Short title

This Act may be cited as the

Parents’ Tax Relief Act of 2005

Minimum dependent care credit for parents caring for children at home

(a)

In general

Subsection (e) of section 21 of the Internal Revenue Code of 1986 (relating to special rules) is amended by adding at the end the following new paragraph:

(11)

Minimum credit allowed for stay-at-home parents

In the case of any taxpayer with one or more qualifying individuals described in subparagraph (A) of subsection (b)(1) under the age of 6 at any time during the taxable year, such taxpayer shall be deemed to have employment-related expenses with respect to each such qualifying individual and earned income in an amount equal to the greater of— (A)the amount of employment-related expenses incurred for such qualifying individuals for the taxable year (determined under this section without regard to this paragraph), or (B)$250 for each month beginning in such taxable year with respect to which such qualifying individual has not attained age 6 as of the beginning of such month.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2004.

Increase in personal exemption amount

(a)

In general

Paragraph (1) of section 151(d) of the Internal Revenue Code of 1986 is amended by striking $2,000 and inserting $5,000. (b)

Inflation adjustment

Subparagraph (A) of section 151(d)(4) of such Code is amended— (1)by striking 1989 and inserting 2005, and (2)by striking 1988 in clause (ii) and inserting 2004. (c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

Elimination of marriage penalty in all rate brackets

(a)

In general

Paragraph (8) of section 1(f) of the Internal Revenue Code of 1986 (relating to phaseout of marriage penalty in 15-percent bracket) is amended to read as follows:

(8)

Elimination of marriage penalty

With respect to taxable years beginning after December 31, 2004, in prescribing the tables under paragraph (1)— (A)the minimum and maximum amounts of taxable income in each rate bracket in the table contained in subsection (a) shall be 200 percent of the minimum and maximum amounts of taxable income in the corresponding rate bracket in the table contained in subsection (c) (after any other adjustment under this subsection), and (B)the comparable taxable income amounts in the table contained in subsection (d) shall be ½ of the amounts determined under subparagraph (A).

(b)

Effective date

The amendment made by this section apply to taxable years beginning after December 31, 2004.

Standard deduction for business use of home

(a)

In general

Subsection (c) of section 280A of the Internal Revenue Code of 1986 (relating to disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc.) is amended by adding at the end the following new paragraph:

(7)

Standard home office deduction

(A)

In general

In the case of an individual that is allowed a deduction for the use of a home office because of a use described in paragraphs (1), (2), or (4) of this subsection, notwithstanding the limitations of paragraph (5), such individual may elect to use the standard home office deduction for the taxable year. (B)

Standard Home Office Deduction Amount

For purposes of this paragraph, the standard home office deduction is the lesser of— (i)$2,500, or (ii)the gross income derived from the individual's trade or business for which such use occurs.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Increase and other modifications in child tax credit made permanent

(a)

In general

Title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to the amendments made by section 201 of such Act (relating to modifications to child tax credit). (b)

Credit amount adjusted for inflation

Section 24 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(g)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2005, the $1,000 amount contained in subsection (a) shall be increased by an amount equal to— (1)such dollar amount, multiplied by (2)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 2004 for calendar year 1992 in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50.

Telecommuting tax credit

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

45J.

Telecommuting credit

(a)

Determination of amount

For purposes of section 38, the amount of the telecommuting credit determined under this section for the taxable year shall be equal to 40 percent of the qualified first-year wages for such year. (b)

Qualified first-Year wages

For purposes of this section— (1)

In general

The term qualified first-year wages means, with respect to any individual, qualified wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer. (2)

Qualified wages

The term qualified wages means the wages paid or incurred by the employer during the taxable year to qualified telecommuters. (3)

Only first $6,000 of wages per year taken into account

The amount of the qualified first-year wages which may be taken into account with respect to any individual shall not exceed $6,000 per year. (c)

Qualified telecommuter

For purposes of this section, the term qualified telecommuter means any individual who renders not less than 40 percent of the service described in subsection (b)(2) from the individual’s principal residence. (d)

Wages

For purposes of this section— (1)

In general

The term wages has the meaning given to such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section). (2)

On-the-job training and work supplementation payments

(A)

Exclusion for employers receiving on-the-job training payments

The term wages shall not include any amounts paid or incurred by an employer for any period to any individual for whom the employer receives federally funded payments for on-the-job training of such individual for such period. (B)

Reduction for work supplementation payments to employers

The amount of wages which would (but for this subparagraph) be qualified wages under this section for an employer with respect to an individual for a taxable year shall be reduced by an amount equal to the amount of the payments made to such employer (however utilized by such employer) with respect to such individual for such taxable year under a program established under section 482(e) of the Social Security Act. (e)

Special rules

For purposes of this section, rules similar to the rules of section 52 and subsections (f), (g), (i), (j), and (k) of section 51 shall apply.

(b)

Credit treated as business credit

Section 38(b) of such Code is amended by striking plus at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting , plus, and by adding at the end the following new paragraph:

(20)the telecommuting credit determined under section 45J(a).

(c)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 45J. Telecommuting credit.

(d)

Effective date

The amendments made by this section shall apply to taxable year beginning after December 31, 2004.

Employer-provided computer equipment treated as fringe benefit

(a)

In general

Subsection (a) of section 132 of the Internal Revenue Code of 1986 is amended by striking or at the end of paragraph (7), by striking the period at the end of paragraph (8) and inserting , or, and by adding at the end the following new paragraph:

(9)qualified employer-provided computer equipment fringe.

(b)

Qualified employer-Provided computer equipment fringe

Section 132 of such Code is amended by adding at the end the following new subsection:

(o)

Qualified employer-Provided computer equipment fringe

For purposes of this section— (1)

In general

The term qualified employer-provided computer equipment fringe means any computer and related equipment and services provided to an employee by an employer if— (A)such computer and related equipment and services are necessary for the employee to perform work for the employer from the employee’s home, and (B)the employee makes substantial business use of the equipment in the performance of work for the employer. (2)

Substantial use

For purposes of paragraph (1), the term substantial business use includes standby use for periods when work from home may be required by the employer such as during work closures caused by the threat of terrorism, inclement weather, or natural disasters.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

Increased benefits for individuals precluded from performing remunerative work by need to provide child care

Title II of the Social Security Act (42 U.S.C. 401 et seq.) is amended by adding at the end the following new section:

235.

Increased benefits for individuals precluded from performing remunerative work by need to provide child care

(a)

General rule

For purposes of determining entitlement to and the amount of any monthly benefit or lump-sum death payment payable under this title on the basis of the wages and self-employment income of any individual, and for purposes of section 216(i)(3), if such individual— (1)is not otherwise credited under this title, for one or more of such individual’s elapsed years (referred to in section 215(b)(3)), with wages at least equal to the national average wage index (as defined in section 209(k)) for such year, and (2)is a qualified individual in connection with any such elapsed year after 2005,

then such individual shall be credited under this title for such year after 2005 with additional wages in an amount necessary to increase the total wages credited to such individual under this title for such year to an amount equal to the national average wage index (as so defined) for such year.

(b)

Qualified individual

For purposes of this section, the term qualified individual means, in connection with any year, any individual in any case in which— (1)such individual is married for a period during such year of not less than 90 days, (2)throughout such period during such year, such individual and such individual’s spouse live with a qualified child, and (3)more than 50 percent of the total remuneration of such individual and such individual’s spouse for such year which is attributable to wages or self-employment income earned or derived during the period during such year for which the requirements of paragraphs (1) and (2) are met consists of wages or self-employment income earned or derived away from home by such spouse. (c)

Qualified child

For purposes of this section, the term qualified child means, in connection with a qualified individual, a child of such individual (or such individual’s spouse referred to in subsection (b)(2)) who— (1)is less than 6 years of age, or (2)is less than 10 years of age, is under a disability, and is unable to attend school. (d)

Limitation to 10 elapsed years

In any case in which the requirements of subsection (a) are met in connection with more than 10 elapsed years of an individual, subsection (a) shall apply only with respect to those elapsed years, not in excess of 10, which, when taken into account in the application of subsection (a), result in the highest primary insurance amount for such individual, taking into account which years would be excluded from benefit computation years under section 215(b)(2)(B)(i). (e)

Protection of Trust Fund balances

There are authorized to be appropriated to each of the Trust Funds, consisting of the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, and the Federal Hospital Insurance Trust Fund, for transfer on July 1 of each calendar year after 2005 to such Trust Fund from amounts in the general fund in the Treasury not otherwise appropriated, an amount equal to the total of the additional amounts which would be appropriated to such Trust Fund for the fiscal year ending September 30 of such calendar year under section 201 or 1817 of this Act if the amounts of the additional wages credited for such calendar year by reason of subsection (a) constituted remuneration for employment (as defined in section 3121(b) of the Internal Revenue Code of 1986) for purposes of the taxes imposed by sections 3101 and 3111 of the Internal Revenue Code of 1986. Amounts authorized to be appropriated under this subsection for transfer on July 1 of each calendar year shall be determined on the basis of estimates of the Commissioner of Social Security of the wages required to be credited for such calendar year under subsection (a); and proper adjustments shall be made in amounts authorized to be appropriated for subsequent transfer to the extent prior estimates were in excess of or were less than such wages so credited.