[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5725 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 5725

   To amend the Internal Revenue Code of 1986 to repeal taxes on the 
  income of senior citizens and to improve income security of senior 
                               citizens.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 13, 2010

  Mr. Posey (for himself and Mrs. Blackburn) introduced the following 
  bill; which was referred to the Committee on Ways and Means, and in 
 addition to the Committee on Energy and Commerce, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to repeal taxes on the 
  income of senior citizens and to improve income security of senior 
                               citizens.

    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 ``Senior Citizens Income Security Act 
of 2010''.

SEC. 2. REPEAL OF 1993 INCOME TAX INCREASE ON SOCIAL SECURITY BENEFITS.

    (a) Restoration of Prior Law Formula.--Subsection (a) of section 86 
of the Internal Revenue Code of 1986 is amended to read as follows:
    ``(a) In General.--Gross income for the taxable year of any 
taxpayer described in subsection (b) (notwithstanding section 207 of 
the Social Security Act) includes Social Security benefits in an amount 
equal to the lesser of--
            ``(1) one-half of the Social Security benefits received 
        during the taxable year, or
            ``(2) one-half of the excess described in subsection 
        (b)(1).''.
    (b) Repeal of Adjusted Base Amount.--Subsection (c) of section 86 
of such Code is amended to read as follows:
    ``(c) Base Amount.--For purposes of this section, the term `base 
amount' means--
            ``(1) except as otherwise provided in this subsection, 
        $25,000,
            ``(2) $32,000 in the case of a joint return, and
            ``(3) zero in the case of a taxpayer who--
                    ``(A) is married as of the close of the taxable 
                year (within the meaning of section 7703) but does not 
                file a joint return for such year, and
                    ``(B) does not live apart from his spouse at all 
                times during the taxable year.''.
    (c) Conforming Amendments.--
            (1) Subparagraph (A) of section 871(a)(3) of such Code is 
        amended by striking ``85 percent'' and inserting ``50 
        percent''.
            (2)(A) Subparagraph (A) of section 121(e)(1) of the Social 
        Security Amendments of 1983 (Public Law 98-21) is amended--
                    (i) by striking ``(A) There'' and inserting 
                ``There'';
                    (ii) by striking ``(i)'' immediately following 
                ``amounts equivalent to''; and
                    (iii) by striking ``, less (ii)'' and all that 
                follows and inserting a period.
            (B) Paragraph (1) of section 121(e) of such Act is amended 
        by striking subparagraph (B).
            (C) Paragraph (3) of section 121(e) of such Act is amended 
        by striking subparagraph (B) and by redesignating subparagraph 
        (C) as subparagraph (B).
            (D) Paragraph (2) of section 121(e) of such Act is amended 
        in the first sentence by striking ``paragraph (1)(A)'' and 
        inserting ``paragraph (1)''.
    (d) Maintenance of Transfers to Hospital Insurance Trust Fund.--
            (1) In general.--There are hereby appropriated to the 
        Hospital Insurance Trust Fund established under section 1817 of 
        the Social Security Act amounts equal to the reduction in 
        revenues to the Treasury by reason of the enactment of this 
        section. Amounts appropriated by the preceding sentence shall 
        be transferred from the general fund at such times and in such 
        manner as to replicate to the extent possible the transfers 
        which would have occurred to such Trust Fund had this section 
        not been enacted.
            (2) Reports.--The Secretary of the Treasury or the 
        Secretary's delegate shall annually report to the Committee on 
        Ways and Means of the House of Representatives and the 
        Committee on Finance of the Senate the amounts and timing of 
        the transfers under this subsection.
    (e) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2009.
            (2) Subsection (c)(1).--The amendment made by subsection 
        (c)(1) shall apply to benefits paid after December 31, 2009.
            (3) Subsection (c)(2).--The amendments made by subsection 
        (c)(2) shall apply to tax liabilities for taxable years 
        beginning after December 31, 2009.

SEC. 3. ELIMINATE MANDATORY WITHDRAWALS ON IRAS.

    (a) In General.--Subsection (a) of section 401 of the Internal 
Revenue Code of 1986 is amended by striking paragraph (9).
    (b) Conforming Amendments.--
            (1) Section 403(b)(10) of such Code is amended by striking 
        `` sections 401(a)(9)'' and inserting `` section''.
            (2) Subsections (a)(6) and (b)(3) of section 408 of such 
        Code are both amended by striking ``section 401(a)(9) and''.
            (3) Section 408A(c)(5) of such Code is amended to read as 
        follows:
            ``(5) Mandatory distribution rules not to apply before 
        death.--Notwithstanding subsections (a)(6) and (b)(3) of 
        section 408 (relating to required distributions), the 
        incidental death benefit requirements of section 401(a) shall 
        not apply to any Roth IRA.''.
            (4) Section 402(c) of such Code is amended--
                    (A) in paragraph (4) by striking subparagraph (B), 
                by inserting ``and'' at the end of subparagraph (A), 
                and by redesignating subparagraph (C) as subparagraph 
                (B), and
                    (B) in paragraph (11)(A)--
                            (i) by inserting ``(as in effect on the day 
                        before the date of the enactment of this 
                        phrase)'' after ``section 401(a)(9)(E)'', and
                            (ii) by inserting ``and'' at the end of 
                        clause (i), by striking ``, and'' at the end of 
                        clause (ii) and inserting a period, and by 
                        striking clause (iii).
            (5) Section 409(d) of such Code is amended by striking ``to 
        any distribution required under section 401(a)(9) or''.
            (6) Section 457(d) of such Code is amended--
                    (A) in paragraph (1) by striking subparagraph (B), 
                by inserting ``and'' at the end of subparagraph (A), 
                and be redesignating subparagraph (C) as subparagraph 
                (B), and
                    (B) by striking paragraph (2) and redesignating 
                paragraph (3) as paragraph (2).
            (7) Section 4974(b) of such Code is amended by striking 
        ``401(a)(9)''.

SEC. 4. ELIMINATE PAYROLL TAX FOR MEDICARE AND SOCIAL SECURITY 
              BENEFICIARIES.

    (a) In General.--Section 3101 of the Internal Revenue Code of 1986 
is amended by adding at the end the following:
    ``(d) Exception.--Subsections (a) and (b) shall not apply to any 
individual who--
            ``(1) is entitled to benefits under part A of title XVIII 
        of the Social Security Act or is enrolled under part B of such 
        title, or
            ``(2) is entitled to a monthly insurance benefit under 
        title II of the Social Security Act based on such individual's 
        wages and self-employment income.''.
    (b) Self-Employment.--Section 1401 of such Code is amended by 
adding at the end the following new subsection:
    ``(d) Exception.--In the case of any individual who--
            ``(1) is entitled to benefits under part A of title XVIII 
        of the Social Security Act or is enrolled under part B of such 
        title, or
            ``(2) is entitled to a monthly insurance benefit under 
        title II of the Social Security Act based on such individual's 
        wages and self-employment income,
subsections (a) and (b) shall be applied for the taxable year by 
substituting one-half of the percent otherwise specified in such 
subsections.''.
    (c) Effective Dates.--
            (1) The amendment made by subsection (a) shall apply to 
        wages paid after December 31, 2009.
            (2) The amendment made by subsection (b) shall apply to 
        enumeration paid in taxable years ending after the date of the 
        enactment of this Act.
    (d) Trust Funds Held Harmless.--There is hereby appropriated (out 
of any money in the Treasury not otherwise appropriated) for each 
fiscal year to each fund under the Social Security Act an amount equal 
to the reduction in the transfers to such fund for such fiscal year by 
reason of the amendments made by this section.

SEC. 5. AUTHORITY TO ELECT VOUCHER PROGRAM INSTEAD OF MEDICARE PART A 
              ENTITLEMENT.

    (a) In General.--Section 226 of the Social Security Act (42 U.S.C. 
426) is amended by adding at the end the following new subsections:
    ``(k) Waiver of Entitlement and Election of Voucher Program.--
            ``(1) In general.--Notwithstanding the previous provisions 
        of this section, the Secretary shall establish a procedure 
        under which an individual otherwise entitled under subsection 
        (a) to benefits under part A of title XVIII may waive such 
        entitlement and be automatically enrolled in the Medicare 
        Alternative Voucher Program established under subsection (l) 
        if--
                    ``(A) at the time such waiver is made the 
                individual--
                            ``(i) has a health savings account 
                        described in subsection (d) of section 223 of 
                        the Internal Revenue Code of 1986; and
                            ``(ii) is enrolled under a high deductible 
                        health plan, as defined in subsection (c)(1) of 
                        such section; and
                    ``(B) the individual waives such entitlement during 
                the individual's initial enrollment period described in 
                section 1837(d).
            ``(2) Treatment under the internal revenue code of 1986.--
        An individual who waives entitlement under paragraph (1) shall 
        not be treated as entitled to benefits under title XVIII for 
        purposes of section 223(b)(7) of the Internal Revenue Code of 
        1986.
            ``(3) Ineligibility for part b or d benefits.--An 
        individual shall not be eligible for benefits under part B or D 
        of title XVIII during the period for which the individual 
        waives entitlement under part A of such title under paragraph 
        (1).
            ``(4) Termination of waiver and reenrollment under medicare 
        program.--The Secretary shall establish a procedure under which 
        an individual who waives entitlement under paragraph (1) may 
        terminate such waiver during an annual period that shall be the 
        same as the annual general enrollment period described in 
        section 1837(e). For purposes of applying parts B and D of 
        title XVIII, such individual shall be treated as if the 
        individual were entitled to benefits under part A of such title 
        as of the date such individual terminates the waiver under this 
        paragraph. An individual who has terminated such a waiver may 
        not subsequently make such a waiver.
    ``(l) Medicare Alternative Voucher Program.--
            ``(1) Establishment of program.--The Secretary shall 
        establish a program to be known as the Medicare Alternative 
        Voucher Program (in this subsection referred to as the `voucher 
        program') consistent with this subsection.
            ``(2) Automatic enrollment.--An individual who waives 
        entitlement under subsection (k)(1) shall be enrolled in the 
        voucher program for the period during which such waiver is in 
        effect.
            ``(3) Amount of voucher.--
                    ``(A) Amount based on age cohort.--
                            ``(i) In general.--Subject to clause (ii), 
                        for each month that an individual within an age 
                        cohort is enrolled in the voucher program, the 
                        Secretary shall provide a voucher to such 
                        individual in an amount that is equal to the 
                        monthly actuarial rate for that month computed 
                        under section 1818(d)(1) multiplied by the age 
                        cohort adjustment factor for such age cohort 
                        under subparagraph (B).
                            ``(ii) Monthly limit.--The amount of a 
                        voucher provided to an individual for a month 
                        may not exceed $200.
                    ``(B) Age cohort adjustment factor.--For each age 
                cohort the Secretary shall determine an age cohort 
                adjustment factor equal to the ratio of--
                            ``(i) the monthly actuarial rate described 
                        in section 1818(d)(1) as determined by the 
                        Secretary for individuals in such age cohort, 
                        to
                            ``(ii) the monthly actuarial rate described 
                        in such section.
                    ``(C) Age cohort defined.--For purposes of this 
                paragraph, an `age cohort' means a group of individuals 
                whose age falls within a span of 5 consecutive years, 
                consistent with the following:
                            ``(i) The first such span begins at age 65.
                            ``(ii) Other spans follow consecutively.
            ``(4) Permissible use of voucher.--A voucher under 
        paragraph (3) may be used only for the following purposes:
                    ``(A) As a contribution into a health savings 
                account established by such individual, as described in 
                subsection (k)(1)(A).
                    ``(B) For payment of premiums for enrollment of 
                such individual under a high deductible health plan 
                described in such subsection.
            ``(5) Effect of subsequent termination of waiver.--If an 
        individual terminates a waiver under subsection (k)(3), the 
        enrollment of such individual in the voucher program shall be 
        terminated on the date on which the termination becomes 
        effective.''.
    (b) Amendment of Internal Revenue Code of 1986.--Paragraph (7) of 
section 223(b) of the Internal Revenue Code of 1986 (relating to 
Medicare eligible individuals) is amended to read as follows:
            ``(7) Medicare eligible individuals.--
                    ``(A) In general.--The limitation under this 
                subsection for any month with respect to an individual 
                shall be zero for any month such individual is entitled 
                to benefits under title XVIII of the Social Security 
                Act.
                    ``(B) Medicare alternative voucher program.--In the 
                case of an individual who is enrolled in the Medicare 
                Alternative Voucher Program under section 226(l) of the 
                Social Security Act, the applicable limitation under 
                subparagraphs (A) and (B) of paragraph (2) shall be 
                increased by the amount of the voucher described in 
                paragraph (3) of such section which is contributed to a 
                health savings account of such individual.''.
    (c) Effective Date.--
            (1) In general.--The amendment made by subsection (a) shall 
        take effect on the date that is six months after the date of 
        the enactment of this Act and shall apply to an individual who 
        becomes entitled to benefits under part A of title XVIII of the 
        Social Security Act on or after such date of the enactment.
            (2) Amendment of internal revenue code of 1986.--The 
        amendment made by subsection (b) shall apply to months ending 
        after the date referred to in paragraph (1), in taxable years 
        ending after such date.

SEC. 6. PARTIAL EXCLUSION OF INTEREST, DIVIDENDS, AND CAPITAL GAINS 
              RECEIVED BY INDIVIDUALS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to amounts specifically 
excluded from gross income) is amended by inserting after section 115 
the following new section:

``SEC. 116. PARTIAL EXCLUSION FOR INTEREST, DIVIDENDS, AND CAPITAL 
              GAINS RECEIVED BY INDIVIDUALS.

    ``(a) In General.--Gross income does not include the sum of amounts 
received during the taxable year by an individual as--
            ``(1) dividends from a domestic corporation,
            ``(2) interest, and
            ``(3) capital gains.
    ``(b) Limitation.--The aggregate amount excluded under subsection 
(a) for any taxable year shall not exceed $250 ($500 in the case of a 
joint return), as identified by the taxpayer on the return of tax for 
such year.
    ``(c) Interest.--For purposes of this section, the term `interest' 
means--
            ``(1) interest on deposits with a bank (as defined in 
        section 581),
            ``(2) amounts (whether or not designated as interest) paid 
        in respect of deposits, investment certificates, or 
        withdrawable or repurchasable shares, by--
                    ``(A) a mutual savings bank, cooperative bank, 
                domestic building and loan association, industrial loan 
                association or bank, or credit union, or
                    ``(B) any other savings or thrift institution which 
                is chartered and supervised under Federal or State law, 
                the deposits or accounts in which are insured under 
                Federal or State law or which are protected and 
                guaranteed under State law,
            ``(3) interest on--
                    ``(A) evidences of indebtedness (including bonds, 
                debentures, notes, and certificates) issued by a 
                domestic corporation in registered form, and
                    ``(B) to the extent provided in regulations 
                prescribed by the Secretary, other evidences of 
                indebtedness issued by a domestic corporation of a type 
                offered by corporations to the public,
            ``(4) interest on obligations of the United States, a 
        State, or a political subdivision of a State (not excluded from 
        gross income of the taxpayer under any other provision of law), 
        and
            ``(5) interest attributable to participation shares in a 
        trust established and maintained by a corporation established 
        pursuant to Federal law.
    ``(d) Dividends.--For purposes of this section, the term `dividend' 
means qualified dividend income (as defined in paragraph (11)(B) of 
section 1(h)) (determined without regard to paragraph (13) thereof).
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Distributions from regulated investment companies and 
        real estate investment trusts.--Subsection (a) shall apply with 
        respect to distributions by--
                    ``(A) regulated investment companies to the extent 
                provided in section 854(c), and
                    ``(B) real estate investment trusts to the extent 
                provided in section 857(c)(3).
            ``(2) Distributions by a trust.--For purposes of subsection 
        (a), the amount of interest properly allocable to a beneficiary 
        under section 652 or 662 shall be deemed to have been received 
        by the beneficiary ratably on the same date that the interest 
        was received by the estate or trust.
            ``(3) Certain nonresident aliens ineligible for 
        exclusion.--In the case of a nonresident alien individual, 
        subsection (a) shall apply only--
                    ``(A) in determining the tax imposed for the 
                taxable year pursuant to section 871(b)(1) and only in 
                respect of interest which are effectively connected 
                with the conduct of a trade or business within the 
                United States, or
                    ``(B) in determining the tax imposed for the 
                taxable year pursuant to section 877(b).''.
    (b) Conforming Amendments.--
            (1) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 115 the following new item:

``Sec. 116. Partial exclusion for interest, dividends, and capital 
                            gains received by individuals.''.
            (2) Subsection (h) of section 1 of such Code is amended by 
        adding at the end the following:
            ``(13) Coordination with partial exclusion for interest, 
        dividends, and capital gains received by individuals.--For 
        purposes of this section, dividends and capital gains excluded 
        from gross income by section 116 shall not be taken into 
        account.''.
            (3) Paragraph (2) of section 265(a) of such Code is amended 
        by inserting before the period at the end thereof the 
        following: ``, or to purchase or carry obligations or shares, 
        or to make deposits, to the extent the interest thereon is 
        excludable from gross income under section 116''.
            (4) Subsection (c) of section 584 of such Code is amended 
        by adding at the end thereof the following new sentence: ``The 
        proportionate share of each participant in the amount of 
        interest received by the common trust fund and to which section 
        116 applies shall be considered for purposes of such section as 
        having been received by such participant.''.
            (5) Subsection (a) of section 643 of such Code is amended 
        by redesignating paragraph (7) as paragraph (8) and by 
        inserting after paragraph (6) the following new paragraph:
            ``(7) Interest.--There shall be included the amount of any 
        interest excluded from gross income pursuant to section 116.''.
            (6) Section 854 of such Code is amended by adding at the 
        end thereof the following new subsection:
    ``(c) Treatment Under Section 116 for Other Dividends and Taxable 
Interest.--
            ``(1) In general.--For purposes of section 116, in the case 
        of any dividend (other than a dividend described in subsection 
        (a)) received from a regulated investment company which meets 
        the requirements of section 852 for the taxable year in which 
        it paid the dividend--
                    ``(A) the entire amount of such dividend shall be 
                treated as interest if the aggregate interest received 
                by such company during the taxable year equals or 
                exceeds 75 percent of its gross income,
                    ``(B) the entire amount of such dividend shall be 
                treated as interest if the aggregate interest received 
                by such company during the taxable year equals or 
                exceeds 75 percent of its gross income, or
                    ``(C) if subparagraphs (A) and (B) do not apply, a 
                portion of such dividend shall be treated as a dividend 
                (and a portion of such dividend shall be treated as 
                interest) based on the portion of the company's gross 
                income which consists of aggregate dividends or 
                aggregate interest, as the case may be.
        For purposes of the preceding sentence, gross income and 
        aggregate interest received shall each be reduced by so much of 
        the deduction allowable by section 163 for the taxable year as 
        does not exceed aggregate interest received for the taxable 
        year.
            ``(2) Notice to shareholders.--The amount of any 
        distribution by a regulated investment company which may be 
        taken into account as a dividend and as interest for purposes 
        of the exclusion under section 116 shall not exceed the amount 
        so designated by the company in a written notice to its 
        shareholders mailed not later than 45 days after the close of 
        its taxable year.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) The term `gross income' does not include gain 
                from the sale or other disposition of stock or 
                securities.
                    ``(B) The term `aggregate dividends received' 
                includes only dividends described in section 116(d).
                    ``(C) The term `aggregate interest received' 
                includes only interest described in section 116(c).''.
            (7) Subsection (c) of section 857 of such Code is amended 
        by adding at the end the following new paragraph:
            ``(3) Treatment as interest.--
                    ``(A) In general.--For purposes of section 116, in 
                the case of a dividend (other than a capital gain 
                dividend, as defined in subsection (b)(3)(C)) received 
                from a real estate investment trust which meets the 
                requirements of this part for the taxable year in which 
                it paid the dividend--
                            ``(i) such dividend shall be treated as 
                        interest if the aggregate interest received by 
                        the real estate investment trust for the 
                        taxable year equals or exceeds 75 percent of 
                        its gross income, or
                            ``(ii) if clause (i) does not apply, the 
                        portion of such dividend which bears the same 
                        ratio to the amount of such dividend as the 
                        aggregate interest received bears to gross 
                        income shall be treated as interest.
                    ``(B) Adjustments to gross income and aggregate 
                interest received.--For purposes of paragraph (2)--
                            ``(i) gross income does not include the net 
                        capital gain,
                            ``(ii) gross income and aggregate interest 
                        received shall each be reduced by so much of 
                        the deduction allowable by section 163 for the 
                        taxable year (other than for interest on 
                        mortgages on real property owned by the real 
                        estate investment trust) as does not exceed 
                        aggregate interest received by the taxable 
                        year, and
                            ``(iii) gross income shall be reduced by 
                        the sum of the taxes imposed by paragraphs (4), 
                        (5), and (6) of section 857(b).
                    ``(C) Aggregate interest received.--The term 
                `aggregate interest received' includes only interest 
                described in section 116(c).
                    ``(D) Notice to shareholders.--The amount of any 
                distribution by a real estate investment trust which 
                may be taken into account as interest for purposes of 
                the exclusion under section 116 shall not exceed the 
                amount so designated by the trust in a written notice 
                to its shareholders mailed not later than 45 days after 
                the close of its taxable year.''.
            (8) The heading for subsection (c) of section 857 of such 
        Code is amended by inserting ``and Interest'' after 
        ``Dividends''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.
                                 <all>