[House Report 107-68]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     107-68

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   PROVIDING FOR CONSIDERATION OF H.R. 1836, ECONOMIC GROWTH AND TAX 
                   RELIEF RECONCILIATION ACT OF 2001

                                _______
                                

May 15, 2001.--Referred to the House Calendar and ordered to be printed

                                _______
                                

   Mr. Reynolds, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 142]

    The Committee on Rules, having had under consideration 
House Resolution 142, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                summary of provisions of the resolution

    The resolution provides for consideration in the House of 
H.R. 1836, the Economic Growth and Tax Relief Reconciliation 
Act of 2001, under a modified closed rule. The rule provides 
one hour of debate equally divided and controlled by the 
chairman and ranking minority member of the Committee on Ways 
and Means. The rule waives all points of order against 
consideration of the bill.
    The rule provides for consideration of the amendment in the 
nature of a substitute printed in this report, if offered by 
Representative Rangel or his designee, which shall be 
considered as read and shall be separately debatable for one 
hour equally divided and controlled by the proponent and an 
opponent. The rule waives all points of order against the 
amendment in the nature of a substitute. The rule also provides 
one motion to recommit with or without instructions.
    Finally, the rule provides that upon receipt of a message 
from the Senate transmitting H.R. 1836 with Senate amendments 
thereto, it shall be in order to consider in the House a motion 
offered by the chairman of the Committee on Ways and Means or 
his designee that the House disagree to the Senate amendments 
and request or agree to a conference with the Senate thereon.

                        Amendment made in order

    Rangel--Amendment in the Nature of a Substitute. Includes a 
one-time rebate, payable immediately after enactment, to all 
individuals who had income tax liability for taxable year 2000, 
up to a maximum of $300 for single taxpayers ($600 for married 
couples); individuals with children who have payroll tax 
liabilities but not income tax liabilities, would be entitled 
to a refund of a portion of their payroll taxes; the refund 
would be automatically paid by the IRS without any requirement 
for taxpayers to submit claims; for families with children, the 
rebate could not exceed the sum of net income tax liability and 
payroll tax liability for taxable year 2000. Also creates a new 
12% rate bracket for the first $20,000 of taxable income on a 
joint return ($10,000 for single returns); adjusts the minimum 
tax so that all taxpayers with income tax liability receive the 
benefit of the rate reductions; eliminates the interaction of 
the minimum tax with certain refundable credits; also includes 
a provision that provides that the transfers to the Social 
Security and Medicare Trust Funds (based on the income taxation 
of Social Security benefits) will not be reduced by reasons of 
the rate reductions. Modifies the earned income tax credit by 
increasing the amount of earned income eligible for the credit 
by $800; addresses the marriage penalty contained in the EITC 
by increasing by $2,500 the income level at which the credit 
begins to phase out on a joint return; coordinates the EITC 
phase out rates with the rate reductions provided in the bill; 
dramatically simplifies the EITC by eliminating complicated 
income calculations and worksheets resulting in a credit that 
would require 3 or 4 lines on a return, all of which would be 
based on other information set forth in Form 1040. Creates a 
standard deduction for married couples twice the standard 
available to single individuals.

             text of amendment made in order under the rule

1. An Amendment To Be Offered by Representative Rangel of New York, or 
                  a Designee, Debatable for 60 Minutes

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  (a) Short Title.--This Act may be cited as the ``Tax 
Reduction Act of 2001''.
  (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is 
expressed in terms of an amendment to, or repeal of, a section 
or other provision, the reference shall be considered to be 
made to a section or other provision of the Internal Revenue 
Code of 1986.
  (c) Section 15 Not To Apply.--No amendment made by this Act 
shall be treated as a change in a rate of tax for purposes of 
section 15 of the Internal Revenue Code of 1986.
  (d) Table of Contents.--

Sec. 1. Short title.

             TITLE I--REFUND OF 2000 INDIVIDUAL INCOME TAXES

Sec. 101. Refund of 2000 individual income taxes.

  TITLE II--INDIVIDUAL INCOME TAX RATE REDUCTIONS; EXPANSION OF EARNED 
                        INCOME CREDIT ASSISTANCE

Sec. 201. Individual income tax rate reductions.
Sec. 202. Modifications to earned income tax credit.

                   TITLE III--MARRIAGE PENALTY RELIEF

Sec. 301. Marriage penalty relief.

            TITLE I--REFUND OF 2000 INDIVIDUAL INCOME TAXES

SEC. 101. REFUND OF 2000 INDIVIDUAL INCOME TAXES.

  (a) In General.--Subchapter B of chapter 65 (relating to 
rules of special application) is amended by adding at the end 
the following new section:

``SEC. 6428. REFUND OF 2000 INDIVIDUAL INCOME TAXES.

  ``(a) In General.--Except as otherwise provided in this 
section, each individual shall be treated as having made a 
payment against the tax imposed by chapter 1 for such 
individual's first taxable year beginning in 2000 in an amount 
equal to 100 percent of the amount of such individual's net 
Federal tax liability for such taxable year.
  ``(b) Maximum Payment.--The amount treated as paid by reason 
of this section shall not exceed $300 ($600 in the case of a 
married couple filing a joint return).
  ``(c) Net Federal Tax Liability.--For purposes of this 
section--
          ``(1) In general.--The term `net Federal tax 
        liability' means the amount equal to the excess (if 
        any) of--
                  ``(A) the sum of the regular tax liability 
                (as defined in section 26(b)) plus the tax 
                imposed by section 55, over
                  ``(B) the sum of the credits allowable under 
                part IV of subchapter A (other than the credits 
                allowable subpart C thereof, relating to 
                refundable credits).
          ``(2) Families with children.--In the case of a 
        taxpayer with 1 or more qualifying children (as defined 
        in section 32) for the taxpayer's first taxable year 
        beginning in 2000, such taxpayer's net Federal tax 
        liability for such year shall be the amount determined 
        under paragraph (1) increased by 7.65 percent of the 
        taxpayer's taxable earned income for such year. For 
        purposes of the preceding sentence, the term `taxable 
        earned income' means earned income as defined in 
        section 32 but only to the extent includible in gross 
        income.
  ``(d) Date Payment Deemed Made.--The payment provided by this 
section shall be deemed made on the later of--
          ``(1) the date prescribed by law (determined without 
        extensions) for filing the return of tax imposed by 
        chapter 1 for the taxable year, or
          ``(2) the date on which the taxpayer files his return 
        of tax imposed by chapter 1 for the taxable year.
  ``(e) Certain Persons Not Eligible.--This section shall not 
apply to--
          ``(1) any estate or trust, and
          ``(2) any nonresident alien individual.''.
  (b) Clerical Amendment.--The table of sections for subchapter 
B of chapter 65 is amended by adding at the end the following 
new item:

        ``Sec. 6428. Refund of 2000 individual income taxes.''

  (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning in 2000.
  (d) Protection of Social Security and Medicare.--The amounts 
transferred to any trust fund under the Social Security Act 
shall be determined as if this Act had not been enacted.

 TITLE II--INDIVIDUAL INCOME TAX RATE REDUCTIONS; EXPANSION OF EARNED 
                        INCOME CREDIT ASSISTANCE

SEC. 201. INDIVIDUAL INCOME TAX RATE REDUCTIONS.

  (a) In General.--Section 1 is amended by adding at the end 
the following new subsection:
  ``(i) 12 Percent Rate Bracket.--
          ``(1) In general.--In the case of taxable years 
        beginning after December 31, 2001--
                  ``(A) the rate of tax under subsections (a), 
                (b), (c), and (d) on taxable income not over 
                the initial bracket amount shall be 12 percent, 
                and
                  ``(B) the 15 percent rate of tax shall apply 
                only to taxable income over the initial bracket 
                amount.
          ``(2) Initial bracket amount.--For purposes of this 
        subsection, the initial bracket amount is--
                  ``(A) $20,000 in the case of subsection (a),
                  ``(B) 80 percent of the dollar amount in 
                subparagraph (A) in the case of subsection (b), 
                and
                  ``(C) 50 percent of the dollar amount in 
                subparagraph (B) in the case of subsections (c) 
                and (d).
          ``(3) Inflation adjustment.--
                  ``(A) In general.--In the case of any taxable 
                year beginning in a calendar year after 2002, 
                the $20,000 amount under paragraph (2)(A)(i) 
                shall be increased by an amount equal to--
                          ``(i) such dollar amount, multiplied 
                        by
                          ``(ii) the cost-of-living adjustment 
                        determined under subsection (f)(3) for 
                        the calendar year in which the taxable 
                        year begins, determined by substituting 
                        `calendar year 2001' for `calendar year 
                        1992' in subparagraph (B) thereof.
                  ``(B) Rounding rules.--If any amount after 
                adjustment under subparagraph (A) is not a 
                multiple of $50, such amount shall be rounded 
                to the next lowest multiple of $50.
          ``(4) Adjustment of tables.--The Secretary shall 
        adjust the tables prescribed under subsection (f) to 
        carry out this subsection.''
  (b) Adjustment in Computation of Alternative Minimum Tax.--
Paragraph (2) of section 55(a) is amended to read as follows:
          ``(2) the sum of--
                  ``(A) the regular tax for the taxable year, 
                plus
                  ``(B) in the case of an individual, 3 percent 
                of so much of the individual's taxable income 
                for the taxable year as is taxed at 12 
                percent.''
  (c) Repeal of Reduction of Refundable Tax Credits.--
          (1) Subsection (d) of section 24 is amended by 
        striking paragraph (2) and redesignating paragraph (3) 
        as paragraph (2).
          (2) Section 32 is amended by striking subsection (h).
  (d) Conforming Amendment.--Subclause (II) of section 
1(g)(7)(B)(ii) is amended by striking ``15 percent'' and 
inserting ``12 percent''.
  (e) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 2001.
  (f) Protection of Social Security and Medicare.--The amounts 
transferred to any trust fund under the Social Security Act 
shall be determined as if this Act had not been enacted.

SEC. 202. MODIFICATIONS TO EARNED INCOME TAX CREDIT.

  (a) Increases in Percentages and Amounts Used To Determine 
Credit; Marriage Penalty Relief.--
          (1) In general.--Subsection (b) of section 32 is 
        amended to read as follows:
  ``(b) Percentages and Amounts.--
          ``(1) Percentages.--The credit percentage, the 
        initial phaseout percentage, and the final phaseout 
        percentage shall be determined as follows:


   ``In the case of an eligible                                 The initial phaseout       The final phaseout
         individual with:          The credit percentage is:       percentage is:            percentage is:

1 qualifying child...............              34                       15.98                     18.98
2 or more qualifying children....              40                       21.06                     24.06
No qualifying children...........             7.65                      7.65                      7.65


          ``(2) Amounts.--
                  ``(A) In general.--The earned income amount 
                and the initial phaseout amount shall be 
                determined as follows:


``In the case of an eligible    The earned income   The initial phaseout
      individual with:             amount is:            amount is:

1 qualifying child..........         $8,140                $13,470
2 or more qualifying                 $11,120               $13,470
 children.
No qualifying children......         $4,900                $6,130.


                In the case of a joint return where there is at 
                least 1 qualifying child, the initial phaseout 
                amount shall be $2,500 greater than the amount 
                otherwise applicable under the preceding 
                sentence.
                  ``(B) Final phaseout amount.--The final 
                phaseout amount is $26,000 ($28,500 in the case 
                of a joint return).''
          (2) Modification of computation of phaseout.--
        Paragraph (2) of section 32(a) is amended to read as 
        follows:
          ``(2) Phaseout of credit.--The amount of the credit 
        allowable to a taxpayer under paragraph (1) for any 
        taxable year shall be reduced (but not below zero) by 
        the sum of--
                  ``(A) the initial phaseout percentage of so 
                much of the total income (or, if greater, the 
                earned income) of the taxpayer for the taxable 
                year as exceeds the initial phaseout amount but 
                does not exceed the final phaseout amount, plus
                  ``(B) the final phaseout percentage of so 
                much of the total income (or, if greater, the 
                earned income) of the taxpayer for the taxable 
                year as exceeds the final phaseout amount.''
          (3) Total income.--Paragraph (5) of section 32(c) is 
        amended to read as follows:
          ``(5) Total income.--The term `total income' means 
        adjusted gross income determined without regard to--
                  ``(A) the deductions referred to in 
                paragraphs (6), (7), (9), (10), (15), (16), and 
                (17) of section 62(a),
                  ``(B) the deduction allowed by section 
                162(l), and
                  ``(C) the deduction allowed by section 
                164(f).''
          (4) Conforming amendments.--
                  (A) Subsection (j) of section 32 is amended 
                to read as follows:
  ``(j) Inflation Adjustment.--
          ``(1) In general.--In the case of any taxable year 
        beginning after 2002, each of the dollar amounts in 
        subsection (b)(2) 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 the 
                calendar year in which the taxable year begins, 
                determined by substituting `calendar year 2001' 
                for `calendar year 1992' in subparagraph (B) 
                thereof.
          ``(2) Rounding.--If any dollar amount, after being 
        increased under paragraph (1), is not a multiple of 
        $10, such dollar amount shall be rounded to the nearest 
        multiple of $10.''
                  (B) Subparagraph (C) of section 32(c)(1) is 
                amended by striking ``modified adjusted gross 
                income'' and inserting ``total income''.
                  (C) Paragraph (2) of section 32(f) is amended 
                to read as follows:
          ``(2) Requirements for tables.--
                  ``(A) In general.--The provisions of 
                subsection (a)(1) and the provisions of 
                subsection (a)(2) shall be reflected in 
                separate tables prescribed under paragraph (1).
                  ``(B) Subsection (a)(1) table.--The tables 
                prescribed under paragraph (1) to reflect the 
                provisions of subsection (a)(1) shall have 
                income brackets of not greater than $50 each 
                for earned income between $0 and the earned 
                income amount.
                  ``(C) Subsection (a)(2) table.--The tables 
                prescribed under paragraph (1) to reflect the 
                provisions of subsection (a)(2) shall have 
                income brackets of not greater than $50 each 
                for total income (or, if greater, the earned 
                income) above the initial phaseout threshold.''
  (b) Repeal of Denial of Credit Where Investment Income.--
Section 32 is amended by striking subsection (i).
  (c) Earned Income To Include Only Amounts Includible in Gross 
Income.--
          (1) In general.--Section 32(c)(2)(A)(i) (defining 
        earned income) is amended by inserting ``, but only if 
        such amounts are includible in gross income for the 
        taxable year'' after ``other employee compensation''.
          (2) Conforming amendment.--Section 32(c)(2)(B) is 
        amended by striking ``and'' at the end of clause (iv), 
        by striking the period at the end of clause (v) and 
        inserting ``, and'', and by adding at the end the 
        following new clause:
                        ``(vi) the requirement under 
                        subparagraph (A)(i) that an amount be 
                        includible in gross income shall not 
                        apply if such amount is exempt from tax 
                        under section 7873 or is derived 
                        directly from restricted and allotted 
                        land under the Act of February 8, 1887 
                        (commonly known as the Indian General 
                        Allotment Act) (25 U.S.C. 331 et seq.) 
                        or from land held under Acts or 
                        treaties containing an exception 
                        provision similar to the Indian General 
                        Allotment Act.''
  (d) Modification of Joint Return Requirement.--Subsection (d) 
of section 32 is amended to read as follows:
  ``(d) Married Individuals.--
          ``(1) In general.--If the taxpayer is married at the 
        close of the taxable year, the credit shall be allowed 
        under subsection (a) only if the taxpayer and his 
        spouse file a joint return for the taxable year.
          ``(2) Marital status.--For purposes of paragraph (1), 
        an individual legally separated from his spouse under a 
        decree of divorce or of separate maintenance shall not 
        be considered as married.
          ``(3) Certain married individuals living apart.--For 
        purposes of paragraph (1), if--
                  ``(A) an individual --
                          ``(i) is married and files a separate 
                        return, and
                          ``(ii) has a qualifying child who is 
                        a son, daughter, stepson, or 
                        stepdaughter of such individual, and
                  ``(B) during the last 6 months of such 
                taxable year, such individual and such 
                individual's spouse do not have the same 
                principal place of abode,
        such individual shall not be considered as married.''
  (e) Expansion of Mathematical Error Authority.--Paragraph (2) 
of section 6213(g) is amended by striking ``and'' at the end of 
subparagraph (K), by striking the period at the end of 
subparagraph (L) and inserting ``, and'', and by inserting 
after subparagraph (L) the following new subparagraph:
                  ``(M) the entry on the return claiming the 
                credit under section 32 with respect to a child 
                if, according to the Federal Case Registry of 
                Child Support Orders established under section 
                453(h) of the Social Security Act, the taxpayer 
                is a noncustodial parent of such child.''
  (f) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 2001.

                   TITLE III--MARRIAGE PENALTY RELIEF

SEC. 301. MARRIAGE PENALTY RELIEF.

  (a) Standard Deduction.--
          (1) In general.--Paragraph (2) of section 63(c) 
        (relating to standard deduction) is amended--
                  (A) by striking ``$5,000'' in subparagraph 
                (A) and inserting ``twice the dollar amount in 
                effect under subparagraph (C) for the taxable 
                year'',
                  (B) by adding ``or'' at the end of 
                subparagraph (B),
                  (C) by striking ``in the case of'' and all 
                that follows in subparagraph (C) and inserting 
                ``in any other case.'', and
                  (D) by striking subparagraph (D).
          (2) Increase allowed as deduction in determining 
        minimum tax.--Subparagraph (E) of section 56(b)(1) is 
        amended by adding at the end the following new 
        sentence: ``The preceding sentence shall not apply to 
        so much of the standard deduction under subparagraph 
        (A) of section 63(c)(2) as exceeds the amount which 
        would be such deduction but for the amendment made by 
        section 201(a)(1) of the Tax Reduction Act of 2001.
          (3) Technical amendments.--
                  (A) Subparagraph (B) of section 1(f)(6) is 
                amended by striking ``(other than with'' and 
                all that follows through ``shall be applied'' 
                and inserting ``(other than with respect to 
                sections 63(c)(4) and 151(d)(4)(A)) shall be 
                applied''.
                  (B) Paragraph (4) of section 63(c) is amended 
                by adding at the end the following flush 
                sentence:
        ``The preceding sentence shall not apply to the amount 
        referred to in paragraph (2)(A).''.
  (b) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 2000.

                                
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