[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6 Introduced in House (IH)]

  1st Session
                                 H. R. 6

To amend the Internal Revenue Code of 1986 to provide a tax credit for 
   families, to reform the marriage penalty, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 4, 1995

Mr. Crane, Mr. Nussle, and Mr. Salmon (for themselves, Mr. Allard, Mr. 
Armey, Mr. Baker of California, Mr. Baker of Louisiana, Mr. Ballenger, 
Mr. Barr, Mr. Bartlett of Maryland, Mr. Barton of Texas, Mr. Bilirakis, 
Mr. Bliley, Mr. Blute, Mr. Bono, Mr. Bunning of Kentucky, Mr. Burr, Mr. 
 Callahan, Mr. Calvert, Mr. Camp, Mr. Canady of Florida, Mr. Cremeans, 
Mr. Christensen, Mr. Chrysler, Mr. Coburn, Mr. Cooley, Mrs. Cubin, Mr. 
  Cunningham, Mr. Doolittle, Mr. Dornan, Ms. Dunn of Washington, Mr. 
   Emerson, Mr. English of Pennsylvania, Mr. Ensign, Mr. Ewing, Mr. 
Flanagan, Mr. Foley, Mrs. Fowler, Mr. Forbes, Mr. Fox of Pennsylvania, 
  Mr. Frisa, Mr. Ganske, Mr. Gilchrest, Mr. Gilman, Mr. Gillmor, Mr. 
Goodlatte, Mr. Goodling, Mr. Greenwood, Mr. Gunderson, Mr. Hancock, Mr. 
  Hastings of Washington, Mr. Hayworth, Mr. Heineman, Mr. Herger, Mr. 
  Hilleary, Mr. Hobson, Mr. Hostettler, Mr. Hutchinson, Mr. Inglis of 
South Carolina, Mr. Istook, Mrs. Johnson of Connecticut, Mr. Jones, Mr. 
Kingston, Mr. Knollenberg, Mr. Largent, Mr. LaTourette, Mr. Latham, Mr. 
    Lewis of Kentucky, Mr. Lightfoot, Mr. Linder, Mr. Longley, Mr. 
 McCollum, Mr. McHugh, Mr. McIntosh, Mr. Mica, Mr. Miller of Florida, 
Ms. Molinari, Mrs. Myrick, Mr. Packard, Mr. Radanovich, Mr. Riggs, Mr. 
Roth, Mr. Royce, Mr. Saxton, Mr. Sensenbrenner, Mr. Shadegg, Mr. Shaw, 
Mr. Shays, Mr. Smith of New Jersey, Mr. Smith of Michigan, Mr. Solomon, 
Mr. Stearns, Mr. Stockman, Mr. Stump, Mr. Talent, Mr. Tate, Mr. Taylor 
    of North Carolina, Mr. Thornberry, Mr. Thomas, Mr. Tiahrt, Mrs. 
Waldholtz, Mr. Wamp, Mr. Weldon of Florida, Mr. Weller, Mr. Wicker, Mr. 
  Zimmer, Mr. Crapo, Mr. Kolbe, Mr. Paxon, Mr. Young of Florida, Mr. 
  Brownback, Mr. Weldon of Pennsylvania, Mr. Combest, Mr. Coble, Mr. 
  Ehrlich, and Mrs. Meyers of Kansas) 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 provide a tax credit for 
   families, to reform the marriage penalty, 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 ``American Dream 
Restoration Act''.
    (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.

SEC. 2. FAMILY TAX CREDIT.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
(relating to refundable credits) is amended by redesignating section 35 
as section 36 and by inserting after section 34 the following new 
section:

``SEC. 35. FAMILY TAX CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an eligible individual, 
        there shall be allowed as a credit against the tax imposed by 
        this subtitle for the taxable year an amount equal to the 
        amount described in paragraph (2) multiplied by the number of 
        qualifying children of the taxpayer.
            ``(2) Description of amount.--
                    ``(A) In general.--The amount described in this 
                paragraph is an amount equal to $500, reduced (but not 
                below zero) by the applicable reduction amount.
                    ``(B) Applicable reduction amount.--For purposes of 
                subparagraph (A), the term `applicable reduction 
                amount' means an amount which bears the same ratio to 
                the amount applicable under subparagraph (A) as--
                            ``(i) the excess (if any) of the taxpayer's 
                        adjusted gross income over $200,000, bears to
                            ``(ii) $50,000.
    ``(b) Limitation Based on Amount of Tax.--
            ``(1) In general.--The credit allowed by subsection (a) for 
        the taxable year shall not exceed the excess (if any) of--
                    ``(A) the sum of--
                            ``(i) the tax imposed by this chapter for 
                        the taxable year (reduced by the credits 
                        allowable against such tax other than the 
                        credits allowable under this subpart), and
                            ``(ii) the taxpayer's social security taxes 
                        for such taxable year, over
                    ``(B) the credit allowed for the taxable year under 
                section 32.
            ``(2) Social security taxes.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--The term `social security taxes' 
                means, with respect to any taxpayer for any taxable 
                year--
                            ``(i) the amount of the taxes imposed by 
                        sections 3101, 3111, 3201(a), and 3221(a) on 
                        amounts received by the taxpayer during the 
                        calendar year in which the taxable year begins,
                            ``(ii) the taxes imposed by section 1401 on 
                        the self-employment income of the taxpayer for 
                        the taxable year, and
                            ``(iii) the taxes imposed by section 
                        3211(a)(1) on amounts received by the taxpayer 
                        during the calendar year in which the taxable 
                        year begins.
                    ``(B) Coordination with special refund of social 
                security taxes.--The term `social security taxes' shall 
                not include any taxes to the extent the taxpayer is 
                entitled to a special refund of such taxes under 
                section 6413(c).
                    ``(C) Special rule.--Any amounts paid pursuant to 
                an agreement under section 3121(l) (relating to 
                agreements entered into by American employers with 
                respect to foreign affiliates) which are equivalent to 
                the taxes referred to in subparagraph (A)(i) shall be 
                treated as taxes referred to in such subparagraph.
    ``(c) Inflation Adjustments.--
            ``(1) In general.--In the case of a taxable year beginning 
        in a calendar year after 1996, the $500 and $200,000 amounts 
        contained in subsection (a)(2) shall each be increased by an 
        amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 1995' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $50, such amount shall be rounded to 
        the nearest multiple of $50.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Eligible individual.--The term `eligible individual' 
        has the meaning given to such term by section 32(c)(1) 
        (determined without regard to subparagraph (B) thereof).
            ``(2) Qualifying child.--The term `qualifying child' means 
        an individual who--
                    ``(A) is a qualifying child, within the meaning of 
                section 32(c)(3) (determined without regard to 
                subparagraph (E) thereof), and
                    ``(B) has not attained the age of 18 as of the 
                close of the calendar year in which the taxable year of 
                the taxpayer begins.
            ``(3) Certain other rules apply.--Rules similar to the 
        rules of subsections (d) and (e) of section 32 shall apply.''
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 35 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 is amended by striking the item 
        relating to section 35 and inserting the following new items:

                              ``Sec. 35. Family tax credit.
                              ``Sec. 36. Overpayments of tax.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 3. CREDIT TO REDUCE THE MARRIAGE PENALTY.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 22 the following new section:

``SEC. 23. REDUCTION OF MARRIAGE PENALTY.

    ``(a) Allowance of Credit.--In the case of a qualified married 
couple, there shall be allowed as a credit against the tax imposed by 
this chapter for the taxable year an amount equal to the applicable 
dollar amount.
    ``(b) Qualified Married Couple.--For purposes of this section, the 
term `qualified married couple' means a husband and wife who file a 
joint return for the taxable year and who, but for this section, would 
be required to pay more in income taxes under this subtitle because of 
the fact that they were legally married during such taxable year than 
they would be required to pay if they had not been married.
    ``(c) Applicable Dollar Amount.--For purposes of this section, the 
term `applicable dollar amount' means, with respect to taxable years 
beginning in any calendar year, the amount which the Secretary 
estimates will result in a reduction in revenues to the Treasury for 
such taxable years of $2,000,000,000. In no event may the applicable 
dollar amount with respect to any taxpayer exceed the marriage penalty 
that such taxpayer would be required to pay but for this section.''
    (b) Table of Sections.--The table of sections for such subpart A is 
amended by inserting after the item relating to section 22 the 
following new item:

                              ``Sec. 23. Reduction of marriage 
                                        penalty.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 4. ESTABLISHMENT OF AMERICAN DREAM SAVINGS ACCOUNTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to pension, profit-sharing, stock bonus plans, etc.) is 
amended by inserting after section 408 the following new section:

``SEC. 408A. AMERICAN DREAM SAVINGS ACCOUNTS.

    ``(a) General Rule.--Except as provided in this section, an 
American Dream Savings Account shall be treated for purposes of this 
title in the same manner as an individual retirement plan.
    ``(b) American Dream Savings Account.--For purposes of this title, 
the term `American Dream Savings Account' or `ADS account' means an 
individual retirement plan which is designated at the time of the 
establishment of the plan as an American Dream Savings Account. Such 
designation shall be made in such manner as the Secretary may 
prescribe.
    ``(c) Contribution Rules.--
            ``(1) No deduction allowed.--No deduction shall be allowed 
        under section 219 for a contribution to an ADS account.
            ``(2) Contribution limit.--
                    ``(A) In general.--The aggregate amount of 
                contributions (other than rollover contributions) for 
                any taxable year to all ADS accounts maintained for the 
                benefit of an individual shall not exceed the lesser 
                of--
                            ``(i) $2,000, or
                            ``(ii) an amount equal to the compensation 
                        includible in the individual's gross income for 
                        such taxable year.
                    ``(B) $4,000 limitation for certain additional 
                married individuals.--
                            ``(i) In general.--In the case of an 
                        individual to whom this subparagraph applies 
                        for the taxable year, the limitation of 
                        subparagraph (A)(ii) shall be equal to the sum 
                        of--
                                    ``(I) the compensation includible 
                                in such individual's gross income for 
                                the taxable year, plus
                                    ``(II) the compensation includible 
                                in the gross income of such 
                                individual's spouse for the taxable 
                                year reduced by the amount of the 
                                limitation under subparagraph (A) 
                                applicable to such spouse for such 
                                taxable year.
                            ``(ii) Individuals to whom clause (i) 
                        applies.--Clause (i) shall apply to any 
                        individual if--
                                    ``(I) such individual files a joint 
                                return for the taxable year, and
                                    ``(II) the amount of compensation 
                                (if any) includible in such 
                                individual's gross income for the 
                                taxable year is less than the 
                                compensation includible in the gross 
                                income of such individual's spouse for 
                                the taxable year.
                    ``(C) Adjustment for inflation.--
                            ``(i) In general.--In the case of a taxable 
                        year beginning in a calendar year after 1996, 
                        the $2,000 amount contained in subparagraph (A) 
                        shall be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment under section 1(f)(3) for 
                                the calendar year in which the taxable 
                                year begins, determined by substituting 
                                `calendar year 1995' for `calendar year 
                                1992' in subparagraph (B) thereof.
                            ``(ii) Rounding.--If any amount as adjusted 
                        under clause (i) is not a multiple of $50, such 
                        amount shall be rounded to the nearest multiple 
                        of $50.
                    ``(D) Tax on excess contributions.--Section 4973 
                shall be applied separately with respect to individual 
                retirement plans which are ADS accounts and individual 
                retirement plans which are not ADS accounts; except 
                that, for purposes of applying such section with 
                respect to individual retirement plans which are ADS 
                accounts, excess contributions shall be considered to 
                be any amounts in excess of the limitation under 
                subsection (c)(2)(A).
            ``(3) Contributions permitted after age 70\1/2\.--
        Contributions to an ADS account may be made even after the 
        individual for whom the account is maintained has attained age 
        70\1/2\.
            ``(4) Mandatory distribution rules not to apply, etc.--
        Subsections (a)(6) and (b)(3) of section 408 (relating to 
        required distributions) and section 4974 (relating to excise 
        tax on certain accumulations in qualified retirement plans) 
        shall not apply to any ADS account.
            ``(5) Limitations on rollover contributions.--No rollover 
        contribution may be made to an ADS account unless--
                    ``(A) such contribution is from another ADS 
                account, or
                    ``(B) such contribution is from an individual 
                retirement plan (other than an ADS account) and is made 
                before January 1, 1998.
    ``(d) Distribution Rules.--For purposes of this title--
            ``(1) In general.--In the case of a qualified distribution 
        from an ADS account--
                    ``(A) no portion of such distribution shall be 
                includible in gross income, and
                    ``(B) section 72(t) shall not apply.
            ``(2) Qualified distribution.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified 
                distribution' means any payment or distribution--
                            ``(i) made on or after the date on which 
                        the individual attains age 59\1/2\,
                            ``(ii) made to a beneficiary (or to the 
                        estate of the individual) on or after the death 
                        of the individual,
                            ``(iii) attributable to the individual's 
                        being disabled (within the meaning of section 
                        72(m)(7)), or
                            ``(iv) which is a qualified special purpose 
                        distribution (within the meaning of subsection 
                        (e)).
                    ``(B) Distributions within 5 years.--No payment or 
                distribution shall be treated as a qualified 
                distribution if--
                            ``(i) it is made within the 5-taxable year 
                        period beginning with the 1st taxable year in 
                        which the individual made a contribution to an 
                        ADS account (or such individual's spouse made a 
                        contribution to an ADS account) established for 
                        such individual, or
                            ``(ii) in the case of a payment or 
                        distribution properly allocable to a rollover 
                        contribution (or income allocable thereto), it 
                        is made within 5 years after the date on which 
                        such rollover contribution was made, as 
                        determined under regulations prescribed by the 
                        Secretary.
                Clause (ii) shall not apply to a rollover contribution 
                from an ADS account.
            ``(3) Income inclusion for rollovers from non-ADS 
        accounts.--In the case of any amount paid or distributed out of 
        an individual retirement plan (other than an ADS account) which 
        is paid into an ADS account (established for the benefit of the 
        payee or distributee, as the case may be) before the close of 
        the 60th day after the day on which the payment or distribution 
        is received--
                    ``(A) sections 72(t) and 408(d)(3) shall not apply, 
                and
                    ``(B) any amount required to be included in gross 
                income by reason of this paragraph shall be so included 
                ratably over the 4-taxable year period beginning with 
                the taxable year in which the payment or distribution 
                is made.
    ``(e) Qualified Special Purpose Distribution.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified special purpose distribution' means any payments or 
        distributions to an individual from an ADS account--
                    ``(A) if such payments or distributions are 
                qualified first-time homebuyer distributions, or
                    ``(B) to the extent such payments or distributions 
                do not exceed--
                            ``(i) the qualified higher education 
                        expenses of the taxpayer for the taxable year 
                        in which received, and
                            ``(ii) the qualified medical expenses of 
                        the taxpayer for the taxable year in which 
                        received.
        The term `qualified special purpose distribution' shall not 
        include any payment or distribution to the extent such payment 
        or distribution reduces the balance of the amounts in ADS 
        accounts of the taxpayer below $1,000.
            ``(2) Qualified first-time homebuyer distributions.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified first-time homebuyer distribution' 
                means any payment or distribution received by an 
                individual to the extent such payment or distribution 
                is used by the individual before the close of the 60th 
                day after the day on which such payment or distribution 
                is received to pay qualified acquisition costs with 
                respect to a principal residence for such individual as 
                a first-time homebuyer.
                    ``(B) Qualified acquisition costs.--For purposes of 
                this paragraph, the term `qualified acquisition costs' 
                means the costs of acquiring, constructing, or 
                reconstructing a residence. Such term includes any 
                usual or reasonable settlement, financing, or other 
                closing costs.
                    ``(C) First-time homebuyer; other definitions.--For 
                purposes of this paragraph--
                            ``(i) First-time homebuyer.--The term 
                        `first-time homebuyer' means any individual if 
                        such individual (and, if married, such 
                        individual's spouse) had no present ownership 
                        interest in a principal residence during the 3-
year period ending on the date of acquisition of the principal 
residence to which this paragraph applies.
                            ``(ii) Principal residence.--The term 
                        `principal residence' has the same meaning as 
                        when used in section 1034.
                            ``(iii) Date of acquisition.--The term 
                        `date of acquisition' means the date--
                                    ``(I) on which a binding contract 
                                to acquire the principal residence to 
                                which subparagraph (A) applies is 
                                entered into, or
                                    ``(II) on which construction or 
                                reconstruction of such a principal 
                                residence is commenced.
                    ``(D) Special rule where delay in acquisition.--If 
                any payment or distribution out of an ADS account fails 
                to meet the requirements of subparagraph (A) solely by 
                reason of a delay or cancellation of the purchase or 
                construction of the residence, the amount of the 
                payment or distribution may be contributed to an ADS 
                account as provided in subsection (d)(3)(A)(i) of 
                section 408 (determined by substituting `120 days' for 
                `60 days' in such section), except that--
                            ``(i) subsection (d)(3)(B) of such section 
                        shall not be applied to such contribution, and
                            ``(ii) such amount shall not be taken into 
                        account in determining whether subsection 
                        (d)(3)(A)(i) of such section applies to any 
                        other amount.
            ``(5) Qualified higher education expenses.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `qualified higher 
                education expenses' means tuition, fees, books, 
                supplies, and equipment required for the enrollment or 
                attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse, or
                            ``(iii) the taxpayer's child (as defined in 
                        section 151(c)(3)) or grandchild,
                at an eligible educational institution (as defined in 
                section 135(c)(3)).
                    ``(B) Coordination with savings bond provisions.--
                The amount of qualified higher education expenses for 
                any taxable year shall be reduced by any amount 
                excludable from gross income under section 135.
            ``(6) Qualified medical expenses.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified medical expenses' means any amounts 
                paid during the taxable year, not compensated for by 
                insurance or otherwise, for medical care (as defined in 
                section 213(d)) of the taxpayer, his spouse, or a 
                dependent (as defined in section 152).
                    ``(B) Long-term care insurance.--Such term includes 
                premiums paid during the taxable year for any long-term 
                care insurance contract for the benefit of the 
                individual or such individual's spouse.
                    ``(C) Long-term care insurance contract.--For 
                purposes of subparagraph (B), the term `long-term care 
                insurance contract' means any insurance contract issued 
                if--
                            ``(i) the only insurance protection 
                        provided under such contract is coverage of 
                        qualified long-term care services and benefits 
                        incidental to such coverage (as defined under 
                        regulations prescribed by the Secretary),
                            ``(ii) the maximum benefit under the policy 
                        for expenses incurred for any day does not 
                        exceed $200,
                            ``(iii) such contract does not cover 
                        expenses incurred for services or items to the 
                        extent that such expenses are reimbursable 
                        under title XVIII of the Social Security Act or 
                        would be so reimbursable but for the 
                        application of a deductible or coinsurance 
                        amount,
                            ``(iv) such contract is guaranteed 
                        renewable,
                            ``(v) such contract does not have any cash 
                        surrender value, and
                            ``(vi) all refunds of premiums, and all 
                        policyholder dividends or similar amounts, 
                        under such contract are to be applied as a 
                        reduction in future premiums or to increase 
                        future benefits.
    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Rollover contributions.--The term `rollover 
        contributions' means contributions described in sections 
        402(c), 403(a)(4), 403(b)(8), and 408(d)(3).
            ``(2) Compensation.--The term `compensation' has the 
        meaning given such term by section 219(f).''
    (b) Conforming Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 is amended by inserting after the 
item relating to section 408 the following new item:

                              ``Sec. 408A. American dream savings 
                                        accounts.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.
                                 <all>
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