[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1640 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 1640

 To amend the Internal Revenue Code of 1986 to allow a married couple 
 who operates an unincorporated business as co-owners to file separate 
    returns for purposes of the self-employment tax, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 3, 2003

Mr. Udall of Colorado 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 allow a married couple 
 who operates an unincorporated business as co-owners to file separate 
    returns for purposes of the self-employment tax, 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. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds that--
            (1) thousands of married couples own and operate 
        unincorporated businesses that are classified as partnerships 
        for Federal income tax purposes; but
            (2) the record-keeping and other requirements applicable to 
        partnerships under Federal tax laws are so complex and time-
        consuming that many such couples instead report the results of 
        their business operations as if the businesses involved were 
        sole proprietorships; and
            (3) such reporting not only does not meet the technical 
        requirements of the tax laws, it also can result in other 
        problems, including the inability of one spouse to obtain 
        Social Security and Medicare benefits, the inability of 
        surviving children to obtain survivor benefits under Social 
        Security, or adverse consequences for one spouse in the event 
        of divorce.
    (b) Purpose.--The purpose of this Act is to enable married couples 
operating unincorporated businesses to comply with certain requirements 
of Federal tax law in a manner that is more convenient and less likely 
to result in adverse consequences in the event of a spouses disability, 
the death of the other spouse, or divorce.

SEC. 2. TREATMENT OF BUSINESSES OPERATED BY HUSBAND AND WIFE.

    (a) In General.--Section 761 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (f) as subsection (g) and by 
inserting after subsection (e) the following new subsection:
    ``(f) Qualified Joint Businesses.--
            ``(1) In general.--In the case of a qualified joint 
        business conducted by a husband and wife who file a joint 
        return for the taxable year, for purposes of this title--
                    ``(A) such joint business shall not be treated as a 
                partnership,
                    ``(B) all items of income, gain, loss, deduction, 
                and credit shall be divided between the spouses in such 
                percentages as the spouses designate, and
                    ``(C) each spouse shall take into account such 
                spouse's respective share of such items as if they were 
                attributable to a trade or business conducted by such 
                spouse as a sole proprietor.
            ``(2) Qualified joint business.--For purposes of this 
        paragraph (1), the term `qualified joint business' means any 
        joint venture involving the conduct of a business if--
                    ``(A) the only members of such joint venture are a 
                husband and wife, and
                    ``(B) both spouses elect the application of this 
                subsection.''.
    (b) Net Earnings From Self-Employment.--
            (1) Subsection (a) of section 1402 of such Code (defining 
        net earnings from self-employment) is amended by striking 
        ``and'' at the end of paragraph (14), by striking the period at 
        the end of paragraph (15) and inserting ``; and'', and by 
        inserting after paragraph (15) the following new paragraph:
            ``(16) notwithstanding the preceding provisions of this 
        subsection, each spouse's share of income or loss from a 
        qualified joint business (as defined in section 761(f)(2)) 
        shall be taken into account as provided in section 761(f) in 
        determining net earnings from self-employment of such 
        spouse.''.
            (2) Subsection (a) of section 211 of the Social Security 
        Act (defining net earnings from self-employment) is amended by 
        striking ``and'' at the end of paragraph (14), by striking the 
        period at the end of paragraph (15) and inserting ``; and'', 
        and by inserting after paragraph (15) the following new 
        paragraph:
            ``(16) Notwithstanding the preceding provisions of this 
        subsection, each spouse's share of income or loss from a 
        qualified joint business (as defined in section 761(f)(2) of 
        the Internal Revenue Code of 1986) shall be taken into account 
        as provided in such section 761(f) in determining net earnings 
        from self-employment of such spouse.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.
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