1.This Act may be cited as the
Senior Citizens Income Security Act of
2010
.
2.Repeal of 1993
income tax increase on Social Security benefits
(a)Restoration of
prior law formulaSubsection (a) of section 86 of the Internal
Revenue Code of 1986 is amended to read as follows:
(a)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 amountSubsection (c) of section 86 of such Code is
amended to read as follows:
(c)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)
(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)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)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)
(1)Except as otherwise provided in this subsection, the
amendments made by this section shall apply to taxable years beginning after
December 31, 2009.
(2)The amendment made by
subsection (c)(1) shall apply to benefits paid after December 31, 2009.
(3)The amendments made by
subsection (c)(2) shall apply to tax liabilities for taxable years beginning
after December 31, 2009.
3.Eliminate
mandatory withdrawals on IRAs
(a)Subsection (a) of
section 401 of the Internal Revenue Code of 1986 is amended by striking
paragraph (9).
(b)
(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 deathNotwithstanding 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)
.
4.Eliminate payroll tax
for Medicare and Social Security beneficiaries
(a)Section 3101 of the
Internal Revenue Code of 1986 is amended by adding at the end the
following:
(d)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)Section 1401 of such Code is amended by
adding at the end the following new subsection:
(d)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)
(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
HarmlessThere 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.
5.Authority to
elect voucher program instead of Medicare part A entitlement
(a)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)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 1986An 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 benefitsAn 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 programThe 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)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)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)
(A)Amount based on
age cohort
(i)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)The amount of a voucher provided to an individual for a
month may not exceed $200.
(B)Age cohort
adjustment factorFor 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)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 voucherA 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 waiverIf 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 1986Paragraph (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)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 programIn 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)
(1)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 1986The 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.
6.Partial exclusion
of interest, dividends, and capital gains received by individuals
(a)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:
116.Partial
exclusion for interest, dividends, and capital gains received by
individuals
(a)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)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)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)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)For purposes of this
section—
(1)Distributions
from regulated investment companies and real estate investment
trustsSubsection (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)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 exclusionIn 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)
(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
individualsFor 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)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)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)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)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)
(A)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 receivedFor 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 receivedThe term aggregate interest
received includes only interest described in section 116(c).
(D)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)The amendments made by
this section shall apply to taxable years beginning after December 31,
2009.