees) is 
                        amended by striking ``and'' at the end of 
                        paragraph (8), by striking the period at the 
                        end of paragraph (9) and inserting a comma, and 
                        by inserting after paragraph (9) the following 
                        new paragraphs:
            ``(10) in the case of an employee who is a member of the 
        Armed Forces of the United States, such employee's earned 
        income as determined for purposes of section 32 (relating to 
        earned income credit), and
            ``(11) in the case of a minister of the gospel, any amount 
        excludable from gross income under section 107 (relating to 
        rental value of parsonages).''
                            (ii) Simplified valuation.--The Secretary 
                        of the Treasury or his delegate may, for 
                        purposes of paragraphs (10) and (11) of section 
                        6051(a) of the Internal Revenue Code of 1986 
                        (as added by clause (i)), prescribe a 
                        simplified valuation method for determining the 
                        value of any housing allowances of members of 
                        the Armed Forces and the rental value of 
                        parsonages.
                    (C) Conforming amendment.--Section 32(c)(1) is 
                amended by striking subparagraphs (B) and (C) and by 
                redesignating subparagraph (D) as subparagraph (B).
    (d) Technical and Conforming Amendments.--
            (1) Section 21(e)(5)(A) is amended by striking ``or (4)'' 
        and inserting ``or (3)''.
            (2) Section 51(i)(1) is amended to read as follows:
            ``(1) Related individuals.--No wages shall be taken into 
        account under subsection (a) with respect to an individual--
                    ``(A) who bears a relationship described in section 
                152(d)(2) to--
                            ``(i) the taxpayer,
                            ``(ii) if the taxpayer is a corporation, to 
                        an individual who owns, directly or indirectly, 
                        more than 50 percent in value of the 
                        outstanding stock of the corporation 
                        (determined with the application of section 
                        267(c)), or
                            ``(iii) if the taxpayer is an estate or 
                        trust, a grantor, beneficiary, or fiduciary of 
                        the estate or trust, or
                    ``(B) in the case of a taxpayer which is an estate 
                or trust, who is a grantor, beneficiary, or fiduciary 
                of the estate or trust.''
            (3) Section 170(g)(3) is amended to read as follows:
            ``(3) Relative defined.--For purposes of paragraph (1), the 
        term `relative of the taxpayer' means an individual who bears a 
        relationship described in subsection (d)(2) of section 152 to 
        the taxpayer.''
            (4) Section 2032A(c)(7)(D) is amended by striking ``section 
        151(c)(4)'' and inserting ``section 152(f)(1)''.
            (5) Section 7701(a)(17) is amended by striking ``152(b)(4), 
        682,'' and inserting ``682''.
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 1993.
            (2) Reporting requirements.--The amendments made by 
        subsection (c)(2)(B) shall apply to taxable years beginning 
        after December 31, 1994.

SEC. 102. MODIFICATIONS OF DEFINITIONS OF HEAD OF HOUSEHOLD AND 
              SURVIVING SPOUSE.

    (a) Surviving Spouse.--Section 2(a)(1) is amended--
            (1) by striking subparagraph (B) and inserting:
                    ``(B) subject to the provisions of subsection (e), 
                who has a child who is a dependent with respect to whom 
                the taxpayer is entitled to a deduction for the taxable 
                year under section 151.'', and
            (2) by striking the last sentence.
    (b) Head of Household.--Section 2(b) is amended to read as follows:
    ``(b) Head of Household.--For purposes of this subtitle--
            ``(1) In general.--An individual shall be considered a head 
        of a household for any taxable year if--
                    ``(A) such individual is not married as of the 
                close of the taxable year, and
                    ``(B) subject to the provisions of subsection (e), 
                such individual is entitled to a deduction for such 
                taxable year under section 151(c) for 1 or more 
                dependents (determined without regard to section 152 
                (d)(3) or (e)(2)).
            ``(2) Determination of status.--For purposes of this 
        subsection--
                    ``(A) an individual who is legally separated from 
                his spouse under a decree of divorce or of separate 
                maintenance shall not be considered as married;
                    ``(B) a taxpayer shall be considered as not married 
                at the close of his taxable year if at any time during 
                the taxable year his spouse is a nonresident alien; and
                    ``(C) a taxpayer shall be considered as married at 
                the close of his taxable year if his spouse (other than 
                a spouse described in subparagraph (B)) died during the 
                taxable year.
            ``(3) Limitation.--A taxpayer shall not be treated as a 
        head of a household under this subsection if at any time during 
        the taxable year the taxpayer is a nonresident alien.''
    (c) Certain Dependents Must Live With Taxpayers.--Section 2 is 
amended by redesignating subsection (e) as subsection (f) and by 
inserting after subsection (d) the following new subsection:
    ``(e) Certain Dependents Must Live With Taxpayer.--For purposes of 
subsections (a)(1)(B) and (b)(1)(B), an individual shall not be treated 
as entitled to a deduction under section 151(c) for a qualifying 
relative unless the requirements of section 152(d)(1)(C)(i) are met 
with respect to such relative. The preceding sentence shall not apply 
to the father or mother of a taxpayer.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 103. MARRIED INDIVIDUALS LIVING APART.

    (a) In General.--Section 7703(b) (relating to married individuals 
living apart) is amended to read as follows:
    ``(b) Certain Married Individuals Living Apart.--For purposes of 
the provisions of this title which refer to this subsection or section, 
an individual shall not be treated as married for a taxable year if--
            ``(1) such individual--
                    ``(A) is married (within the meaning of subsection 
                (a)) and files a separate return, and
                    ``(B) has a principal place of abode for more than 
                one-half of such taxable year which is the same 
                principal place of abode of a child (as defined in 
                section 7701(l)) with respect to whom such individual 
                is entitled to a deduction under section 151 (or would 
                be so entitled but for paragraph (2) or (3) of section 
                152(e)), and
            ``(2) such individual's spouse does not have at any time 
        during the last 6 months of such taxable year the same 
        principal place of abode as such individual.''
    (b) Conforming Amendments.--
            (1) Section 21(e)(4) is amended to read as follows:
            ``(4) Certain married individuals living apart.--
        Individuals described in section 7703(b) for any taxable year 
        shall not be treated as married.''
            (2) Section 7703(a) is amended by inserting ``or section'' 
        after ``subsection''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 104. COORDINATION OF BENEFITS FOR DEPENDENTS.

    (a) Health Insurance Credit and Medical Deductions.--
            (1) Medical expense deduction.--Section 213 is amended by 
        striking subsection (f).
            (2) Self-employed individuals.--Paragraph (3) of section 
        162(l) is amended to read as follows:
            ``(3) Coordination with medical deduction.--Any amount paid 
        by a taxpayer for insurance to which paragraph (1) applies 
        shall not be taken into account in computing the amount 
        allowable to the taxpayer as a deduction under section 
        213(a).''
    (b) Young Child Credit and Dependent Care Credit and Exclusion.--
Section 32(b)(1)(D) is amended by striking the last sentence.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

                     TITLE II--DEFINITION OF CHILD

SEC. 201. UNIFORM DEFINITION OF CHILD.

    (a) In General.--Section 7701 is amended by redesignating 
subsection (l) as subsection (m) and by inserting after subsection (k) 
the following new subsection:
    ``(l) Uniform Definition of Child.--For purposes of this title--
            ``(1) In general.--The term `child' means, with respect to 
        any individual, the son, daughter, stepson, or stepdaughter of 
        the individual.
            ``(2) Adoption.--The term `child' includes--
                    ``(A) any legally adopted child of an individual, 
                and
                    ``(B) any child who is a member of an individual's 
                household if placed with such individual by an 
                authorized placement agency for legal adoption by such 
                individual.
            ``(3) Other children.--The term `child' includes any 
        individual not described in paragraph (1) or (2) who--
                    ``(A) a taxpayer cares for as the taxpayer's own 
                child, and
                    ``(B) has the same principal place of abode as the 
                taxpayer for the taxpayer's entire taxable year.''
    (b) Technical and Conforming Amendments.--
            (1) Section 21(e)(6) is amended by striking ``a child of 
        the taxpayer (within the meaning of section 151(c)(3))'' and 
        inserting ``a child of the taxpayer (within the meaning of 
        section 7701(l))''.
            (2) Section 129(c)(2) is amended by striking ``a child of 
        such employee (within the meaning of section 151(c)(3))'' and 
        inserting ``a child of such employee (within the meaning of 
        section 7701(l))''.
            (3) Section 132(g)(2)(B) is amended by striking ``any child 
        (as defined in section 151(c)(3))'' and inserting ``any child 
        (as defined in section 7701(l))''.
            (4) Section 318(a)(1) is amended to read as follows:
            ``(1) Members of family.--An individual shall be considered 
        as owning the stock owned, directly or indirectly, by or for--
                    ``(A) his spouse (other than a spouse who is 
                legally separated from the individual under a decree of 
                divorce or separate maintenance), and
                    ``(B) his children, grandchildren, or parents.''
            (5) Section 1563(e)(6) is amended by striking subparagraph 
        (C).
            (6) Section 2032A(e)(2) is amended by striking the last 
        sentence.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1994, except that such amendments shall not apply 
to taxable years beginning before such date.

                                 <all>

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