[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5524 Introduced in House (IH)]







106th CONGRESS
  2d Session
                                H. R. 5524

     To amend the Internal Revenue Code of 1986 to strengthen the 
effectiveness of the earned income tax credit in reducing child poverty 
                          and promoting work.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 23, 2000

Mr. Cardin (for himself, Mr. Stark, Mr. Menendez, Mr. Levin, Mr. Lewis 
of Georgia, Mr. Becerra, Mr. Doggett, and Ms. Roybal-Allard) 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 strengthen the 
effectiveness of the earned income tax credit in reducing child poverty 
                          and promoting work.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tax Relief for Working Families Act 
of 2000''.

SEC. 2. INCREASED EARNED INCOME TAX CREDIT FOR 2 OR MORE QUALIFYING 
              CHILDREN.

    (a) In General.--The table in section 32(b)(1)(A) of the Internal 
Revenue Code of 1986 (relating to percentages) is amended--
            (1) in the second item--
                    (A) by striking ``or more'', and
                    (B) by striking ``21.06'' and inserting ``19.06'', 
                and
            (2) by inserting after the second item the following new 
        item:


 
 
 
``3 or more qualifying children....  45..................................                 19.06''
 

      
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 3. SIMPLIFICATION OF DEFINITION OF EARNED INCOME.

    (a) In General.--Section 32(c)(2)(A)(i) of the Internal Revenue 
Code of 1986 (defining earned income) is amended by inserting ``, but 
only if such amounts are includible in gross income for the taxable 
year'' after ``other employee compensation''.
    (b) Conforming Amendment.--Section 32(c)(2)(B) of the Internal 
Revenue Code of 1986 is amended by striking ``and'' at the end of 
clause (iv), by striking the period at the end of clause (v) and 
inserting ``, and'', and by adding at the end the following new clause:
                        ``(vi) the requirement under subparagraph 
                        (A)(i) that an amount be includible in gross 
                        income shall not apply if such amount is exempt 
                        from tax under section 7873 or is derived 
                        directly from restricted and allotted land 
                        under the Act of February 8, 1887 (commonly 
                        known as the Indian General Allotment Act) (25 
                        U.S.C. 331 et seq.) or from land held under 
                        Acts or treaties containing an exception 
                        provision similar to the Indian General 
                        Allotment Act.''
    (c) Effective Date.--The amendment made by this section shall apply 
to amounts received in taxable years beginning after December 31, 2000.

SEC. 4. SIMPLIFICATION OF DEFINITION OF CHILD DEPENDENT.

    (a) Removal of Support Test for Certain Individuals.--Section 
152(a) of the Internal Revenue Code of 1986 (relating to definition of 
dependent) is amended to read as follows:
    ``(a) General Definition.--For purposes of this subtitle--
            ``(1) Dependent.--The term `dependent' means--
                    ``(A) any individual described in paragraph (2) 
                over half of whose support, for the calendar year in 
                which the taxable year of the taxpayer begins, was 
                received from the taxpayer (or is treated under 
                subsection (c) as received from the taxpayer), or
                    ``(B) any individual described in subsection (f).
            ``(2) Individuals.--An individual is described in this 
        paragraph if such individual is--
                    ``(A) a brother, sister, stepbrother, or stepsister 
                of the taxpayer,
                    ``(B) the father or mother of the taxpayer, or an 
                ancestor of either,
                    ``(C) a stepfather or stepmother of the taxpayer,
                    ``(D) a son or daughter of a brother or sister of 
                the taxpayer,
                    ``(E) a brother or sister of the father or mother 
                of the taxpayer,
                    ``(F) a son-in-law, daughter-in-law, father-in-law, 
                mother-in-law, brother-in-law, or sister-in-law of the 
                taxpayer, or
                    ``(G) an individual (other than an individual who 
                at any time during the taxable year was the spouse, 
                determined without regard to section 7703, of the 
                taxpayer) who, for the taxable year of the taxpayer, 
                has as their principal place of abode the home of the 
                taxpayer and is a member of the taxpayer's 
                household.''.
    (b) Other Modifications.--Section 152 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following:
    ``(f) Subsection (f) Dependents.--
            ``(1) In general.--An individual is described in this 
        subsection for the taxable year if such individual--
                    ``(A) bears a relationship to the taxpayer 
                described in paragraph (2),
                    ``(B) except in the case of an eligible foster 
                child or as provided in subsection (e), has the same 
                principal place of abode as the taxpayer for more than 
                one-half of such taxable year, and
                    ``(C)(i) has not attained the age of 19 at the 
                close of the calendar year in which the taxable year 
                begins, or
                    ``(ii) is a student (within the meaning of section 
                151(c)(4)) who has not attained the age of 24 at the 
                close of such calendar year.
            ``(2) Relationship test.--An individual bears a 
        relationship to the taxpayer described in this paragraph if 
        such individual is--
                    ``(A) a son or daughter of the taxpayer, or a 
                descendant of either, or
                    ``(B) a stepson or stepdaughter of the taxpayer.
            ``(3) Special rules.--
                    ``(A) 2 or more claiming dependent.--Except as 
                provided in subparagraph (B), if an individual may be 
                claimed as a dependent by 2 or more taxpayers (but for 
                this subparagraph) for a taxable year beginning in the 
                same calendar year, only the taxpayer with the highest 
                adjusted gross income for such taxable year shall be 
                allowed the deduction with respect to such individual.
                    ``(B) Release of claim to exemption.--Subparagraph 
                (A) shall not apply with respect to an individual if--
                            ``(i) the taxpayer with the highest 
                        adjusted gross income under subparagraph (A), 
                        for any calendar year signs a written 
                        declaration (in such manner and form as the 
                        Secretary may by regulations prescribe) that 
                        such taxpayer will not claim such individual as 
                        a dependent for any taxable year beginning in 
                        such calendar year,
                            ``(ii) the other taxpayer provides over 
                        half of such individual's support for the 
                        calendar year in which the taxable year of such 
                        other taxpayer begins, and
                            ``(iii) such other taxpayer attaches such 
                        written declaration to such taxpayer's return 
                        for the taxable year beginning during such 
                        calendar year.''.
    (c) Rules Relating to Foster Child.--Section 152(b)(2) (relating to 
rules relating to general definition) is amended by striking ``a foster 
child'' and all that follows through ``individual)'' and inserting ``an 
eligible foster child (as defined in section 32(c)(3)(B)(iii)) of an 
individual''.
    (d) Exemption From Gross Income Test.--Section 151(c)(3) (relating 
to definition of child) is amended by striking ``or stepdaughter'' and 
inserting ``stepdaughter, or a descendant of such individual''.
    (e) Waiver of Deduction for Divorced Parents.--
            (1) In general.--So much of section 152(e) as precedes 
        paragraph (4) (relating to support test in case of child of 
        divorced parents, etc.) is amended to read as follows:
    ``(e) Special Rules for Child of Divorced Parents.--
            ``(1) Release of claim to exemption.--In the case of a 
        child (as defined in section 151(c)(3)) of parents--
                    ``(A) who are divorced or legally separated under a 
                decree of divorce or separate maintenance,
                    ``(B) who are separated under a written separation 
                agreement, or
                    ``(C) who live apart at all times during the last 6 
                months of the calendar year,
        the custodial parent who is entitled to the deduction under 
        section 151 for a taxable year with respect to such child may 
        release such deduction to the noncustodial parent.
            ``(2) Procedure.--The noncustodial parent may claim a child 
        described in paragraph (1) as a dependent for the taxable year 
        if--
                    ``(A) 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,
                    ``(B) the custodial parent and the noncustodial 
                parent provide over half of such child's support for 
                the calendar year in which the taxable years of such 
                parents begin, and
                    ``(C) the noncustodial parent attaches such written 
                declaration to such noncustodial parent's return for 
                the taxable year beginning during such calendar year.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Custodial parent.--The term `custodial 
                parent' means, with regard to an individual, a parent 
                who has custody of such individual for a greater 
                portion of the calendar year than the noncustodial 
                parent.
                    ``(B) Noncustodial parent.--The term `noncustodial 
                parent' means the parent who is not the custodial 
                parent.''.
            (2) Pre-1985 instruments.--Section 152(e)(4)(A) of such 
        Code is amended by striking ``A child'' and all that follows 
        through ``noncustodial parent'' and inserting ``A noncustodial 
        parent described in paragraph (1) shall be entitled to the 
        deduction under section 151 for a taxable year with respect to 
        a child if''.
    (f) Conforming Amendments.--
            (1) Section 1(g)(5)(A) of the Internal Revenue Code of 1986 
        is amended by inserting ``as in effect on the day before the 
        date of the enactment of the Tax Relief for Working Families 
        Act of 2000'' after ``152(e)''.
            (2) Section 2(b)(1)(A)(i) of such Code is amended by 
        striking ``paragraph (2) or (4) of''.
            (3) Section 2(b)(3)(B)(i) of such Code is amended by 
        striking ``paragraph (9)'' and inserting ``paragraph (2)(G)''.
            (4) Section 21(e)(5)(A) of such Code is amended by striking 
        ``paragraph (2) or (4) of''.
            (5) Section 21(e)(5) of such Code is amended in the matter 
        following subclause (B) by inserting ``as in effect on the day 
        before the date of the enactment of the Tax Relief for Working 
        Families Act of 2000'' after ``152(e)(1)''.
            (6) Section 32(c)(1)(G) of such Code is amended by striking 
        ``(3)(D).'' and inserting ``(1)(C). An individual whose 
        qualifying child or qualifying children are not taken into 
        account under subsection (b) solely by reason of paragraph 
        (3)(D) shall be treated as an eligible individual if such 
        individual otherwise meets the requirements of subparagraph 
        (A)(ii).''.
            (7) Section 32(c)(3)(B)(ii) of such Code is amended by 
        striking ``paragraph (2) or (4) of''.
            (8) Section 51(i)(1)(C) of such Code is amended by striking 
        ``152(a)(9)'' and inserting ``152(a)(2)(G)''.
            (9) Section 152(b) of such Code is amended by striking 
        ``specified in subsection (a)'' and inserting ``specified in 
        subsection (a)(2) or (f)(2)''.
            (10) Section 152(c) of such Code is amended by striking 
        ``(a)'' and inserting ``(a)(1)''.
            (11) Section 7703(b)(1) of such Code is amended by striking 
        ``paragraph (2) or (4) of''.
            (12) The following provisions of such Code are each amended 
        by striking ``paragraphs (1) through (8) of section 152(a)'' 
        and inserting ``subparagraphs (A) through (F) of subsection 
        (a)(2) or subsection (f)(2) of section 152'':
                    (A) Section 170(g)(3).
                    (B) Subparagraphs (A) and (B) of section 51(i)(1).
                    (C) The second sentence of section 213(d)(11).
                    (D) Section 529(e)(2)(B).
                    (E) Section 7702B(f)(2)(C)(iii).
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 5. OTHER MODIFICATIONS TO EARNED INCOME TAX CREDIT.

    (a) Modification of Joint Return Requirement.--Subsection (d) of 
section 32 of the Internal Revenue Code of 1986 is amended to read as 
follows:
    ``(d) Married Individuals.--
            ``(1) In general.--If the taxpayer is married at the close 
        of the taxable year, the credit shall be allowed under 
        subsection (a) only if the taxpayer and his spouse file a joint 
        return for the taxable year.
            ``(2) Marital status.--For purposes of paragraph (1), an 
        individual legally separated from his spouse under a decree of 
        divorce or of separate maintenance shall not be considered as 
        married.
            ``(3) Certain married individuals living apart.--For 
        purposes of paragraph (1), if--
                    ``(A) an individual --
                            ``(i) is married and files a separate 
                        return, and
                            ``(ii) has a qualifying child who is a son, 
                        daughter, stepson, or stepdaughter of such 
                        individual, and
                    ``(B) during the last 6 months of such taxable 
                year, such individual and such individual's spouse do 
                not have the same principal place of abode,
        such individual shall not be considered as married.''
    (b) Modification of Rule Where There Are 2 or More Eligible 
Individuals.--Subparagraph (C) of section 32(c)(1) of such Code is 
amended to read as follows:
                    ``(C) 2 or more eligible individuals.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), if 2 or more individuals would 
                        (but for this subparagraph and after 
                        application of subparagraph (B)) be treated as 
                        eligible individuals with respect to the same 
                        qualifying child for taxable years beginning in 
                        the same calendar year, only the individual 
                        with the highest modified adjusted gross income 
                        for such taxable years shall be treated as an 
                        eligible individual with respect to such 
                        qualifying child.
                            ``(ii) Exception for certain parents.--An 
                        otherwise eligible individual who is not 
                        treated under clause (i) as the only eligible 
                        individual with respect to any qualifying child 
                        shall be treated as an eligible individual with 
                        respect to such child if--
                                    ``(I) such child is the son, 
                                daughter, stepson, or stepdaughter of 
                                such individual,
                                    ``(II) such child is not taken into 
                                account under subsection (b) by any 
                                other individual, and
                                    ``(III) the limitation under 
                                subsection (a)(2) for the individual 
                                who would (but for this clause) be 
                                treated under clause (i) as the only 
                                eligible individual with respect to 
                                such child would be greater than zero 
                                (determined as if such individual had 2 
                                qualifying children).''
    (c) Expansion of Mathematical Error Authority.--Paragraph (2) of 
section 6213(g) of such Code is amended by striking ``and'' at the end 
of subparagraph (K), by striking the period at the end of subparagraph 
(L) and inserting ``, and'', and by inserting after subparagraph (L) 
the following new subparagraph:
                    ``(M) the entry on the return claiming the credit 
                under section 32 with respect to a child if, according 
                to the Federal Case Registry of Child Support Orders 
                established under section 453(h) of the Social Security 
                Act, the taxpayer is a noncustodial parent of such 
                child.''
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2000.
            (2) Expansion of mathematical error authority.--The 
        amendment made by subsection (c) shall apply to taxable years 
        beginning after December 31, 2001.
                                 <all>