[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 127 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 127

   To allow a custodial parent a bad debt deduction for unpaid child 
support payments, and to require a parent who is chronically delinquent 
  in child support to include the amount of the unpaid obligation in 
                             gross income.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 9, 2003

 Mrs. Boxer (for herself and Ms. Snowe) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To allow a custodial parent a bad debt deduction for unpaid child 
support payments, and to require a parent who is chronically delinquent 
  in child support to include the amount of the unpaid obligation in 
                             gross income.

    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 ``Child Support Enforcement Act''.

 SEC. 2. NO EFFECT ON RIGHTS AND LIABILITIES.

    Nothing in this Act shall be construed to affect--
            (1) the right of an individual or State to receive any 
        child support payment; or
            (2) the obligation of an individual to pay child support.

 SEC. 3. ALLOWANCE OF BAD DEBT DEDUCTION FOR UNPAID CHILD SUPPORT 
              PAYMENTS.

    (a) In General.--Section 166 of the Internal Revenue Code of 1986 
(relating to deduction for bad debts) is amended by redesignating 
subsection (f) as subsection (g) and by inserting after subsection (e) 
the following new subsection:
    ``(f) Unpaid Child Support.--
            ``(1) In general.--In the case of a custodial parent who, 
        as of the close of the taxable year, is owed child support, the 
        amount of unpaid child support shall be deemed a canceled debt 
        as of such date, and shall be allowed as a deduction for such 
        taxable year.
            ``(2) Presumption of worthlessness.--Subsection (a) 
        (relating to worthless debts) shall not apply to child support.
            ``(3) Subsequent payments.--If any unpaid child support 
        with respect to which a deduction was allowed under paragraph 
        (1) is subsequently paid to the custodial parent, the amount of 
        such payment shall not be included in the gross income of the 
        custodial parent, nor shall it be allowed as a deduction to the 
        delinquent debtor. The delinquent debtor shall be neither 
        required nor allowed to file an amended return in any 
        subsequent year to reflect the subsequent payment of unpaid 
        child support.
            ``(4) Full deduction from ordinary income.--Subsection (d) 
        (relating to the treatment of nonbusiness bad debt as a loss 
        from the sale or exchange of a capital asset) shall not apply 
        to the deductibility of unpaid child support.
            ``(5) Tax returns.--A custodial parent who wishes to deduct 
        the amount of unpaid child support shall include on the return 
        claiming the deduction the name and taxpayer identification 
        number of each child with respect to whom child support 
        payments to which this subsection applies are required to be 
        paid.
            ``(6) Information returns.--
                    ``(A) In general.--A custodial parent who wishes to 
                deduct the amount of unpaid child support shall 
                complete Form 1099-CS (or such other form as the 
                Secretary may prescribe) and provide such form to the 
                Secretary, and (if the address is known) to the 
                delinquent debtor, within 45 days following the close 
                of the taxable year for which the deduction is claimed. 
                Failure to so file such form with the Secretary (or, if 
                the address is known, with the delinquent debtor) shall 
                result in disallowance of the deduction for the taxable 
                year.
                    ``(B) Contents of form.--The Form 1099-CS (or such 
                other form as the Secretary may prescribe) shall 
                contain--
                            ``(i) the total amount of child support 
                        owed (whether or not paid) for such taxable 
                        year,
                            ``(ii) the total amount of unpaid child 
                        support as of the last day of such taxable 
                        year,
                            ``(iii) the name, address (if known), and 
                        taxpayer identification number of the 
                        delinquent debtor, and
                            ``(iv) notice that the delinquent debtor is 
                        required to include such total amount of unpaid 
                        child support in gross income for the 
                        delinquent debtor's taxable year which includes 
                        the last day of the custodial parent's taxable 
                        year.
                    ``(C) Debtor's address unknown.--If the delinquent 
                debtor's address is not known to the custodial parent, 
                the Form 1099-CS (or such other form as the Secretary 
                may prescribe) shall indicate that fact. In such a 
                case, the Secretary may send such notice if the address 
                is available to the Secretary, and the notice from the 
                custodial parent to the delinquent debtor under 
                subparagraph (A) shall not be required.
            ``(7) Determination of whether child support is paid.--
                    ``(A) Child support enforcement office records as 
                conclusive evidence of payment.--Child support shall be 
                treated as paid if such payment is recorded by the 
                State office of child support enforcement in which the 
                custodial parent is registered.
                    ``(B) Timely mailing as timely payment.--A payment 
                received by the State office of child support 
                enforcement in which the custodial parent is registered 
                after the last day of the custodial parent's taxable 
                year shall be treated for the purpose of this 
                subsection as paid on such day if the postmark date 
                falls on or before such day. The rules of section 
                7502(f) and regulations issued thereunder shall apply 
                for purposes of this subparagraph.
            ``(8) Definitions.--For the purposes of this subsection--
                    ``(A) Child support.--The term `child support' 
                means--
                            ``(i) any periodic payment of a fixed 
                        amount, or
                            ``(ii) any payment of a medical expense, 
                        education expense, insurance premium, or other 
                        similar item,
                which is required to be paid to a custodial parent by 
                an individual under a support instrument for the 
                support of any qualifying child of such individual. 
                `Child support' does not include any amount which is 
                described in section 408(a)(3) of the Social Security 
                Act and which has been assigned to a State.
                    ``(B) Custodial parent.--The term `custodial 
                parent' means an individual who is entitled to receive 
                child support and who has registered with the 
                appropriate State office of child support enforcement 
                charged with implementing section 454 of the Social 
                Security Act.
                    ``(C) Delinquent debtor.--The term `delinquent 
                debtor' means a taxpayer who owes unpaid child support 
                to a custodial parent.
                    ``(D) Qualifying child.--The term `qualifying 
                child' means a child of a custodial parent with respect 
                to whom a dependent deduction is allowable under 
                section 151 for the taxable year (or would be so 
                allowable but for paragraph (2) or (4) of section 
                152(e)).
                    ``(E) Support instrument.--The term `support 
                instrument' means--
                            ``(i) a decree of divorce or separate 
                        maintenance or a written instrument incident to 
                        such a decree,
                            ``(ii) a written separation agreement, or
                            ``(iii) a decree (not described in clause 
                        (i)) of a court or administrative agency 
                        requiring a parent to make payments for the 
                        support or maintenance of 1 or more children of 
                        such parent.
                    ``(F) Unpaid child support.--The term `unpaid child 
                support' means child support that is payable for months 
                during a custodial parent's taxable year and unpaid as 
                of the last day of such taxable year, provided that 
                such unpaid amount as of such day equals or exceeds 
                one-half of the total amount of child support due to 
                the custodial parent for such year.''.
    (b) Deduction for Nonitemizers.--Section 62(a) of such Code is 
amended by inserting after paragraph (18) the following new paragraph:
            ``(19) Unpaid child support payments.--The deduction 
        allowed by section 166(f).''.
    (c) Conforming Amendment.--Section 166(d)(2) of such Code is 
amended by striking ``or'' at the end of subparagraph (A), by striking 
the period at the end of the subparagraph (B) and by inserting ``, or'' 
and by adding at the end the following new subparagraph:
                    ``(C) a debt which constitutes unpaid child support 
                payment under subsection (f).''.

 SEC. 4. INCLUSION IN INCOME OF AMOUNT OF UNPAID CHILD SUPPORT.

    (a) In General.--Section 108 of the Internal Revenue Code of 1986 
(relating to discharge of indebtedness income) is amended by adding at 
the end the following new subsection:
    ``(h) Unpaid Child Support.--
            ``(1) In general.--For purposes of this chapter, any unpaid 
        child support of a delinquent debtor for any taxable year shall 
        be treated as amounts includible in gross income of the 
        delinquent debtor for the taxable year.
            ``(2) Determination of whether child support is unpaid.--
                    ``(A) In general.--Child support shall be treated 
                as paid if such payment is recorded by the State office 
                of child support enforcement in which the custodial 
                parent is registered.
                    ``(B) Timely mailing as timely payment.--A payment 
                received by the State office of child support 
                enforcement in which the custodial parent is registered 
                after the last day of the custodial parent's taxable 
                year shall be treated for the purpose of this 
                subsection as paid on such day if the postmark date 
                falls on or before such day. The rules of section 
                7502(f) and regulations issued thereunder shall apply 
                for purposes of this subparagraph.
            ``(3) Definitions.--For the purposes of this subsection--
                    ``(A) Child support.--The term `child support' 
                means--
                            ``(i) any periodic payment of a fixed 
                        amount, or
                            ``(ii) any payment of a medical expense, 
                        education expense, insurance premium, or other 
                        similar item,
                which is required to be paid to a custodial parent by 
                an individual under a support instrument for the 
                support of any qualifying child of such individual. 
                `Child support' does not include any amount which is 
                described in section 408(a)(3) of the Social Security 
                Act and which has been assigned to a State.
                    ``(B) Custodial parent.--The term `custodial 
                parent' means an individual who is entitled to receive 
                child support and who has registered with the 
                appropriate State office of child support enforcement 
                charged with implementing section 454 of the Social 
                Security Act.
                    ``(C) Delinquent debtor.--The term `delinquent 
                debtor' means a taxpayer who owes unpaid child support 
                to a custodial parent.
                    ``(D) Qualifying child.--The term `qualifying 
                child' means a child of a custodial parent with respect 
                to whom a dependent deduction is allowable under 
                section 151 for the taxable year (or would be so 
                allowable but for paragraph (2) or (4) of section 
                152(e)).
                    ``(E) Support instrument.--The term `support 
                instrument' means--
                            ``(i) a decree of divorce or separate 
                        maintenance or a written instrument incident to 
                        such a decree,
                            ``(ii) a written separation agreement, or
                            ``(iii) a decree (not described in clause 
                        (i)) of a court or administrative agency 
                        requiring a parent to make payments for the 
                        support or maintenance of 1 or more children of 
                        such parent.
                    ``(F) Unpaid child support.--The term `unpaid child 
                support' means child support that is payable for months 
                during a custodial parent's taxable year and unpaid as 
                of the last day of such taxable year, provided that 
                such unpaid amount as of such day equals or exceeds 
                one-half of the total amount of child support due to 
                the custodial parent for such year.
            ``(4) Coordination with other laws.--Amounts treated as 
        income by paragraph (1) shall not be treated as income by 
        reason of paragraph (1) for the purposes of any provision of 
        law which is not an internal revenue law.''.

SEC. 5. TAXPAYER INFORMATION REGARDING CHILD SUPPORT NOT BASIS FOR 
              AUDIT.

    A discrepancy between the tax returns of a custodial parent and a 
delinquent debtor concerning whether a payment of child support has 
been made may not be used or relied upon by the Internal Revenue 
Service in any way in selecting an individual's tax return for a 
general audit.

SEC. 6. EFFECTIVE DATE; IMPLEMENTATION.

    The amendments made by the Act shall apply to taxable years 
beginning after December 31, 2002. The Secretary of the Treasury shall 
publish Form 1099-CS (or such other form that may be prescribed to 
comply with the amendment made by section 3(a) of this Act) and 
regulations, if any, that may be deemed necessary to carry out the 
purposes of this Act, not later than 90 days after the date of 
enactment of this Act.
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