II 109th CONGRESS 1st Session S. 2139 IN THE SENATE OF THE UNITED STATES December 16, 2005 Mr. Rockefeller (for himself and Ms. Snowe) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to simplify the earned income tax credit eligibility requirements regarding filing status, presence of children, investment income, and work and immigrant status.

1.

Short title

This Act may be cited as the Earned Income Tax Credit Simplification Act of 2005.

2.

Modification of abandoned spouse rule

(a)

In general

Section 32(c)(1) of the Internal Revenue Code of 1986 (relating to eligible individual) is amended by adding at the end the following new paragraph: (H)

Certain married individuals living apart

For purposes of this section, an individual who— (i)is married (within the meaning of section 7703(a)) and files a separate return for the taxable year, (ii)lives with a qualifying child of the individual for more than one-half of such taxable year, and (iii)during the last 6 months of such taxable year, does not have the same principal place of abode as the individual’s spouse, shall not be considered as married. . (b)

Conforming amendments

(1)The last sentence of section 32(c)(1)(A) of the Internal Revenue Code of 1986 is amended by striking section 7703 and inserting section 7703(a). (2)Section 32(d) of such Code is amended by striking In the case of an individual who is married (within the meaning of section 7703) and inserting In the case of an individual who is married (within the meaning of section 7703(a)) and is not described in subsection (c)(1)(H). (c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

3.

Simplification of rules regarding presence of qualifying child

(a)

Taxpayer eligible for credit for worker without qualifying child if qualifying child claimed by another member of family

Section 32(c)(1) of the Internal Revenue Code of 1986 (relating to eligible individual), as amended by this Act, is amended by adding at the end the following new paragraph: (I)

Taxpayer eligible for credit for worker without qualifying child if qualifying child claimed by another member of family

(i)

General rule

Except as provided in clause (ii), in the case of 2 or more eligible individuals who may claim for such taxable year the same individual as a qualifying child, if such individual is claimed as a qualifying child by such an eligible individual, then any other such eligible individual who does not make such a claim of such child or of any other qualifying child may be considered an eligible individual without a qualifying child for purposes of the credit allowed under this section for such taxable year. (ii)

Exception if qualifying child claimed by parent

If an individual is claimed as a qualifying child for any taxable year by an eligible individual who is a parent of such child, then no other parent of such child who does not make such a claim of such child or of any other qualifying child may be considered an eligible individual without a qualifying child for purposes of the credit allowed under this section for such taxable year. . (b)

Taxpayer eligible for credit for worker without qualifying child if qualifying children do not have valid social security number

Subparagraph (G) of section 32(c)(1) of the Internal Revenue Code of 1986 is amended to read as follows: (G)

Individuals who do not include tin, etc., of any qualifying child

In the case of any eligible individual who has one or more qualifying children, if no qualifying child of such individual is taken into account under subsection (b) by reason of paragraph (3)(D), for purposes of the credit allowed under this section, such individual may be considered an eligible individual without a qualifying child. . (c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

4.

Elimination of disqualified investment income test

(a)

In general

Section 32 of the Internal Revenue Code of 1986 is amended by striking subsection (i). (b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2005.

5.

Definition of valid taxpayer identification number for earned income credit

(a)

In general

Section 32(m) of the Internal Revenue Code of 1986 is amended to read as follows: (m)

Identification numbers

(1)

In general

Solely for purposes of subsections (c)(1)(E) and (c)(3)(D), a taxpayer identification number means a social security number assigned by the Social Security Administration. (2)

Limitation

(A)

In general

To be eligible for a credit under this section, the return of tax for the taxable year must clearly indicate that any alien with earned income possesses a social security number assigned by the Social Security Administration which is authorized for employment purposes. (B)

Joint returns

When a married couple files a joint return, and one spouse’s social security number is authorized for employment and the other spouse’s social security number is not authorized for employment purposes, a credit under this section is only available if the return of tax for the taxable year clearly indicates that the earned income is attributable only to the spouse whose social security number is authorized for employment purposes. . (b)

Effective date

The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2005. (c)

Notice requirements

(1)

In general

The Secretary of the Treasury shall make reasonable efforts to provide at least 3 months advance notification to households likely to be affected by the amendment made by subsection (a) so that individuals eligible to obtain an employment-authorized social security number may understand what action is needed to preserve their eligibility for the earned income credit under section 32 of the Internal Revenue Code of 1986. (2)

Response if conditions not satisfied

If a taxpayer appears to be otherwise eligible for the earned income credit under section 32 of such Code but has not satisfied the conditions of subsection (m)(2) of such section, the Secretary of the Treasury shall send a mathematical or clerical error notice under section 6213(b)(1) of such Code informing the taxpayer of the actions needed to establish eligibility for such credit and of the option of filing an amended tax return if eligibility for such credit cannot be established within the response period for such mathematical or clerical error notice.