[Congressional Record Volume 167, Number 42 (Friday, March 5, 2021)]
[Senate]
[Pages S1394-S1398]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

  SA 1381. Mr. LEE (for himself and Mr. Rubio) proposed an amendment to 
amendment SA 891 proposed by Mr. Schumer (for himself, Mr. Wyden, Mrs. 
Murray, Mr. Brown, Mr. Peters, Mr. Cardin, Ms. Cantwell, Ms. Stabenow, 
Mr. Tester, Mr. Menendez, Mr. Schatz, Mr. Carper, Mr. Leahy, and Mr. 
Sanders) to the bill H.R. 1319, to provide for reconciliation pursuant 
to title II of S. Con. Res. 5; which was ordered to lie on sthe table; 
as follows:

        In subtitle G of title IX, strike part 2 and all that 
     follows through the end of part 4 and insert the following:

                        PART 2--CHILD TAX CREDIT

     SEC. 9611. CHILD TAX CREDIT IMPROVEMENTS FOR 2021.

       (a) In General.--Section 24 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new 
     subsection:
       ``(i) Special Rules for 2021.--In the case of any taxable 
     year beginning after December 31, 2020, and before January 1, 
     2022--
       ``(1) Refundable credit.--Paragraphs (5) and (6) of 
     subsection (h) shall not apply, and in applying subsection 
     (d)--
       ``(A) subsection (d)(1)(A) shall be applied without regard 
     to subsection (h)(4), and
       ``(B) subsection (d)(1)(B)(i) shall be applied by 
     substituting `15.3 percent of the taxpayer's earned income 
     (within the meaning of section 32) which is taken into 
     account in computing taxable income' for `15 percent of so 
     much of the taxpayer's earned income (within the meaning of 
     section 32) which is taken into account in computing taxable 
     income for the taxable year as exceeds $3,000'.
       ``(2) 17-year-olds eligible for treatment as qualifying 
     children.--This section shall be applied--
       ``(A) by substituting `age 18' for `age 17' in subsection 
     (c)(1), and
       ``(B) by substituting `described in subsection (c) 
     (determined after the application of subsection (i)(2)(A))' 
     for `described in subsection (c)' in subsection (h)(4)(A).
       ``(3) Credit amount.--Subsection (h)(2) shall not apply and 
     subsection (a) shall be applied by substituting `$3,300 
     ($4,200 in the case of a qualifying child who has not 
     attained age 6 as of the close of the calendar year in which 
     the taxable year of the taxpayer begins)' for `$1,000'.
       ``(4) Reduction of increased credit amount based on 
     modified adjusted gross income.--
       ``(A) In general.--The amount of the credit allowable under 
     subsection (a) (determined without regard to subsection (b)) 
     shall be reduced by $50 for each $1,000 (or fraction thereof) 
     by which the taxpayer's modified adjusted gross income (as 
     defined in subsection (b)) exceeds the applicable threshold 
     amount.
       ``(B) Applicable threshold amount.--For purposes of this 
     paragraph, the term `applicable threshold amount' means--
       ``(i) $150,000, in the case of a joint return or surviving 
     spouse (as defined in section 2(a)) ,
       ``(ii) $112,500, in the case of a head of household (as 
     defined in section 2(b)), and
       ``(iii) $75,000, in any other case.
       ``(C) Limitation on reduction.--
       ``(i) In general.--The amount of the reduction under 
     subparagraph (A) shall not exceed the lesser of--

       ``(I) the applicable credit increase amount, or
       ``(II) 5 percent of the applicable phaseout threshold 
     range.

       ``(ii) Applicable credit increase amount.--For purposes of 
     this subparagraph, the term `applicable credit increase 
     amount' means the excess (if any) of--

       ``(I) the amount of the credit allowable under this section 
     for the taxable year determined without regard to this 
     paragraph and subsection (b), over
       ``(II) the amount of such credit as so determined and 
     without regard to paragraph (3).

       ``(iii) Applicable phaseout threshold range.--For purposes 
     of this subparagraph, the term `applicable phaseout threshold 
     range' means the excess of--

       ``(I) the threshold amount applicable to the taxpayer under 
     subsection (b) (determined after the application of 
     subsection (h)(3)), over
       ``(II) the applicable threshold amount applicable to the 
     taxpayer under this paragraph.

       ``(D) Coordination with limitation on overall credit.--
     Subsection (b) shall be applied by substituting `the credit 
     allowable under subsection (a) (determined after the 
     application of subsection (i)(4)(A)' for `the credit 
     allowable under subsection (a)'.''.
       (b) Advance Payment of Credit.--
       (1) In general.--Chapter 77 of such Code is amended by 
     inserting after section 7527 the following new section:

     ``SEC. 7527A. ADVANCE PAYMENT OF CHILD TAX CREDIT.

       ``(a) In General.--The Secretary shall establish a program 
     for making periodic payments to taxpayers which, in the 
     aggregate during any calendar year, equal the annual advance 
     amount determined with respect to such taxpayer for such 
     calendar year. Except as provided in subsection (b)(3)(B), 
     the periodic payments made to any taxpayer for any calendar 
     year shall be in equal amounts.
       ``(b) Annual Advance Amount.--For purposes of this 
     section--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the term `annual advance amount' means, with 
     respect to any taxpayer for any calendar year, the amount (if 
     any) which is estimated by the Secretary as being equal to 50 
     percent of the amount which would be treated as allowed under 
     subpart C of part IV of subchapter A of chapter 1 by reason 
     of section 24(d) (after application of subsection (i)(1) 
     thereof) for the taxpayer's taxable year beginning in such 
     calendar year if--
       ``(A) the taxpayer's modified adjusted gross income for 
     such taxable year is equal to the taxpayer's modified 
     adjusted gross income for the reference taxable year,
       ``(B) the only children of such taxpayer for such taxable 
     year are qualifying children properly claimed on the 
     taxpayer's return of tax for the reference taxable year,
       ``(C) the ages of such children (and the status of such 
     children as qualifying children) are determined for such 
     taxable year by taking into account the passage of time since 
     the reference taxable year, and
       ``(D) the earned income (within the meaning of section 32) 
     which is taken into account in computing taxable income for 
     the taxable year of such taxpayer for such taxable year is 
     equal to the earned income for the reference taxable year.
       ``(2) Reference taxable year.--Except as provided in 
     paragraph (3)(A), the term `reference taxable year' means, 
     with respect to any taxpayer for any calendar year, the 
     taxpayer's taxable year beginning in the preceding calendar 
     year or, in the case of taxpayer who did not file a return of 
     tax for such taxable year, the taxpayer's taxable year 
     beginning in the second preceding calendar year.
       ``(3) Modifications during calendar year.--
       ``(A) In general.--The Secretary may modify, during any 
     calendar year, the annual advance amount with respect to any 
     taxpayer for such calendar year to take into account--
       ``(i) a return of tax filed by such taxpayer during such 
     calendar year (and the taxable year to which such return 
     relates may be taken into account as the reference taxable 
     year), and
       ``(ii) any other information provided by the taxpayer to 
     the Secretary which allows the Secretary to determine 
     payments under subsection (a) which, in the aggregate during 
     any taxable year of the taxpayer, more closely total the 
     Secretary's estimate of the amount treated as allowed under 
     subpart C

[[Page S1395]]

     of part IV of subchapter A of chapter 1 by reason of section 
     24(i)(1) for such taxable year of such taxpayer.
       ``(B) Adjustment to reflect excess or deficit in prior 
     payments.--In the case of any modification of the annual 
     advance amount under subparagraph (A), the Secretary may 
     adjust the amount of any periodic payment made after the date 
     of such modification to properly take into account the amount 
     by which any periodic payment made before such date was 
     greater than or less than the amount that such payment would 
     have been on the basis of the annual advance amount as so 
     modified.
       ``(4) Treatment of certain deaths.--A child shall not be 
     taken into account in determining the annual advance amount 
     under paragraph (1) if the death of such child is known to 
     the Secretary as of the beginning of the calendar year for 
     which the estimate under such paragraph is made.
       ``(c) On-line Information Portal.--The Secretary shall 
     establish an on-line portal which allows taxpayers to--
       ``(1) elect not to receive payments under this section, and
       ``(2) provide information to the Secretary which would be 
     relevant to a modification under subsection (b)(3)(B) of the 
     annual advance amount, including information regarding--
       ``(A) a change in the number of the taxpayer's qualifying 
     children, including by reason of the birth of a child,
       ``(B) a change in the taxpayer's marital status,
       ``(C) a significant change in the taxpayer's income, and
       ``(D) any other factor which the Secretary may provide.
       ``(d) Notice of Payments.--Not later than January 31 of the 
     calendar year following any calendar year during which the 
     Secretary makes one or more payments to any taxpayer under 
     this section, the Secretary shall provide such taxpayer with 
     a written notice which includes the taxpayer's taxpayer 
     identity (as defined in section 6103(b)(6)), the aggregate 
     amount of such payments made to such taxpayer during such 
     calendar year, and such other information as the Secretary 
     determines appropriate.
       ``(e) Administrative Provisions.--
       ``(1) Application of electronic funds payment 
     requirement.--The payments made by the Secretary under 
     subsection (a) shall be made by electronic funds transfer to 
     the same extent and in the same manner as if such payments 
     were Federal payments not made under this title.
       ``(2) Application of certain rules.--Rules similar to the 
     rules of subparagraphs (B) and (C) of section 6428A(f)(3) 
     shall apply for purposes of this section.
       ``(3) Exception from reduction or offset.--Any payment made 
     to any individual under this section shall not be--
       ``(A) subject to reduction or offset pursuant to subsection 
     (c), (d), (e), or (f) of section 6402, or
       ``(B) reduced or offset by other assessed Federal taxes 
     that would otherwise be subject to levy or collection.
       ``(4) Application of advance payments in the possessions of 
     the united states.--
       ``(5) Advance payments not applicable to possessions of the 
     united states.--
       ``(A) In general.--In the case of any possession of the 
     United States with a mirror code tax system (as defined in 
     section 24(k)), this section shall not be treated as part of 
     the income tax laws of the United States for purposes of 
     determining the income tax law of such possession.
       ``(B) Administrative expenses of advance payments.--
       ``(i) Mirror code possessions.--In the case of any 
     possession described in subparagraph (B) which makes the 
     election described in such subparagraph, the amount otherwise 
     paid by the Secretary to such possession under section 
     24(k)(1)(A) with respect to taxable years beginning in 2021 
     shall be increased by $300,000 if such possession has a plan, 
     which has been approved by the Secretary, for making advance 
     payments consistent with such election.
       ``(ii) American samoa.--The amount otherwise paid by the 
     Secretary to American Samoa under subparagraph (A) of section 
     24(k)(3) with respect to taxable years beginning in 2021 
     shall be increased by $300,000 if the plan described in 
     subparagraph (B) of such section includes a program, which 
     has been approved by the Secretary, for making advance 
     payments under rules similar to the rules of this section.
       ``(iii) Timing of payment.--The Secretary may pay, upon the 
     request of the possession of the United States to which the 
     payment is to be made, the amount of the increase determined 
     under clause (i) or (ii) immediately upon approval of the 
     plan referred to in such clause, respectively.
       ``(f) Application.--No payments shall be made under the 
     program established under subsection (a) with respect to--
       ``(1) any period before July 1, 2021, or
       ``(2) any period after December 31, 2021.
       ``(g) Regulations.--The Secretary shall issue such 
     regulations or other guidance as the Secretary determines 
     necessary or appropriate to carry out the purposes of this 
     section and subsections (i)(1) and (j) of section 24, 
     including regulations or other guidance which provides for 
     the application of such provisions where the filing status of 
     the taxpayer for a taxable year is different from the status 
     used for determining the annual advance amount.''.
       (2) Reconciliation of credit and advance credit.--Section 
     24 of such Code, as amended by the preceding provision of 
     this Act, is amended by adding at the end the following new 
     subsection:
       ``(j) Reconciliation of Credit and Advance Credit.--
       ``(1) In general.--The amount of the credit allowed under 
     this section to any taxpayer for any taxable year shall be 
     reduced (but not below zero) by the aggregate amount of 
     payments made under section 7527A to such taxpayer during 
     such taxable year. Any failure to so reduce the credit shall 
     be treated as arising out of a mathematical or clerical error 
     and assessed according to section 6213(b)(1).
       ``(2) Excess advance payments.--
       ``(A) In general.--If the aggregate amount of payments 
     under section 7527A to the taxpayer during the taxable year 
     exceeds the amount of the credit allowed under this section 
     to such taxpayer for such taxable year (determined without 
     regard to paragraph (1)), the tax imposed by this chapter for 
     such taxable year shall be increased by the amount of such 
     excess. Any failure to so increase the tax shall be treated 
     as arising out of a mathematical or clerical error and 
     assessed according to section 6213(b)(1).
       ``(B) Safe harbor based on modified adjusted gross 
     income.--
       ``(i) In general.--In the case of a taxpayer whose modified 
     adjusted gross income (as defined in subsection (b)) for the 
     taxable year does not exceed 200 percent of the applicable 
     income threshold, the amount of the increase determined under 
     subparagraph (A) with respect to such taxpayer for such 
     taxable year shall be reduced (but not below zero) by the 
     safe harbor amount.
       ``(ii) Phase out of safe harbor amount.--In the case of a 
     taxpayer whose modified adjusted gross income (as defined in 
     subsection (b)) for the taxable year exceeds the applicable 
     income threshold, the safe harbor amount otherwise in effect 
     under clause (i) shall be reduced by the amount which bears 
     the same ratio to such amount as such excess bears to the 
     applicable income threshold.
       ``(iii) Applicable income threshold.--For purposes of this 
     subparagraph, the term `applicable income threshold' means--

       ``(I) $60,000 in the case of a joint return or surviving 
     spouse (as defined in section 2(a)),
       ``(II) $50,000 in the case of a head of household, and
       ``(III) $40,000 in any other case.

       ``(iv) Safe harbor amount.--For purposes of this 
     subparagraph, the term `safe harbor amount' means, with 
     respect to any taxable year, the product of--

       ``(I) $2,000, multiplied by
       ``(II) the excess (if any) of the number of qualified 
     children taken into account in determining the annual advance 
     amount with respect to the taxpayer under section 7527A with 
     respect to months beginning in such taxable year, over the 
     number of qualified children taken into account in 
     determining the credit allowed under this section for such 
     taxable year.''.

       (3) Coordination with wage withholding.--Section 
     3402(f)(1)(C) of such Code is amended by striking ``section 
     24(a)'' and inserting ``section 24 (determined after 
     application of subsection (j) thereof)''.
       (4) Conforming amendments.--
       (A) Section 26(b)(2) of such Code is amended by striking 
     ``and'' at the end of subparagraph (X), by striking the 
     period at the end of subparagraph (Y) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(Z) section 24(j)(2) (relating to excess advance 
     payments).''.
       (B) Section 6211(b)(4)(A) of such Code, as amended by the 
     preceding provisions of this subtitle, is amended by striking 
     ``and 6428B'' and inserting ``6428B, and 7527A''.
       (C) Paragraph (2) of section 1324(b) of title 31, United 
     States Code, is amended--
       (i) by inserting ``24,'' before ``25A'', and
       (ii) by striking `` or 6431'' and inserting ``6431, or 
     7527A''.
       (D) The table of sections for chapter 77 of the Internal 
     Revenue Code of 1986 is amended by inserting after the item 
     relating to section 7527 the following new item:

``Sec. 7527A. Advance payment of child tax credit.''.
       (5) Appropriations to carry out advance payments.--
     Immediately upon the enactment of this Act, in addition to 
     amounts otherwise available, there are appropriated for 
     fiscal year 2021, out of any money in the Treasury not 
     otherwise appropriated:
       (A) $397,200,000 to remain available until September 30, 
     2022, for necessary expenses for the Internal Revenue Service 
     to carry out this section (and the amendments made by this 
     section), which shall supplement and not supplant any other 
     appropriations that may be available for this purpose, and
       (B) $16,200,000 to remain available until September 30, 
     2022, for necessary expenses for the Bureau of the Fiscal 
     Service to carry out this section (and the amendments made by 
     this section), which shall supplement and not supplant any 
     other appropriations that may be available for this purpose.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2020.
       (2) Establishment of advance payment program.--The 
     Secretary of the Treasury (or the Secretary's designee) shall 
     establish the program described in section 7527A of the 
     Internal Revenue Code of 1986 as soon as practicable after 
     the date of the enactment of

[[Page S1396]]

     this Act, except that the Secretary shall ensure that the 
     timing of the establishment of such program does not 
     interfere with carrying out section 6428B(g) as rapidly as 
     possible.

     SEC. 9612. APPLICATION OF CHILD TAX CREDIT IN POSSESSIONS.

       (a) In General.--Section 24 of the Internal Revenue Code of 
     1986, as amended by the preceding provisions of this Act, is 
     amended by adding at the end the following new subsection:
       ``(k) Application of Credit in Possessions.--
       ``(1) Mirror code possessions.--
       ``(A) In general.--The Secretary shall pay to each 
     possession of the United States with a mirror code tax system 
     amounts equal to the loss (if any) to that possession by 
     reason of the application of this section (determined without 
     regard to this subsection) with respect to taxable years 
     beginning after 2020. Such amounts shall be determined by the 
     Secretary based on information provided by the government of 
     the respective possession.
       ``(B) Coordination with credit allowed against united 
     states income taxes.--No credit shall be allowed under this 
     section for any taxable year to any individual to whom a 
     credit is allowable against taxes imposed by a possession of 
     the United States with a mirror code tax system by reason of 
     the application of this section in such possession for such 
     taxable year.
       ``(C) Mirror code tax system.--For purposes of this 
     paragraph, the term `mirror code tax system' means, with 
     respect to any possession of the United States, the income 
     tax system of such possession if the income tax liability of 
     the residents of such possession under such system is 
     determined by reference to the income tax laws of the United 
     States as if such possession were the United States.
       ``(2) Puerto rico.--In the case of any bona fide resident 
     of Puerto Rico (within the meaning of section 937(a)) for any 
     taxable year beginning after December 31, 2020--
       ``(A) the credit determined under this section shall be 
     allowable to such resident, and
       ``(B) subsection (d)(1)(B)(ii) shall be applied without 
     regard to the phrase `in the case of a taxpayer with 3 or 
     more qualifying children'.
       ``(3) American samoa.--
       ``(A) In general.--The Secretary shall pay to American 
     Samoa amounts estimated by the Secretary as being equal to 
     the aggregate benefits that would have been provided to 
     residents of American Samoa by reason of the application of 
     this section for taxable years beginning after 2020 if the 
     provisions of this section had been in effect in American 
     Samoa (applied as if American Samoa were the United States 
     and without regard to the application of this section to bona 
     fide residents of Puerto Rico under subsection (i)(1)).
       ``(B) Distribution requirement.--Subparagraph (A) shall not 
     apply unless American Samoa has a plan, which has been 
     approved by the Secretary, under which American Samoa will 
     promptly distribute such payments to its residents.
       ``(C) Coordination with credit allowed against united 
     states income taxes.--
       ``(i) In general.--In the case of a taxable year with 
     respect to which a plan is approved under subparagraph (B), 
     this section (other than this subsection) shall not apply to 
     any individual eligible for a distribution under such plan.
       ``(ii) Application of section in event of absence of 
     approved plan.--In the case of a taxable year with respect to 
     which a plan is not approved under subparagraph (B), rules 
     similar to the rules of paragraph (2) shall apply with 
     respect to bona fide residents of American Samoa (within the 
     meaning of section 937(a)).
       ``(4) Treatment of payments.--For purposes of section 1324 
     of title 31, United States Code, the payments under this 
     subsection shall be treated in the same manner as a refund 
     due from a credit provision referred to in subsection (b)(2) 
     of such section.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2020.

                    PART 3--EARNED INCOME TAX CREDIT

     SEC. 9621. STRENGTHENING THE EARNED INCOME TAX CREDIT FOR 
                   INDIVIDUALS WITH NO QUALIFYING CHILDREN.

       (a) Special Rules for 2021.--Section 32 of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following new subsection:
       ``(n) Special Rules for Individuals Without Qualifying 
     Children.--In the case of any taxable year beginning after 
     December 31, 2020, and before January 1, 2022--
       ``(1) Decrease in minimum age for credit.--
       ``(A) In general.--Subsection (c)(1)(A)(ii)(II) shall be 
     applied by substituting `the applicable minimum age' for `age 
     25'.
       ``(B) Applicable minimum age.--For purposes of this 
     paragraph, the term `applicable minimum age' means--
       ``(i) except as otherwise provided in this subparagraph, 
     age 19,
       ``(ii) in the case of a specified student (other than a 
     qualified former foster youth or a qualified homeless youth), 
     age 24, and
       ``(iii) in the case of a qualified former foster youth or a 
     qualified homeless youth, age 18.
       ``(C) Specified student.--For purposes of this paragraph, 
     the term `specified student' means, with respect to any 
     taxable year, an individual who is an eligible student (as 
     defined in section 25A(b)(3)) during at least 5 calendar 
     months during the taxable year.
       ``(D) Qualified former foster youth.--For purposes of this 
     paragraph, the term `qualified former foster youth' means an 
     individual who--
       ``(i) on or after the date that such individual attained 
     age 14, was in foster care provided under the supervision or 
     administration of an entity administering (or eligible to 
     administer) a plan under part B or part E of title IV of the 
     Social Security Act (without regard to whether Federal 
     assistance was provided with respect to such child under such 
     part E), and
       ``(ii) provides (in such manner as the Secretary may 
     provide) consent for entities which administer a plan under 
     part B or part E of title IV of the Social Security Act to 
     disclose to the Secretary information related to the status 
     of such individual as a qualified former foster youth.
       ``(E) Qualified homeless youth.--For purposes of this 
     paragraph, the term `qualified homeless youth' means, with 
     respect to any taxable year, an individual who certifies, in 
     a manner as provided by the Secretary, that such individual 
     is either an unaccompanied youth who is a homeless child or 
     youth, or is unaccompanied, at risk of homelessness, and 
     self-supporting.
       ``(2) Elimination of maximum age for credit.--Subsection 
     (c)(1)(A)(ii)(II) shall be applied without regard to the 
     phrase `but not attained age 65'.
       ``(3) Increase in credit and phaseout percentages.--The 
     table contained in subsection (b)(1) shall be applied by 
     substituting `15.3' for `7.65' each place it appears therein.
       ``(4) Increase in earned income and phaseout amounts.--
       ``(A) In general.--The table contained in subsection 
     (b)(2)(A) shall be applied--
       ``(i) by substituting `$9,820' for `$4,220', and
       ``(ii) by substituting `$11,610' for `$5,280'.
       ``(B) Coordination with inflation adjustment.--Subsection 
     (j) shall not apply to any dollar amount specified in this 
     paragraph.''.
       (b) Information Return Matching.--As soon as practicable, 
     the Secretary of the Treasury (or the Secretary's delegate) 
     shall develop and implement procedures to use information 
     returns under section 6050S (relating to returns relating to 
     higher education tuition and related expenses) to check the 
     status of individuals as specified students for purposes of 
     section 32(n)(1)(B)(ii) of the Internal Revenue Code of 1986 
     (as added by this section).
       (c) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2020.

     SEC. 9622. TAXPAYER ELIGIBLE FOR CHILDLESS EARNED INCOME 
                   CREDIT IN CASE OF QUALIFYING CHILDREN WHO FAIL 
                   TO MEET CERTAIN IDENTIFICATION REQUIREMENTS.

       (a) In General.--Section 32(c)(1) of the Internal Revenue 
     Code of 1986 is amended by striking subparagraph (F).
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2020.

     SEC. 9623. CREDIT ALLOWED IN CASE OF CERTAIN SEPARATED 
                   SPOUSES.

       (a) In General.--Section 32(d) of the Internal Revenue Code 
     of 1986 is amended--
       (1) by striking ``Married Individuals.--In the case of'' 
     and inserting the following: ``Married Individuals.--
       ``(1) In general.--In the case of'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Determination of marital status.--For purposes of 
     this section--
       ``(A) In general.--Except as provided in subparagraph (B), 
     marital status shall be determined under section 7703(a).
       ``(B) Special rule for separated spouse.--An individual 
     shall not be treated as married if such individual--
       ``(i) is married (as determined under section 7703(a)) and 
     does not file a joint return for the taxable year,
       ``(ii) resides with a qualifying child of the individual 
     for more than one-half of such taxable year, and
       ``(iii)(I) during the last 6 months of such taxable year, 
     does not have the same principal place of abode as the 
     individual's spouse, or
       ``(II) has a decree, instrument, or agreement (other than a 
     decree of divorce) described in section 121(d)(3)(C) with 
     respect to the individual's spouse and is not a member of the 
     same household with the individual's spouse by the end of the 
     taxable year.''.
       (b) Conforming Amendments.--
       (1) Section 32(c)(1)(A) of such Code is amended by striking 
     the last sentence.
       (2) Section 32(c)(1)(E)(ii) of such Code is amended by 
     striking ``(within the meaning of section 7703)''.
       (3) Section 32(d)(1) of such Code, as amended by subsection 
     (a), is amended by striking ``(within the meaning of section 
     7703)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2020.

     SEC. 9624. MODIFICATION OF DISQUALIFIED INVESTMENT INCOME 
                   TEST.

       (a) In General.--Section 32(i) of the Internal Revenue Code 
     of 1986 is amended by striking ``$2,200'' and inserting 
     ``$10,000''.
       (b) Inflation Adjustment.--Section 32(j)(1) of such Code is 
     amended--
       (1) in the matter preceding subparagraph (A), by inserting 
     ``(2021 in the case of the dollar amount in subsection 
     (i)(1))'' after ``2015'',
       (2) in subparagraph (B)(i)--

[[Page S1397]]

       (A) by striking ``subsections (b)(2)(A) and (i)(1)'' and 
     inserting ``subsection (b)(2)(A)'', and
       (B) by striking ``and'' at the end,
       (3) by striking the period at the end of subparagraph 
     (B)(ii) and inserting ``, and'', and
       (4) by inserting after subparagraph (B)(ii) the following 
     new clause:
       ``(iii) in the case of the $10,000 amount in subsection 
     (i)(1), `calendar year 2020' for `calendar year 2016'.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2020.

     SEC. 9625. APPLICATION OF EARNED INCOME TAX CREDIT IN 
                   POSSESSIONS OF THE UNITED STATES.

       (a) In General.--Chapter 77 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new 
     section:

     ``SEC. 7530. APPLICATION OF EARNED INCOME TAX CREDIT TO 
                   POSSESSIONS OF THE UNITED STATES.

       ``(a) Puerto Rico.--
       ``(1) In general.--With respect to calendar year 2021 and 
     each calendar year thereafter, the Secretary shall, except as 
     otherwise provided in this subsection, make payments to 
     Puerto Rico equal to--
       ``(A) the specified matching amount for such calendar year, 
     plus
       ``(B) in the case of calendar years 2021 through 2025, the 
     lesser of--
       ``(i) the expenditures made by Puerto Rico during such 
     calendar year for education efforts with respect to 
     individual taxpayers and tax return preparers relating to the 
     earned income tax credit, or
       ``(ii) $1,000,000.
       ``(2) Requirement to reform earned income tax credit.--The 
     Secretary shall not make any payments under paragraph (1) 
     with respect to any calendar year unless Puerto Rico has in 
     effect an earned income tax credit for taxable years 
     beginning in or with such calendar year which (relative to 
     the earned income tax credit which was in effect for taxable 
     years beginning in or with calendar year 2019) increases the 
     percentage of earned income which is allowed as a credit for 
     each group of individuals with respect to which such 
     percentage is separately stated or determined in a manner 
     designed to substantially increase workforce participation.
       ``(3) Specified matching amount.--For purposes of this 
     subsection--
       ``(A) In general.--The term `specified matching amount' 
     means, with respect to any calendar year, the lesser of--
       ``(i) the excess (if any) of--

       ``(I) the cost to Puerto Rico of the earned income tax 
     credit for taxable years beginning in or with such calendar 
     year, over
       ``(II) the base amount for such calendar year, or

       ``(ii) the product of 3, multiplied by the base amount for 
     such calendar year.
       ``(B) Base amount.--
       ``(i) Base amount for 2021.--In the case of calendar year 
     2021, the term `base amount' means the greater of--

       ``(I) the cost to Puerto Rico of the earned income tax 
     credit for taxable years beginning in or with calendar year 
     2019 (rounded to the nearest multiple of $1,000,000), or
       ``(II) $200,000,000.

       ``(ii) Inflation adjustment.--In the case of any calendar 
     year after 2021, the term `base amount' means the dollar 
     amount determined under clause (i) increased by an amount 
     equal to--

       ``(I) such dollar amount, multiplied by--
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `calendar year 2020' for `calendar year 2016' in 
     subparagraph (A)(ii) thereof.

     Any amount determined under this clause shall be rounded to 
     the nearest multiple of $1,000,000.
       ``(4) Rules related to payments.--
       ``(A) Timing of payments.--The Secretary shall make 
     payments under paragraph (1) for any calendar year--
       ``(i) after receipt of such information as the Secretary 
     may require to determine such payments, and
       ``(ii) except as provided in clause (i), within a 
     reasonable period of time before the due date for individual 
     income tax returns (as determined under the laws of Puerto 
     Rico) for taxable years which began on the first day of such 
     calendar year.
       ``(B) Information.--The Secretary may require the reporting 
     of such information as the Secretary may require to carry out 
     this subsection.
       ``(C) Determination of cost of earned income tax credit.--
     For purposes of this subsection, the cost to Puerto Rico of 
     the earned income tax credit shall be determined by the 
     Secretary on the basis of the laws of Puerto Rico and shall 
     include reductions in revenues received by Puerto Rico by 
     reason of such credit and refunds attributable to such 
     credit, but shall not include any administrative costs with 
     respect to such credit.
       ``(b) Possessions With Mirror Code Tax Systems.--
       ``(1) In general.--With respect to calendar year 2021 and 
     each calendar year thereafter, the Secretary shall, except as 
     otherwise provided in this subsection, make payments to the 
     Virgin Islands, Guam, and the Commonwealth of the Northern 
     Mariana Islands equal to--
       ``(A) the cost to such possession of the earned income tax 
     credit for taxable years beginning in or with such calendar 
     year, plus
       ``(B) in the case of calendar years 2021 through 2025, the 
     lesser of--
       ``(i) the expenditures made by such possession during such 
     calendar year for education efforts with respect to 
     individual taxpayers and tax return preparers relating to 
     such earned income tax credit, or
       ``(ii) $50,000.
       ``(2) Application of certain rules.--Rules similar to the 
     rules of subparagraphs (A), (B), and (C) of subsection (a)(4) 
     shall apply for purposes of this subsection.
       ``(c) American Samoa.--
       ``(1) In general.--With respect to calendar year 2021 and 
     each calendar year thereafter, the Secretary shall, except as 
     otherwise provided in this subsection, make payments to 
     American Samoa equal to--
       ``(A) the lesser of--
       ``(i) the cost to American Samoa of the earned income tax 
     credit for taxable years beginning in or with such calendar 
     year, or
       ``(ii) $16,000,000, plus
       ``(B) in the case of calendar years 2021 through 2025, the 
     lesser of--
       ``(i) the expenditures made by American Samoa during such 
     calendar year for education efforts with respect to 
     individual taxpayers and tax return preparers relating to 
     such earned income tax credit, or
       ``(ii) $50,000.
       ``(2) Requirement to enact and maintain an earned income 
     tax credit.--The Secretary shall not make any payments under 
     paragraph (1) with respect to any calendar year unless 
     American Samoa has in effect an earned income tax credit for 
     taxable years beginning in or with such calendar year which 
     allows a refundable tax credit to individuals on the basis of 
     the taxpayer's earned income which is designed to 
     substantially increase workforce participation.
       ``(3) Inflation adjustment.--In the case of any calendar 
     year after 2021, the $16,000,000 amount in paragraph 
     (1)(A)(ii) shall be increased by an amount equal to--
       ``(A) such dollar amount, multiplied by--
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `calendar year 2020' for `calendar year 2016' in 
     subparagraph (A)(ii) thereof.
     Any increase determined under this clause shall be rounded to 
     the nearest multiple of $100,000.
       ``(4) Application of certain rules.--Rules similar to the 
     rules of subparagraphs (A), (B), and (C) of subsection (a)(4) 
     shall apply for purposes of this subsection.
       ``(d) Treatment of Payments.--For purposes of section 1324 
     of title 31, United States Code, the payments under this 
     section shall be treated in the same manner as a refund due 
     from a credit provision referred to in subsection (b)(2) of 
     such section.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     77 of the Internal Revenue Code of 1986 is amended by adding 
     at the end the following new item:

``Sec. 7530. Application of earned income tax credit to possessions of 
              the United States.''.

     SEC. 9626. TEMPORARY SPECIAL RULE FOR DETERMINING EARNED 
                   INCOME FOR PURPOSES OF EARNED INCOME TAX 
                   CREDIT.

       (a) In General.--If the earned income of the taxpayer for 
     the taxpayer's first taxable year beginning in 2021 is less 
     than the earned income of the taxpayer for the taxpayer's 
     first taxable year beginning in 2019, the credit allowed 
     under section 32 of the Internal Revenue Code of 1986 may, at 
     the election of the taxpayer, be determined by substituting-
     --
       (1) such earned income for the taxpayer's first taxable 
     year beginning in 2019, for
       (2) such earned income for the taxpayer's first taxable 
     year beginning in 2021.
       (b) Earned Income.--
       (1) In general.--For purposes of this section, the term 
     ``earned income'' has the meaning given such term under 
     section 32(c) of the Internal Revenue Code of 1986.
       (2) Application to joint returns.--For purposes of 
     subsection (a), in the case of a joint return, the earned 
     income of the taxpayer for the first taxable year beginning 
     in 2019 shall be the sum of the earned income of each spouse 
     for such taxable year.
       (c) Special Rules.--
       (1) Errors treated as mathematical errors.--For purposes of 
     section 6213 of the Internal Revenue Code of 1986, an 
     incorrect use on a return of earned income pursuant to 
     subsection (a) shall be treated as a mathematical or clerical 
     error.
       (2) No effect on determination of gross income, etc.--
     Except as otherwise provided in this subsection, the Internal 
     Revenue Code of 1986 shall be applied without regard to any 
     substitution under subsection (a).
       (d) Treatment of Certain Possessions.--
       (1) Payments to possessions with mirror code tax systems.--
     The Secretary of the Treasury shall pay to each possession of 
     the United States which has a mirror code tax system amounts 
     equal to the loss (if any) to that possession by reason of 
     the application of the provisions of this section (other than 
     this subsection) with respect to section 32 of the Internal 
     Revenue Code of 1986. Such amounts shall be determined by the 
     Secretary of the Treasury based on information provided by 
     the government of the respective possession.
       (2) Payments to other possessions.--The Secretary of the 
     Treasury shall pay to each possession of the United States 
     which does not have a mirror code tax system amounts 
     estimated by the Secretary of the Treasury as being equal to 
     the aggregate benefits (if

[[Page S1398]]

     any) that would have been provided to residents of such 
     possession by reason of the provisions of this section (other 
     than this subsection) with respect to section 32 of the 
     Internal Revenue Code of 1986 if a mirror code tax system had 
     been in effect in such possession. The preceding sentence 
     shall not apply unless the respective possession has a plan, 
     which has been approved by the Secretary of the Treasury, 
     under which such possession will promptly distribute such 
     payments to its residents.
       (3) Mirror code tax system.--For purposes of this section, 
     the term ``mirror code tax system'' means, with respect to 
     any possession of the United States, the income tax system of 
     such possession if the income tax liability of the residents 
     of such possession under such system is determined by 
     reference to the income tax laws of the United States as if 
     such possession were the United States.
       (4) Treatment of payments.--For purposes of section 1324 of 
     title 31, United States Code, the payments under this section 
     shall be treated in the same manner as a refund due from a 
     credit provision referred to in subsection (b)(2) of such 
     section.
                                 ______