[Congressional Record Volume 149, Number 52 (Tuesday, April 1, 2003)]
[Senate]
[Pages S4636-S4639]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS (for himself, Mr. Grassley, Mr. Hatch, Mr. Thomas, 
        Mrs. Lincoln, and Mr. Rockfeller):
  S. 755. A bill to amend the Internal Revenue Code of 1986 to provide 
a uniform definition of child, and for other purposes; to the Committee 
on Finance.
  Mr. BAUCUS. Mr. President, today Senator Grassley and I are taking a 
significant step forward in our efforts to simplify the tax code. 
Today, we are introducing an important simplification legislation--the 
Uniform Definition of Child Act.
  This legislation is based on the support of many for simplification 
in this area of the tax law. The President's FY 2004 budget, which was 
released on April 15, 2002, includes a simplification proposal to 
provide a uniform definition of a qualifying child. This is the first 
in a series of Department of Treasury ``white papers'' on 
simplification.
  The concept of a uniform definition of qualifying child also enjoys 
support from the American Bar Association, the American Institute of 
CPAs, the Tax Executives Institute, the Internal Revenue Service's 
Taxpayer Advocate, and staff of the Joint Committee on Taxation.
  Under current law, the complexity in this area is daunting. There are 
five commonly used provisions that provide benefits to taxpayers with 
children: the dependency exemption, the child credit, the earned income 
credit, the dependent care credit, and head of household filing status.
  Each of the five provisions uses variations of four principal 
criteria to determine whether a taxpayer qualifies for applicable tax 
benefits with respect to a particular child: age of the child, 
relationship of the child to the taxpayer, residency of the child with 
the taxpayer, and the amount of financial support provided the child by 
the taxpayer.
  Thus, a taxpayer is required to apply different definitions with 
respect to the same child when determining eligibility for these 
provisions. A taxpayer who qualifies with respect to a child for one 
provision does not necessarily qualify for another. As a result, 
publications, forms, instructions and schedules that are applicable to 
child related provisions number about 200 pages for the preparation of 
an individual income tax return.
  A tremendous number of families are impacted by these Code 
provisions. For example, 44 million taxpayers claimed the dependency 
exemption in the 2001 tax year. The IRS also indicates that a 
significant portion of the issued math error notices are attributable 
to these five provisions of the Internal Revenue Code. In 1999, for 
example, 44 percent of the 7.6 million math error notices were 
attributable to these provisions--40 percent of the total math error 
notices were attributable the dependency exemption, the child tax 
credit and the earned income tax credit alone.
  The legislation reduces complexity through reconciliation of the 
varying child definitions into a single definition for a ``qualifying 
child.'' The uniform child definition generally establishes eligibility 
for all five tax benefits if the child meets the age requirements 
described below, a relationship requirement, and a residency 
requirement--i.e., the child has the same principal place of abode as 
the taxpayer for more than one-half the taxable year.
  The residency requirement is an important departure from current law 
in which the child tax benefits frequently rely upon financial support 
tests which impose significantly higher administrative burdens in the 
form of additional record-keeping not otherwise required under the tax 
law. The legislation also preserves the tax rights of children who 
provide more than half of their own support by excluding those children 
from the uniform definition of a qualifying child.
  The underlying policy objectives of the present law provisions are 
retained. For example, the legislation retains underlying policy by not 
adjusting the ages of qualification--i.e., under age for the dependent 
care credit, under age 17 for the child tax credit, and under age 19--
or age 24 if a full-time student for the dependency exemption, the 
earned income tax credit, and head of household filing status.
  The legislation applies a single relationship test to the varying 
Code sections. Significantly, the proposal retains current law as an 
alternative to the extent that a person does not meet the revised 
uniform child definition--e.g., an elderly parent can still be claimed 
for purposes of the dependency exemption.
  Under the Uniform Definition of Child Act, there will be instances in 
which multiple taxpayers qualify with respect to a given child. To 
address this issue, the proposal extends the present law earned income 
credit tie-breaker rule to the other benefits for multiple eligible 
claimants. That rule awards the tax benefit (i) to a parent over a non-
parent, (ii) to the parent with longer residency or the highest AGI if 
residency is not determinative between parents, and (iii) to the 
taxpayer with the highest AGI if all claimants are non-parents. 
Finally, the legislation continues to allow divorced or separated 
spouses to assign the dependency exemption and the child tax credit to 
non-custodial parents provided that certain support and residency tests 
are met.

[[Page S4637]]

  Simplification of the tax code should be more than just rhetoric. It 
is time for us to put legislation behind our words. We intend to 
continue to look at other areas of the tax code in need of 
simplification.
  Senator Grassley and I also want to thank our Finance Committee 
colleagues, Senators Hatch, Thomas and Lincoln, for their support of 
the Uniform Definition of Child Act of 2003. Simplification of the tax 
laws for the families of our nation is not partisan, it is not 
political, it is simply common sense.
  Mr. President, I ask unanimous consent that the Uniform Definition of 
Child Act of 2003 be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 755

       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 ``Uniform Definition of Child 
     Act of 2003''.

     SEC. 2. UNIFORM DEFINITION OF CHILD, ETC.

       Section 152 of the Internal Revenue Code of 1986 is amended 
     to read as follows:

     ``SEC. 152. DEPENDENT DEFINED.

       ``(a) In General.--For purposes of this subtitle, the term 
     `dependent' means--
       ``(1) a qualifying child, or
       ``(2) a qualifying relative.
       ``(b) Exceptions.--For purposes of this section--
       ``(1) Dependents ineligible.--If an individual is a 
     dependent of a taxpayer for any taxable year of such taxpayer 
     beginning in a calendar year, such individual shall be 
     treated as having no dependents for any taxable year of such 
     individual beginning in such calendar year.
       ``(2) Married dependents.--An individual shall not be 
     treated as a dependent of a taxpayer under subsection (a) if 
     such individual has made a joint return with the individual's 
     spouse under section 6013 for the taxable year beginning in 
     the calendar year in which the taxable year of the taxpayer 
     begins.
       ``(3) Citizens or nationals of other countries.--
       ``(A) In general.--The term `dependent' does not include an 
     individual who is not a citizen or national of the United 
     States unless such individual is a resident of the United 
     States or a country contiguous to the United States.
       ``(B) Exception for adopted child.--Subparagraph (A) shall 
     not exclude any child of a taxpayer (within the meaning of 
     subsection (f)(1)(B)) from the definition of `dependent' if--
       ``(i) for the taxable year of the taxpayer, the child's 
     principal place of abode is the home of the taxpayer, and
       ``(ii) the taxpayer is a citizen or national of the United 
     States.
       ``(c) Qualifying Child.--For purposes of this section--
       ``(1) In general.--The term `qualifying child' means, with 
     respect to any taxpayer for any taxable year, an individual--
       ``(A) who bears a relationship to the taxpayer described in 
     paragraph (2),
       ``(B) who has the same principal place of abode as the 
     taxpayer for more than one-half of such taxable year,
       ``(C) who meets the age requirements of paragraph (3), and
       ``(D) who has not provided over one-half of such 
     individual's own support for the calendar year in which the 
     taxable year of the taxpayer begins.
       ``(2) Relationship test.--For purposes of paragraph (1)(A), 
     an individual bears a relationship to the taxpayer described 
     in this paragraph if such individual is--
       ``(A) a child of the taxpayer or a descendant of such a 
     child, or
       ``(B) a brother, sister, stepbrother, or stepsister of the 
     taxpayer or a descendant of any such relative.
       ``(3) Age requirements.--
       ``(A) In general.--For purposes of paragraph (1)(C), an 
     individual meets the requirements of this paragraph if such 
     individual--
       ``(i) has not attained the age of 19 as of the close of the 
     calendar year in which the taxable year of the taxpayer 
     begins, or
       ``(ii) is a student who has not attained the age of 24 as 
     of the close of such calendar year.
       ``(B) Special rule for disabled.--In the case of an 
     individual who is permanently and totally disabled (as 
     defined in section 22(e)(3)) at any time during such calendar 
     year, the requirements of subparagraph (A) shall be treated 
     as met with respect to such individual.
       ``(4) Special rule relating to 2 or more claiming 
     qualifying child.--
       ``(A) In general.--Except as provided in subparagraph (B) 
     and subsection (e), if (but for this paragraph) an individual 
     may be claimed as a qualifying child by 2 or more taxpayers 
     for a taxable year beginning in the same calendar year, such 
     individual shall be treated as the qualifying child of the 
     taxpayer who is--
       ``(i) a parent of the individual, or
       ``(ii) if clause (i) does not apply, the taxpayer with the 
     highest adjusted gross income for such taxable year.
       ``(B) More than 1 parent claiming qualifying child.--If the 
     parents claiming any qualifying child do not file a joint 
     return together, such child shall be treated as the 
     qualifying child of--
       ``(i) the parent with whom the child resided for the 
     longest period of time during the taxable year, or
       ``(ii) if the child resides with both parents for the same 
     amount of time during such taxable year, the parent with the 
     highest adjusted gross income.
       ``(d) Qualifying Relative.--For purposes of this section--
       ``(1) In general.--The term `qualifying relative' means, 
     with respect to any taxpayer for any taxable year, an 
     individual--
       ``(A) who bears a relationship to the taxpayer described in 
     paragraph (2),
       ``(B) whose gross income for the calendar year in which 
     such taxable year begins is less than the exemption amount 
     (as defined in section 151(d)),
       ``(C) with respect to whom the taxpayer provides over one-
     half of the individual's support for the calendar year in 
     which such taxable year begins, and
       ``(D) who is not a qualifying child of such taxpayer or of 
     any other taxpayer for any taxable year beginning in the 
     calendar year in which such taxable year begins.
       ``(2) Relationship.--For purposes of paragraph (1)(A), an 
     individual bears a relationship to the taxpayer described in 
     this paragraph if the individual is any of the following with 
     respect to the taxpayer:
       ``(A) A child or a descendant of a child.
       ``(B) A brother, sister, stepbrother, or stepsister.
       ``(C) The father or mother, or an ancestor of either.
       ``(D) A stepfather or stepmother.
       ``(E) A son or daughter of a brother or sister of the 
     taxpayer.
       ``(F) A brother or sister of the father or mother of the 
     taxpayer.
       ``(G) A son-in-law, daughter-in-law, father-in-law, mother-
     in-law, brother-in-law, or sister-in-law.
       ``(H) An individual (other than an individual who at any 
     time during the taxable year was the spouse, determined 
     without regard to section 7703, of the taxpayer) who, for the 
     taxable year of the taxpayer, has as such individual's 
     principal place of abode the home of the taxpayer and is a 
     member of the taxpayer's household.
       ``(3) Special rule relating to multiple support 
     agreements.--For purposes of paragraph (1)(C), over one-half 
     of the support of an individual for a calendar year shall be 
     treated as received from the taxpayer if--
       ``(A) no one person contributed over one-half of such 
     support,
       ``(B) over one-half of such support was received from 2 or 
     more persons each of whom, but for the fact that any such 
     person alone did not contribute over one-half of such 
     support, would have been entitled to claim such individual as 
     a dependent for a taxable year beginning in such calendar 
     year,
       ``(C) the taxpayer contributed over 10 percent of such 
     support, and
       ``(D) each person described in subparagraph (B) (other than 
     the taxpayer) who contributed over 10 percent of such support 
     files a written declaration (in such manner and form as the 
     Secretary may by regulations prescribe) that such person will 
     not claim such individual as a dependent for any taxable year 
     beginning in such calendar year.
       ``(4) Special rule relating to income of handicapped 
     dependents.--
       ``(A) In general.--For purposes of paragraph (1)(B), the 
     gross income of an individual who is permanently and totally 
     disabled (as defined in section 22(e)(3)) at any time during 
     the taxable year shall not include income attributable to 
     services performed by the individual at a sheltered workshop 
     if--
       ``(i) the availability of medical care at such workshop is 
     the principal reason for the individual's presence there, and
       ``(ii) the income arises solely from activities at such 
     workshop which are incident to such medical care.
       ``(B) Sheltered workshop defined.--For purposes of 
     subparagraph (A), the term `sheltered workshop' means a 
     school--
       ``(i) which provides special instruction or training 
     designed to alleviate the disability of the individual, and
       ``(ii) which is operated by an organization described in 
     section 501(c)(3) and exempt from tax under section 501(a), 
     or by a State, a possession of the United States, any 
     political subdivision of any of the foregoing, the United 
     States, or the District of Columbia.
       ``(5) Special support test in case of students.--For 
     purposes of paragraph (1)(C), in the case of an individual 
     who is--
       ``(A) a child of the taxpayer, and
       ``(B) a student,
     amounts received as scholarships for study at an educational 
     organization described in section 170(b)(1)(A)(ii) shall not 
     be taken into account in determining whether such individual 
     received more than one-half of such individual's support from 
     the taxpayer.
       ``(6) Special rules for support.--For purposes of this 
     subsection--
       ``(A) payments to a spouse which are includible in the 
     gross income of such spouse under section 71 or 682 shall not 
     be treated as a payment by the payor spouse for the support 
     of any dependent,
       ``(B) amounts expended for the support of a child or 
     children shall be treated as received from the noncustodial 
     parent (as defined in subsection (e)(3)(B)) to the extent 
     that such parent provided amounts for such support, and

[[Page S4638]]

       ``(C) in the case of the remarriage of a parent, support of 
     a child received from the parent's spouse shall be treated as 
     received from the parent.
       ``(e) Special Rule for Divorced Parents.--
       ``(1) In general.--Notwithstanding subsection (c)(4) or 
     (d)(1)(C), if--
       ``(A) a child receives over one-half of the child's support 
     during the calendar year from the child's parents--
       ``(i) who are divorced or legally separated under a decree 
     of divorce or separate maintenance,
       ``(ii) who are separated under a written separation 
     agreement, or
       ``(iii) who live apart at all times during the last 6 
     months of the calendar year, and
       ``(B) such child is in the custody of 1 or both of the 
     child's parents for more than \1/2\ of the calendar year,
     such child shall be treated as being the qualifying child or 
     qualifying relative of the noncustodial parent for a calendar 
     year if the requirements described in paragraph (2) are met.
       ``(2) Requirements.--For purposes of paragraph (1), the 
     requirements described in this paragraph are met if--
       ``(A) a decree of divorce or separate maintenance or 
     written agreement between the parents applicable to the 
     taxable year beginning in such calendar year provides that--
       ``(i) the noncustodial parent shall be entitled to any 
     deduction allowable under section 151 for such child, or
       ``(ii) the custodial parent will sign a written declaration 
     that such parent will not claim such child as a dependent for 
     such taxable year, and
       ``(B) in the case of such an agreement executed before 
     January 1, 1985, the noncustodial parent provides at least 
     $600 for the support of such child during such calendar year.
       ``(3) Custodial parent and noncustodial parent.--For 
     purposes of this subsection--
       ``(A) Custodial parent.--The term `custodial parent' means 
     the parent with whom a child shared the same principal place 
     of abode for the greater portion of the calendar year.
       ``(B) Noncustodial parent.--The term `noncustodial parent' 
     means the parent who is not the custodial parent.
       ``(4) Exception for multiple-support agreements.--This 
     subsection shall not apply in any case where over one-half of 
     the support of the child is treated as having been received 
     from a taxpayer under the provision of subsection (d)(3).
       ``(f) Other Definitions and Rules.--For purposes of this 
     section--
       ``(1) Child defined.--
       ``(A) In general.--The term `child' means an individual who 
     is--
       ``(i) a son, daughter, stepson, or stepdaughter of the 
     taxpayer, or
       ``(ii) an eligible foster child of the taxpayer.
       ``(B) Adopted child.--In determining whether any of the 
     relationships specified in subparagraph (A)(i) or paragraph 
     (4) exists, a legally adopted individual of the taxpayer, or 
     an individual who is placed with the taxpayer by an 
     authorized placement agency for adoption by the taxpayer, 
     shall be treated as a child of such individual by blood.
       ``(C) Eligible foster child.--For purposes of subparagraph 
     (A)(ii), the term `eligible foster child' means an individual 
     who is placed with the taxpayer by an authorized placement 
     agency or by judgment, decree, or other order of any court of 
     competent jurisdiction.
       ``(2) Student defined.--The term `student' means an 
     individual who during each of 5 calendar months during the 
     calendar year in which the taxable year of the taxpayer 
     begins--
       ``(A) is a full-time student at an educational organization 
     described in section 170(b)(1)(A)(ii), or
       ``(B) is pursuing a full-time course of institutional on-
     farm training under the supervision of an accredited agent of 
     an educational organization described in section 
     170(b)(1)(A)(ii) or of a State or political subdivision of a 
     State.
       ``(3) Place of abode.--An individual shall not be treated 
     as having the same principal place of abode of the taxpayer 
     if at any time during the taxable year of the taxpayer the 
     relationship between the individual and the taxpayer is in 
     violation of local law.
       ``(4) Brother and sister.--The terms `brother' and `sister' 
     include a brother or sister by the half blood.
       ``(5) Treatment of missing children.--
       ``(A) In general.--Solely for the purposes referred to in 
     subparagraph (B), a child of the taxpayer--
       ``(i) who is presumed by law enforcement authorities to 
     have been kidnapped by someone who is not a member of the 
     family of such child or the taxpayer, and
       ``(ii) who had, for the taxable year in which the 
     kidnapping occurred, the same principal place of abode as the 
     taxpayer for more than one-half of the portion of such year 
     before the date of the kidnapping,
     shall be treated as meeting the requirement of subsection 
     (c)(1)(B) with respect to a taxpayer for all taxable years 
     ending during the period that the individual is kidnapped.
       ``(B) Purposes.--Subparagraph (A) shall apply solely for 
     purposes of determining--
       ``(i) the deduction under section 151(c),
       ``(ii) the credit under section 24 (relating to child tax 
     credit),
       ``(iii) whether an individual is a surviving spouse or a 
     head of a household (as such terms are defined in section 2), 
     and
       ``(iv) the earned income credit under section 32.
       ``(C) Comparable treatment of certain qualifying 
     relatives.--For purposes of this section, a child of the 
     taxpayer--
       ``(i) who is presumed by law enforcement authorities to 
     have been kidnapped by someone who is not a member of the 
     family of such child or the taxpayer, and
       ``(ii) who was (without regard to this paragraph) a 
     qualifying relative of the taxpayer for the portion of the 
     taxable year before the date of the kidnapping,
     shall be treated as a qualifying relative of the taxpayer for 
     all taxable years ending during the period that the child is 
     kidnapped.
       ``(D) Termination of treatment.--Subparagraphs (A) and (C) 
     shall cease to apply as of the first taxable year of the 
     taxpayer beginning after the calendar year in which there is 
     a determination that the child is dead (or, if earlier, in 
     which the child would have attained age 18).
       ``(6) Cross references.--

``For provision treating child as dependent of both parents for 
purposes of certain provisions, see sections 105(b), 132(h)(2)(B), and 
213(d)(5).''.

     SEC. 3. MODIFICATIONS OF DEFINITION OF HEAD OF HOUSEHOLD.

       (a) Head of Household.--Clause (i) of section 2(b)(1)(A) of 
     the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(i) a qualifying child of the individual (as defined in 
     section 152(c), determined without regard to section 152(e)), 
     but not if such child--

       ``(I) is married at the close of the taxpayer's taxable 
     year, and
       ``(II) is not a dependent of such individual by reason of 
     section 152(b)(2) or 152(b)3), or both, or''.

       (b) Conforming Amendments.--
       (1) Section 2(b)(2) of the Internal Revenue Code of 1986 is 
     amended by striking subparagraph (A) and by redesignating 
     subparagraphs (B), (C), and (D) as subparagraphs (A), (B), 
     and (C), respectively.
       (2) Clauses (i) and (ii) of section 2(b)(3)(B) of such Code 
     are amended to read as follows:
       ``(i) subparagraph (H) of section 152(d)(2), or
       ``(ii) paragraph (3) of section 152(d).''.

     SEC. 4. MODIFICATIONS OF DEPENDENT CARE CREDIT.

       (a) In General.--Section 21(a)(1) of the Internal Revenue 
     Code of 1986 is amended by striking ``In the case of an 
     individual who maintains a household which includes as a 
     member one or more qualifying individuals (as defined in 
     subsection (b)(1))'' and inserting ``In the case of an 
     individual for which there are 1 or more qualifying 
     individuals (as defined in subsection (b)(1)) with respect to 
     such individual''.
       (b) Qualifying Individual.--Paragraph (1) of section 21(b) 
     of the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(1) Qualifying individual.--The term `qualifying 
     individual' means--
       ``(A) a dependent of the taxpayer (as defined in section 
     152(a)(1)) who has not attained age 13,
       ``(B) a dependent of the taxpayer who is physically or 
     mentally incapable of caring for himself or herself and who 
     has the same principal place of abode as the taxpayer for 
     more than one-half of such taxable year, or
       ``(C) the spouse of the taxpayer, if the spouse is 
     physically or mentally incapable of caring for himself or 
     herself and who has the same principal place of abode as the 
     taxpayer for more than one-half of such taxable year.''.
       (c) Conforming Amendment.--Paragraph (1) of section 21(e) 
     of the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(1) Place of abode.--An individual shall not be treated 
     as having the same principal place of abode of the taxpayer 
     if at any time during the taxable year of the taxpayer the 
     relationship between the individual and the taxpayer is in 
     violation of local law.

     SEC. 5. MODIFICATIONS OF CHILD TAX CREDIT.

       (a) In General.--Paragraph (1) of section 24(c) of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(1) In general.--The term `qualifying child' means a 
     qualifying child of the taxpayer (as defined in section 
     152(c)) who has not attained age 17.''.
       (b) Conforming Amendment.--Section 24(c)(2) of the Internal 
     Revenue Code of 1986 is amended by striking ``the first 
     sentence of section 152(b)(3)'' and inserting ``subparagraph 
     (A) of section 152(b)(3)''.

     SEC. 6. MODIFICATIONS OF EARNED INCOME CREDIT.

       (a) Qualifying Child.--Paragraph (3) of section 32(c) of 
     the Internal Revenue Code of 1986 is amended to read as 
     follows:
       ``(3) Qualifying child.--
       ``(A) In general.--The term `qualifying child' means a 
     qualifying child of the taxpayer (as defined in section 
     152(c), determined without regard to paragraph (1)(D) thereof 
     and section 152(e)).
       ``(B) Married individual.--The term `qualifying child' 
     shall not include an individual who is married as of the 
     close of the taxpayer's taxable year unless the taxpayer is 
     entitled to a deduction under section 151 for such taxable 
     year with respect to such individual (or would be so entitled 
     but for section 152(e)).
       ``(C) Place of abode.--For purposes of subparagraph (A), 
     the requirements of section 152(c)(1)(B) shall be met only if 
     the principal place of abode is in the United States.

[[Page S4639]]

       ``(D) Identification requirements.--
       ``(i) In general.--A qualifying child shall not be taken 
     into account under subsection (b) unless the taxpayer 
     includes the name, age, and TIN of the qualifying child on 
     the return of tax for the taxable year.
       ``(ii) Other methods.--The Secretary may prescribe other 
     methods for providing the information described in clause 
     (i).''.
       (b) Conforming Amendments.--
       (1) Section 32(c)(1) of the Internal Revenue Code of 1986 
     is amended by striking subparagraph (C) and by redesignating 
     subparagraphs (D), (E), (F), and (G) as subparagraphs (C), 
     (D), (E), and (F), respectively.
       (2) Section 32(c)(4) of such Code is amended by striking 
     ``(3)(E)'' and inserting ``(3)(C)''.
       (3) Section 32(m) of such Code is amended by striking 
     ``subsections (c)(1)(F)'' and inserting ``subsections 
     (c)(1)(E)''.

     SEC. 7. MODIFICATIONS OF DEDUCTION FOR PERSONAL EXEMPTION FOR 
                   DEPENDENTS.

       Subsection (c) of section 151 of the Internal Revenue Code 
     of 1986 is amended to read as follows:
       ``(c) Additional Exemption for Dependents.--An exemption of 
     the exemption amount for each individual who is a dependent 
     (as defined in section 152) of the taxpayer for the taxable 
     year.''

     SEC. 8. TECHNICAL AND CONFORMING AMENDMENTS.

       (1) Section 21(e)(5) of the Internal Revenue Code of 1986 
     is amended--
       (A) by striking ``paragraph (2) or (4) of'' in subparagraph 
     (A), and
       (B) by striking ``within the meaning of section 152(e)(1)'' 
     and inserting ``as defined in section 152(e)(3)(A)''.
       (2) Section 21(e)(6)(B) of such Code is amended by striking 
     ``section 151(c)(3)'' and inserting ``section 152(f)(1)''.
       (3) Section 25B(c)(2)(B) of such Code is amended by 
     striking ``151(c)(4)'' and inserting ``152(f)(2)''.
       (4)(A) Subparagraphs (A) and (B) of section 51(i)(1) of 
     such Code are each amended by striking ``paragraphs (1) 
     through (8) of section 152(a)'' both places it appears and 
     inserting ``subparagraphs (A) through (G) of section 
     152(d)(2)''.
       (B) Section 51(i)(1)(C) of such Code is amended by striking 
     ``152(a)(9)'' and inserting ``152(d)(2)(H)''.
       (5) Section 72(t)(7)(A)(iii) of such Code is amended by 
     striking ``151(c)(3)'' and inserting ``152(f)(1)''.
       (6) Section 129(c)(2) of such Code is amended by striking 
     ``151(c)(3)'' and inserting ``152(f)(1)''.
       (7) The first sentence of section 132(h)(2)(B) of such Code 
     is amended by striking ``151(c)(3)'' and inserting 
     ``152(f)(1)''.
       (8) Section 153 of such Code is amended by striking 
     paragraph (1) and by redesignating paragraphs (2), (3), and 
     (4) as paragraphs (1), (2), and (3), respectively.
       (9) Section 170(g)(3) of such Code is amended by striking 
     ``paragraphs (1) through (8) of section 152(a)'' and 
     inserting ``subparagraphs (A) through (G) of section 
     152(d)(2)''.
       (10) The second sentence of section 213(d)(11) of such Code 
     is amended by striking ``paragraphs (1) through (8) of 
     section 152(a)'' and inserting ``subparagraphs (A) through 
     (G) of section 152(d)(2)''.
       (11) Section 529(e)(2)(B) of such Code is amended by 
     striking ``paragraphs (1) through (8) of section 152(a)'' and 
     inserting ``subparagraphs (A) through (G) of section 
     152(d)(2)''.
       (12) Section 2032A(c)(7)(D) of such Code is amended by 
     striking ``section 151(c)(4)'' and inserting ``section 
     152(f)(2)''.
       (13) Section 7701(a)(17) of such Code is amended by 
     striking ``152(b)(4), 682,'' and inserting ``682''.
       (14) Section 7702B(f)(2)(C)(iii) of such Code is amended by 
     striking ``paragraphs (1) through (8) of section 152(a)'' and 
     inserting ``subparagraphs (A) through (G) of section 
     152(d)(2)''.
       (15) Section 7703(b)(1) of such Code is amended--
       (A) by striking ``151(c)(3)'' and inserting ``152(f)(1)'', 
     and
       (B) by striking ``paragraph (2) or (4) of''.

     SEC. 9. EFFECTIVE DATE.

       The amendments made by this Act shall apply to taxable 
     years beginning after December 31, 2003.
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