[House Report 118-129]
[From the U.S. Government Publishing Office]


118th Congress }                                             {    Report
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                             {    118-129

======================================================================



 
                   TAX CUTS FOR WORKING FAMILIES ACT

                                _______
                                

 June 30, 2023.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Smith of Missouri, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3936]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3936) to amend the Internal Revenue Code of 1986 to 
rename the standard deduction the guaranteed deduction, and to 
add a bonus amount to the guaranteed deduction for taxable 
years 2024 and 2025, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND...........................................3
          A. Purpose and Summary.................................     3
          B. Background and Need for Legislation.................     3
          C. Legislative History.................................     4
          D. Designated Hearings.................................     4
 II. EXPLANATION OF THE BILL..........................................4
          A. Increase in Standard Deduction (sec. 1 of the bill 
              and sec. 63 of the Code)...........................     4
III. VOTES OF THE COMMITTEE...........................................7
 IV. BUDGET EFFECTS OF THE BILL......................................11
          A. Committee Estimate of Budgetary Effects.............    11
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................    11
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................    11
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......15
          A. Committee Oversight Findings and Recommendations....    15
          B. Statement of General Performance Goals and 
              Objectives.........................................    15
          C. Applicability of House Rule XXI, Clause 5(b)........    15
          D. Tax Complexity Analysis.............................    15
          E. Information Relating to Unfunded Mandates...........    20
          F. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................    20
          G. Duplication of Federal Programs.....................    20
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........21
VII. DISSENTING VIEWS................................................79

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Tax Cuts for Working Families Act''.

SEC. 2. STANDARD DEDUCTION RENAMED GUARANTEED DEDUCTION.

  (a) In General.--Section 63 of the Internal Revenue Code of 1986 is 
amended--
          (1) by striking ``standard deduction'' each place it appears 
        and inserting ``guaranteed deduction'', and
          (2) in subsection (c)--
                  (A) in the heading, by striking ``Standard 
                Deduction'' and inserting ``Guaranteed Deduction'',
                  (B) in the heading of paragraph (2), by striking 
                ``standard deduction'' and inserting ``guaranteed 
                deduction'',
                  (C) in the heading of paragraph (3), by striking 
                ``standard deduction'' and inserting ``guaranteed 
                deduction'',
                  (D) in the heading of paragraph (5), by striking 
                ``standard deduction'' and inserting ``guaranteed 
                deduction'',
                  (E) in the heading of paragraph (6), by striking 
                ``standard deduction'' and inserting ``guaranteed 
                deduction'', and
                  (F) in the heading of paragraph (7)(A), by striking 
                ``standard deduction'' and inserting ``guaranteed 
                deduction''.
  (b) Conforming Amendments.--
          (1) Section 1(g)(4)(A) of such Code is amended by striking 
        ``standard deduction'' and inserting ``guaranteed deduction''.
          (2) Section 56(b)(1)(D) of such Code is amended--
                  (A) in the heading, by striking ``Standard 
                deduction'' and inserting ``guaranteed deduction'', and
                  (B) by striking ``standard deduction'' and inserting 
                ``guaranteed deduction''.
          (3) Section 861(b) of such Code is amended by striking 
        ``standard deduction'' and inserting ``guaranteed deduction''.
          (4) Section 862(b) of such Code is amended by striking 
        ``standard deduction'' and inserting ``guaranteed deduction''.
          (5) Section 1398(c) of such Code is amended--
                  (A) in the heading, by striking ``Standard 
                Deduction'' and inserting ``Guaranteed Deduction'',
                  (B) in the heading of paragraph (3), by striking 
                ``standard deduction'' and inserting ``guaranteed 
                deduction'', and
                  (C) by striking ``standard deduction'' and inserting 
                ``guaranteed deduction''.
          (6) Section 3402 of such Code is amended by striking 
        ``standard deduction'' each place it appears and inserting 
        ``guaranteed deduction''.
          (7) Section 6012 of such Code is amended by striking 
        ``standard deduction'' each place it appears and inserting 
        ``guaranteed deduction''.
          (8) Section 6013(b)(3)(A) of such Code is amended by striking 
        ``standard deduction'' and inserting ``guaranteed deduction''.
          (9) Section 6014(b)(4) of such Code is amended by striking 
        ``standard deduction'' and inserting ``guaranteed deduction''.
          (10) Section 6334 of such Code is amended by striking 
        ``standard deduction'' each place it appears and inserting 
        ``guaranteed deduction''.
  (c) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2023.

SEC. 3. BONUS GUARANTEED DEDUCTION FOR 2024 AND 2025.

  (a) In General.--Section 63(c) of the Internal Revenue Code of 1986 
(as amended by section 2) is amended by adding at the end the following 
new paragraph:
          ``(8) Bonus guaranteed deduction for taxable years 2024 and 
        2025.--
                  ``(A) In general.--In the case of a taxable year 
                beginning after December 31, 2023, and before January 
                1, 2026, the guaranteed deduction shall be increased by 
                the amount of the bonus guaranteed deduction.
                  ``(B) Bonus guaranteed deduction.--For purposes of 
                this paragraph, the bonus guaranteed deduction is--
                          ``(i) twice the dollar amount in effect under 
                        clause (iii) in the case of a joint return or a 
                        surviving spouse (as defined in section 2(a)),
                          ``(ii) $3,000 in the case of a head of 
                        household, and
                          ``(iii) $2,000 in any other case.
                  ``(C) Adjustment for inflation.--In the case of a 
                taxable year beginning after 2024, the dollar amounts 
                in clauses (ii) and (iii) of subparagraph (B) shall 
                each be 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 the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `2023' for `2016' in 
                        subparagraph (A)(ii) thereof.
                 If any increase under this subparagraph is not a 
                multiple of $50, such increase shall be rounded to the 
                next lowest multiple of $50.
                  ``(D) Limitation on bonus guaranteed deduction based 
                on modified adjusted gross income.--
                          ``(i) In general.--The bonus guaranteed 
                        deduction determined under subparagraph (B) 
                        shall be reduced (but not below zero) by 5 
                        percent of so much of the taxpayer's modified 
                        adjusted gross income as exceeds the threshold 
                        amount. For purposes of the preceding sentence, 
                        the term `modified adjusted gross income' means 
                        adjusted gross income increased by any amount 
                        excluded from gross income under section 911, 
                        931, or 933.
                          ``(ii) Threshold amount.--For purposes of 
                        clause (i), the threshold amount is--
                                  ``(I) $400,000 in the case of a joint 
                                return or a surviving spouse (as 
                                defined in section 2(a)),
                                  ``(II) $300,000 in the case of a head 
                                of household, and
                                  ``(III) $200,000 in any other case.
                  ``(E) Bonus guaranteed deduction not allowed to 
                dependents.--In the case of any individual with respect 
                to whom paragraph (5) applies for any taxable year, 
                subparagraph (A) shall not apply.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2023.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 3936, the ``Tax Cuts for Working Families 
Act,'' as ordered reported by the Committee on Ways and Means 
on June 13, 2023, provides tax relief to working families.

                 B. Background and Need for Legislation

    This legislation provides tax cuts to working class 
families that are struggling to make ends meet in the current 
economy by helping them keep more of their hard-earned dollars. 
By renaming the Standard Deduction the Guaranteed Deduction, 
Americans can expect certainty from the Tax Code. Additionally, 
this bill provides a new $4,000 Guaranteed Deduction Bonus for 
families ($2,000 for single filers) for the next two years to 
provide relief during the current economic hardships.
    In the 2017 Tax Cuts and Jobs Act, Congressional 
Republicans doubled the Guaranteed Deduction--simplifying the 
tax filing process and providing tax cuts to low-and middle-
income families. Prior to the 2017 tax reform, two-thirds of 
Americans took the Guaranteed Deduction. Today, over 90 percent 
of filers claim the Guaranteed Deduction.
    The Tax Cuts for Working Families Act builds on the success 
of the 2017 tax law, providing a necessary response to the 
crippling inflation and other economic challenges faced by 
American families. Under this provision, taxpayers will not owe 
federal income tax on their first $68,000 of income. Over 107 
million American households will keep more of their hard-earned 
dollars.

                         C. Legislative History


Background

    H.R. 3936 was introduced on June 12, 2023, and was referred 
to the Committee on Ways and Means.

Committee hearings

    On February 6, 2023, the Committee held a Field Hearing on 
the State of the American Economy: Appalachia in Petersburg, 
West Virginia.
    On March 7, 2023, the Committee held a Field Hearing on the 
State of the American Economy: The Heartland in Yukon, 
Oklahoma.
    On April 21, 2023, the Committee held a Field Hearing on 
the State of the American Economy: The South in Peachtree, 
Georgia.

Committee action

    The Committee on Ways and Means marked up H.R. 3936, the 
``Tax Cuts for Working Families Act,'' on June 13, 2023, and 
ordered the bill, as amended, favorably reported (with a quorum 
being present).

                         D. Designated Hearings

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to consider H.R. 3936:
    Committee on Ways and Means hearing which took place on 
February 6, 2023, entitled, ``the State of the American 
Economy: Appalachia''.
    Committee on Ways and Means hearing which took place on 
March 7, 2023, entitled, ``the State of the American Economy: 
The Heartland''.
    Committee on Ways and Means hearing which took place on 
April 21, 2023, entitled: ``the State of the American Economy: 
The South''.

                      II. EXPLANATION OF THE BILL


 A. Increase in Standard Deduction (Sec. 1 of the Bill and Sec. 63 of 
                               the Code)


                              PRESENT LAW

    An individual who does not elect to itemize deductions 
reduces adjusted gross income (``AGI'') by the amount of the 
applicable standard deduction in arriving at taxable income. 
The standard deduction is the sum of the basic standard 
deduction and, if applicable, the additional standard 
deduction.\1\ The basic standard deduction varies depending 
upon a taxpayer's filing status. For taxable years beginning in 
2023, the amount of the basic standard deduction is $13,850 for 
an unmarried individual (other than a head of household or a 
surviving spouse) and a married individual filing a separate 
return,\2\ $20,800 for a head of household, and $27,700 for 
married individuals filing a joint return and a surviving 
spouse.\3\ An additional standard deduction is allowed to an 
individual who has attained age 65 before the close of the 
taxable year or is blind at the close of the taxable year.\4\
---------------------------------------------------------------------------
    \1\Sec. 63(c)(1).
    \2\In the case of a married individual filing a separate return 
where either spouse itemizes deductions, the standard deduction is 
zero. Sec. 63(c)(6).
    \3\Rev. Proc. 2022-38, 2022-45 I.R.B. 445, November 7, 2022.
    \4\Sec. 63(f). For 2023, the additional amount is $1,500 for a 
married taxpayer (for each spouse meeting the applicable criteria in 
the case of a joint return) and surviving spouses. The additional 
amount for single individuals and heads of households is $1,850. An 
individual who is both blind and has attained age 65 is entitled to two 
additional standard deductions, for a total additional amount (for 
2023) of $3,000 or $3,700, as applicable.
---------------------------------------------------------------------------
    In the case of a dependent for whom a deduction for a 
personal exemption\5\ is allowable to another taxpayer, the 
standard deduction may not exceed the greater of (i) $1,250 (in 
2023) or (ii) the sum of $400 (in 2023) plus the dependent's 
earned income.\6\ The standard deduction for an estate or trust 
is zero.\7\
---------------------------------------------------------------------------
    \5\For taxable years beginning in 2018 through 2025, the personal 
exemption amount is reduced to zero. Sec. 151(d)(5). This reduction is 
not taken into account in determining the limitation on the standard 
deduction for dependents. See sec. 151(d)(5).
    \6\Sec. 63(c)(5).
    \7\Sec. 63(f).
---------------------------------------------------------------------------
    The amount of the standard deduction is indexed annually 
for inflation.\8\
---------------------------------------------------------------------------
    \8\Sec. 63(c)(4) and (c)(7)(B).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee wishes to provide additional tax relief for 
low-and middle-income taxpayers with positive tax liability to 
counteract the effects of high inflation on such taxpayers' 
spending power. The Committee believes that such relief can be 
provided through a simple additional deduction for taxpayers 
below certain high-income thresholds. The Committee believes 
that renaming the ``standard deduction'' the ``guaranteed 
deduction'' will better describe its function.

                        EXPLANATION OF PROVISION

    The provision renames the ``standard deduction'' the 
``guaranteed deduction.'' The terms ``basic standard 
deduction'' and ``additional standard deduction'' are similarly 
renamed the ``basic guaranteed deduction'' and ``additional 
guaranteed deduction,'' respectively.
    The provision adds a new bonus guaranteed deduction for 
taxable years beginning after December 31, 2023, and before 
January 1, 2026. The bonus guaranteed deduction is allowed in 
addition to the basic guaranteed deduction and additional 
guaranteed deduction (i.e., the guaranteed deduction is the sum 
of the basic guaranteed deduction, the additional guaranteed 
deduction, and, if applicable, the bonus guaranteed deduction).
    For taxable years beginning in 2024, the amount of the 
bonus guaranteed deduction is $2,000 for an unmarried 
individual (other than a head of household or a surviving 
spouse) and a married individual filing a separate return, 
$3,000 for a head of household, and, for married individuals 
filing a joint return and for a surviving spouse, twice the 
amount for an unmarried individual and a married individual 
filing a separate return ($4,000). For taxable years beginning 
in 2025, the $2,000 and $3,000 amounts are indexed for 
inflation, and the amount for married individuals filing a 
joint return and for a surviving spouse is twice the inflation-
adjusted amount for an unmarried individual. The bonus 
guaranteed deduction does not apply to taxable years beginning 
after December 31, 2025.\9\ The bonus guaranteed deduction is 
not allowed in the case of a dependent with respect to whom the 
section 63(c)(5) limitation on the basic guaranteed deduction 
applies (i.e., dependent for whom a deduction for a personal 
exemption is allowable to another taxpayer).
---------------------------------------------------------------------------
    \9\The temporary increase in the standard deduction provided in 
present law section 63(c)(7) also expires for these years. For taxable 
years beginning on or after January 1, 2026, the standard deduction is 
determined using the amounts provided in present law section 63(c)(2).
---------------------------------------------------------------------------
    The bonus guaranteed deduction is phased out at a five-
percent rate for taxpayers with modified AGI above certain 
thresholds. This threshold is $200,000 for an unmarried 
individual (other than a head of household or a surviving 
spouse) and a married individual filing a separate return, 
$300,000 for a head of household, and $400,000 for married 
individuals filing a joint return and a surviving spouse. 
Modified AGI means AGI increased by any amount excluded from 
gross income under sections 911 (foreign earned income 
exclusion), 931 (exclusion of income for a bona fide resident 
of American Samoa), or 933 (exclusion of income for a bona fide 
resident of Puerto Rico). In 2024, after application of the 
five-percent phaseout the bonus guaranteed deduction is fully 
eliminated at $240,000 of modified AGI for an unmarried 
individual (other than a head of household or a surviving 
spouse) and a married individual filing a separate return, at 
$360,000 for a head of household, and at $480,000 for married 
individuals filing a joint return and a surviving spouse.\10\ 
Figure 1 below, illustrates the amount of the guaranteed 
deduction under the provision in comparison with the amount of 
the standard deduction under present law allowed to different 
categories of taxpayers by modified AGI for 2024.
---------------------------------------------------------------------------
    \10\Because the bonus guaranteed deduction amounts are indexed for 
inflation in 2025, the modified AGI levels at which the bonus 
guaranteed deduction is fully phased out may increase in 2025. The 
modified AGI levels at which the phaseouts begin are not adjusted for 
inflation.



                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2023.

                      III. VOTES OF THE COMMITTEE

    In compliance with the rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3936, the ``Tax Cuts for Working Families 
Act,'' on June 13, 2023.
    The vote on the motion to table the appeal of the ruling of 
the chair was agreed to by a roll call vote of 24 yeas to 18 
nays (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Kelly......................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Schweikert.................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. LaHood.....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Dr. Wenstrup...................        X   ........  .........  Mr. Davis........  ........        X   .........
Mr. Arrington..................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Dr. Ferguson...................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Estes......................        X   ........  .........  Ms. Sewell.......  ........        X   .........
Mr. Smucker....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Hern.......................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Miller.....................        X   ........  .........  Ms. Moore........  ........        X   .........
Dr. Murphy.....................        X   ........  .........  Mr. Kildee.......  ........        X   .........
Mr. Kustoff....................        X   ........  .........  Mr. Beyer........  ........        X   .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Evans........  ........        X   .........
Mr. Steube.....................  ........  ........  .........  Mr. Schneider....  ........        X   .........
Ms. Tenney.....................        X   ........  .........  Mr. Panetta......  ........        X   .........
Mrs. Fischbach.................        X
Mr. Moore......................        X
Mrs. Steel.....................        X
Ms. Van Duyne..................        X
Mr. Feenstra...................        X
Ms. Malliotakis................        X
Mr. Carey......................        X
----------------------------------------------------------------------------------------------------------------

    In compliance with the rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3936, the ``Tax Cuts for Working Families 
Act,'' on June 13, 2023.
    The vote on the amendment offered by Mr. Pascrell to the 
amendment in the nature of a substitute to H.R. 3936, which 
would provide tax relief to high income earners by increasing 
the cap on the state and local tax deduction to $60,000 in the 
case of single filers and $120,000 in the case of joint filers 
was not agreed to by a roll call vote of 14 yeas, 24 nays, and 
1 present (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Doggett......  ........  ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Kelly......................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Schweikert.................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. LaHood.....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Dr. Wenstrup...................  ........        X   .........  Mr. Davis........        X   ........  .........
Mr. Arrington..................  ........        X   .........  Ms. Sanchez......  ........  ........  .........
Dr. Ferguson...................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Estes......................  ........        X   .........  Ms. Sewell.......  ........  ........         X
Mr. Smucker....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Hern.......................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Miller.....................  ........        X   .........  Ms. Moore........  ........  ........  .........
Dr. Murphy.....................  ........        X   .........  Mr. Kildee.......        X   ........  .........
Mr. Kustoff....................  ........        X   .........  Mr. Beyer........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Evans........        X   ........  .........
Mr. Steube.....................  ........  ........  .........  Mr. Schneider....        X   ........  .........
Ms. Tenney.....................  ........        X   .........  Mr. Panetta......        X   ........  .........
Mrs. Fischbach.................  ........        X
Mr. Moore......................  ........        X
Mrs. Steel.....................  ........        X
Ms. Van Duyne..................  ........        X
Mr. Feenstra...................  ........        X
Ms. Malliotakis................  ........        X
Mr. Carey......................  ........        X
----------------------------------------------------------------------------------------------------------------

    In compliance with the rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3936, the ``Tax Cuts for Working Families 
Act,'' on June 13, 2023.
    The vote on the amendment offered by Mr. Schneider to the 
amendment in the nature of a substitute to H.R. 3936, which 
would complicate the tax code with a new deduction layered on 
top of the existing guaranteed deduction and deduction for 
charitable contributions was not agreed to by a roll call vote 
of 15 yeas and 24 nays (with a quorum being present). The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Doggett......  ........  ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Kelly......................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Schweikert.................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. LaHood.....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Dr. Wenstrup...................  ........        X   .........  Mr. Davis........        X   ........  .........
Mr. Arrington..................  ........        X   .........  Ms. Sanchez......  ........  ........  .........
Dr. Ferguson...................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Estes......................  ........        X   .........  Ms. Sewell.......  ........  ........  .........
Mr. Smucker....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Hern.......................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Miller.....................  ........        X   .........  Ms. Moore........        X   ........  .........
Dr. Murphy.....................  ........        X   .........  Mr. Kildee.......        X   ........  .........
Mr. Kustoff....................  ........        X   .........  Mr. Beyer........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Evans........        X   ........  .........
Mr. Steube.....................  ........  ........  .........  Mr. Schneider....        X   ........  .........
Ms. Tenney.....................  ........        X   .........  Mr. Panetta......        X   ........  .........
Mrs. Fischbach.................  ........        X
Mr. Moore......................  ........        X
Mrs. Steel.....................  ........        X
Ms. Van Duyne..................  ........        X
Mr. Feenstra...................  ........        X
Ms. Malliotakis................  ........        X
Mr. Carey......................  ........        X
----------------------------------------------------------------------------------------------------------------

    In compliance with the rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3936, the ``Tax Cuts for Working Families 
Act,'' on June 13, 2023.
    The vote on the amendment offered by Ms. Chu to the 
amendment in the nature of a substitute to H.R. 3936, which 
would create a safe harbor for certain health care plans, 
allowing employers to be reimbursed for abortion-related 
services, including abortion and travel expenses was not agreed 
to by a roll call vote of 16 yeas and 24 nays (with a quorum 
being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Kelly......................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Schweikert.................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. LaHood.....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Dr. Wenstrup...................  ........        X   .........  Mr. Davis........        X   ........  .........
Mr. Arrington..................  ........        X   .........  Ms. Sanchez......  ........  ........  .........
Dr. Ferguson...................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Estes......................  ........        X   .........  Ms. Sewell.......  ........  ........  .........
Mr. Smucker....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Hern.......................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Miller.....................  ........        X   .........  Ms. Moore........        X   ........  .........
Dr. Murphy.....................  ........        X   .........  Mr. Kildee.......        X   ........  .........
Mr. Kustoff....................  ........        X   .........  Mr. Beyer........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Evans........        X   ........  .........
Mr. Steube.....................  ........  ........  .........  Mr. Schneider....        X   ........  .........
Ms. Tenney.....................  ........        X   .........  Mr. Panetta......        X   ........  .........
Mrs. Fischbach.................  ........        X
Mr. Moore......................  ........        X
Mrs. Steel.....................  ........        X
Ms. Van Duyne..................  ........        X
Mr. Feenstra...................  ........        X
Ms. Malliotakis................  ........        X
Mr. Carey......................  ........        X
----------------------------------------------------------------------------------------------------------------

    In compliance with the rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3936, the ``Tax Cuts for Working Families 
Act,'' on June 13, 2023.
    The vote on the amendment offered by Mr. Davis to the 
amendment in the nature of a substitute to H.R. 3936, which 
complicate the tax code with a new deduction layered on top of 
existing tax benefits for families, including the child tax 
credit and the child and dependent care tax credit was not 
agreed to by a roll call vote of 16 yeas and 24 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).................  ........        X   .........  Mr. Neal.........        X   ........  .........
Mr. Buchanan...................  ........        X   .........  Mr. Doggett......        X   ........  .........
Mr. Smith (NE).................  ........        X   .........  Mr. Thompson.....        X   ........  .........
Mr. Kelly......................  ........        X   .........  Mr. Larson.......        X   ........  .........
Mr. Schweikert.................  ........        X   .........  Mr. Blumenauer...        X   ........  .........
Mr. LaHood.....................  ........        X   .........  Mr. Pascrell.....        X   ........  .........
Dr. Wenstrup...................  ........        X   .........  Mr. Davis........        X   ........  .........
Mr. Arrington..................  ........        X   .........  Ms. Sanchez......  ........  ........  .........
Dr. Ferguson...................  ........        X   .........  Mr. Higgins......        X   ........  .........
Mr. Estes......................  ........        X   .........  Ms. Sewell.......  ........  ........  .........
Mr. Smucker....................  ........        X   .........  Ms. DelBene......        X   ........  .........
Mr. Hern.......................  ........        X   .........  Ms. Chu..........        X   ........  .........
Ms. Miller.....................  ........        X   .........  Ms. Moore........        X   ........  .........
Dr. Murphy.....................  ........        X   .........  Mr. Kildee.......        X   ........  .........
Mr. Kustoff....................  ........        X   .........  Mr. Beyer........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Evans........        X   ........  .........
Mr. Steube.....................  ........  ........  .........  Mr. Schneider....        X   ........  .........
Ms. Tenney.....................  ........        X   .........  Mr. Panetta......        X   ........  .........
Mrs. Fischbach.................  ........        X
Mr. Moore......................  ........        X
Mrs. Steel.....................  ........        X
Ms. Van Duyne..................  ........        X
Mr. Feenstra...................  ........        X
Ms. Malliotakis................  ........        X
Mr. Carey......................  ........        X
----------------------------------------------------------------------------------------------------------------

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 3936, the ``Tax Cuts for Working Families 
Act'' on June 13, 2023.
    H.R. 3936 was ordered favorably reported to the House of 
Representatives as amended by a roll call vote of 24 yeas to 16 
nays (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Kelly......................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Schweikert.................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. LaHood.....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Dr. Wenstrup...................        X   ........  .........  Mr. Davis........  ........        X   .........
Mr. Arrington..................        X   ........  .........  Ms. Sanchez......  ........  ........  .........
Dr. Ferguson...................        X   ........  .........  Mr. Higgins......  ........        X   .........
Mr. Estes......................        X   ........  .........  Ms. Sewell.......  ........  ........  .........
Mr. Smucker....................        X   ........  .........  Ms. DelBene......  ........        X   .........
Mr. Hern.......................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Miller.....................        X   ........  .........  Ms. Moore........  ........        X   .........
Dr. Murphy.....................        X   ........  .........  Mr. Kildee.......  ........        X   .........
Mr. Kustoff....................        X   ........  .........  Mr. Beyer........  ........        X   .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Evans........  ........        X   .........
Mr. Steube.....................  ........  ........  .........  Mr. Schneider....  ........        X   .........
Ms. Tenney.....................        X   ........  .........  Mr. Panetta......  ........        X   .........
Mrs. Fischbach.................        X
Mr. Moore......................        X
Mrs. Steel.....................        X
Ms. Van Duyne..................        X
Mr. Feenstra...................        X
Ms. Malliotakis................        X
Mr. Carey......................        X
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 3936, as 
reported.

----------------------------------------------------------------------------------------------------------------
                                     Fiscal years [1] millions of dollars--
-----------------------------------------------------------------------------------------------------------------
 2023     2024      2025       2026      2027    2028    2029    2030   2031   2032   2033  2023-2028  2023-2033
----------------------------------------------------------------------------------------------------------------
         -28,614   -48,314     -19,492  ......  ......  ......  .....  .....  .....  .....    -96,420    -96,420
----------------------------------------------------------------------------------------------------------------
[1] Estimate contains the following outlay effects:


----------------------------------------------------------------------------------------------------------------
 2023    2024     2025     2026    2027    2028    2029    2030    2031    2032    2033    2023-2028   2023-2033
----------------------------------------------------------------------------------------------------------------
        ......    4,359    4,462  ......  ......  ......  ......  ......  ......  ......      8,821       8,821
----------------------------------------------------------------------------------------------------------------

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee states further that the bill involves no new or 
increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the cost estimate prepared by 
the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974 is 
attached.




    The bill would
           Rename the standard deduction the guaranteed 
        deduction
           Establish a new bonus guaranteed deduction 
        for tax years 2024 and 2025
    Estimated budgetary effects would mainly stem from
           Reduced revenues and increased outlays 
        attributable to the bonus guaranteed deduction for tax 
        years 2024 and 2025
    Areas of significant uncertainty include
           Anticipating the number of taxpayers who 
        would switch from itemizing deductions to taking the 
        temporarily increased guaranteed deduction for tax 
        years 2024 and 2025
    The Congressional Budget Act of 1974, as amended, 
stipulates that revenue estimates provided by the staff of the 
Joint Committee on Taxation (JCT) are the official estimates 
for all tax legislation considered by the Congress. CBO, 
therefore, incorporates such estimates into its cost estimates 
of the effects of legislation. Most of the estimates for the 
provisions of this bill were provided by JCT.
    Bill summary: H.R. 3936 would amend portions of the 
Internal Revenue Code of 1986 that concern the standard 
deduction, which the bill would rename the guaranteed 
deduction. The bill also would establish a bonus guaranteed 
deduction for tax years 2024 and 2025. In tax year 2024, the 
guaranteed deduction would be increased by $2,000 for single 
filers, $3,000 for head-of-household filers, and $4,000 for 
joint filers. For tax year 2025, those amounts would be 
adjusted for inflation. The bonus guaranteed deduction would 
decrease by 5 percent of each additional dollar of modified 
adjusted gross income (a measure of income that adds back 
certain tax exclusions) above a certain threshold. The 
threshold would be $200,000 for single filers, $300,000 for 
head-of-household filers, and $400,000 for joint filers.
    Estimated Federal cost: The estimated budgetary effect of 
H.R. 3936 is shown in Table 1. The costs of the legislation 
primarily fall within budget function 600 (income security).

                                                   TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 3936
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               By Fiscal Year, Millions of Dollars--
                                          --------------------------------------------------------------------------------------------------------------
                                                                                                                                      2023-      2023-
                                            2023     2024       2025       2026     2027   2028   2029   2030   2031   2032   2033     2028       2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Increases in Direct Spending
 
Estimated Budget Authority...............      0          0      4,359      4,462      0      0      0      0      0      0      0      8,821      8,821
Estimated Outlays........................      0          0      4,359      4,462      0      0      0      0      0      0      0      8,821      8,821
 
                                                                Decreases (-) in Revenues
 
Estimated Revenues.......................      0    -28,614    -43,955    -15,030      0      0      0      0      0      0      0    -87,599    -87,599
 
                                        Net Increase in the Deficit From Changes in Direct Spending and Revenues
 
Effect on the Deficit....................      0     28,614     48,314     19,492      0      0      0      0      0      0      0     96,420     96,420
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
Components may not sum to totals because of rounding.
CBO estimates that implementing H.R. 3936 would increase spending subject to appropriation by less than $500,000 in any year over the 2023-2028 period.

    Basis of estimate: The Congressional Budget Act of 1974, as 
amended, stipulates that revenue estimates provided by the 
staff of the Joint Committee on Taxation (JCT) are the official 
estimates for all tax legislation considered by the Congress. 
CBO therefore incorporates such estimates into its cost 
estimates of the effects of legislation. The estimates for the 
revenue and direct spending effects of H.R. 3936 were provided 
by JCT.\1\
---------------------------------------------------------------------------
    \1\For JCT's preliminary estimates of the provisions that include 
detail beyond the summary presented here, see Joint Committee on 
Taxation, Description of H.R. 3936, the ``Tax Cuts for Working Families 
Act'' (JCX-25-23), June 9, 2023, www.jct.gov/publications/2023/jcx-25-
23; other details are in Joint Committee on Taxation, Description of 
the Chairman's Amendment in the Nature of a Substitute to H.R. 3936, 
The ``Tax Cuts for Working Families Act'' (JCX-30-23), June 12, 2023, 
www.jct.gov/publications/2023/jcx-30-23.
---------------------------------------------------------------------------
    For this estimate, JCT assumes that the bill will be 
enacted before the end of calendar year 2023 and that, except 
as otherwise specified, its provisions will take effect upon 
enactment.
    Revenues and direct spending: H.R. 3936 would establish a 
new bonus guaranteed deduction for tax years 2024 and 2025. In 
tax year 2024, the guaranteed deduction would be increased by 
$2,000 for single filers, $3,000 for head-of-household filers, 
and twice the single-filer amount for joint filers ($4,000). 
For tax year 2025, those amounts would be adjusted for 
inflation. The bonus guaranteed deduction would decrease by 5 
percent of each additional dollar of modified adjusted gross 
income above a certain threshold. The threshold would be 
$200,000 for single filers, $300,000 for head-of-household 
filers, and $400,000 for joint filers.
    H.R. 3936 would reduce revenues from income tax receipts 
and increase outlays from refundable tax credits because the 
bonus guaranteed deduction would reduce the amount of income 
subject to taxation. Tax credits reduce a taxpayer's overall 
income tax liability; if the refundable portion of those 
credits exceeds other tax liabilities, the taxpayer may receive 
the excess in a refund. Such refunds are classified as outlays 
in the federal budget. JCT estimates that H.R. 3936 would 
reduce total revenues by $87.6 billion and increase total 
outlays by $8.8 billion over the 2023-2033 period.
    Spending subject to appropriation: CBO estimates that 
implementing H.R. 3936 would increase administrative costs for 
the Internal Revenue Service by less than $500,000 over the 
2023-2028 period. That spending would be subject to the 
availability of appropriated funds.
    Uncertainty: JCT's estimates of the budgetary effects of 
H.R. 3936 are subject to uncertainty because they are made on 
the basis of underlying projections and other factors that 
could change significantly. In particular, the estimates here 
rely on CBO's economic projections for the next decade under 
current law and on expectations about the way taxpayers might 
respond to changes in tax law--in this case whether filers of 
returns for tax years 2024 and 2025 would switch from itemizing 
their deductions to taking the temporarily increased guaranteed 
deduction.
    Pay-As-You-Go Considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in Table 2.

  TABLE 2.--CBO'S ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS OF H.R. 3936, THE TAX CUTS FOR WORKING FAMILIES ACT, AS ORDERED REPORTED BY THE HOUSE
                                                      COMMITTEE ON WAYS AND MEANS ON JUNE 13, 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   By fiscal year, millions of dollars--
                                                  ------------------------------------------------------------------------------------------------------
                                                                                                                                      2023-      2023-
                                                   2023     2024       2025       2026    2027  2028  2029  2030  2031  2032  2033     2028       2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Net Increase in the Deficit
 
Pay-As-You-Go Effect.............................    0      28,614     48,314     19,492    0     0     0     0     0     0     0      96,420     96,420
Memorandum:
    Changes in Outlays...........................    0           0      4,359      4,462    0     0     0     0     0     0     0       8,821      8,821
    Changes in Revenues..........................    0     -28,614    -43,955    -15,030    0     0     0     0     0     0     0     -87,599    -87,599
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.

    Increase in long-term net direct spending and deficits: 
None.
    Mandates: None.
    Estimate prepared by: Federal Revenues: Nathaniel Frentz, 
James Pearce, Staff of the Joint Committee on Taxation; Federal 
Costs: Matthew Pickford; Mandates: Andrew Laughlin, Staff of 
the Joint Committee on Taxation.
    Estimate reviewed by: Joshua Shakin, Chief, Revenue 
Estimating Unit; Susan Willie, Chief, Natural and Physical 
Resources Cost Estimates Unit; Kathleen FitzGerald, Chief, 
Public and Private Mandates Unit; H. Samuel Papenfuss, Deputy 
Director of Budget Analysis; John McClelland, Director of Tax 
Analysis.
    Estimate approved by: Phillip L. Swagel, Director, 
Congressional Budget Office.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, the Committee made findings and 
recommendations that are reflected in this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill does not authorize funding, so no statement of general 
performance goals and objectives is required.

            C. Applicability of House Rule XXI, Clause 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
provide such a Federal income tax rate increase.

                       D. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, for each such provision identified by 
the staff of the Joint Committee on Taxation, a summary 
description of the provision is provided below along with an 
estimate of the number and type of affected taxpayers, and a 
discussion regarding the relevant complexity and administrative 
issues.
    Following the analysis of the staff of the Joint Committee 
on Taxation are the comments of the IRS and Treasury regarding 
the provision included in the complexity analysis.

             LIST OF PROVISIONS IN THE COMPLEXITY ANALYSIS

Increase in standard deduction

Summary description of provision

    The bill renames the standard deduction as the guaranteed 
deduction and adds an additional bonus guaranteed deduction for 
2024 and 2025. For taxable years beginning in 2024, the amount 
of the bonus guaranteed deduction is $2,000 for an unmarried 
individual (other than a head of household or a surviving 
spouse) and a married individual filing a separate return, 
$3,000 for a head of household, and $4,000 for married 
individuals filing a joint return and a surviving spouse. For 
taxable years beginning in 2025, these amounts are indexed for 
inflation.
    The bonus guaranteed deduction is phased out at a five-
percent rate for taxpayers with modified AGI above certain 
thresholds. This threshold is $200,000 for an unmarried 
individual (other than a head of household or a surviving 
spouse) and a married individual filing a separate return, 
$300,000 for a head of household, and $400,000 for married 
individuals filing a joint return and a surviving spouse.

Number of affected taxpayers

    It is estimated that the provision will affect 110 million 
individual income tax filers.

Discussion

    It is not anticipated that individuals will need to keep 
additional records due to this provision. It should not result 
in an increase in disputes with the IRS, nor will regulatory 
guidance be necessary to implement this provision.
    The IRS will need to modify its forms and publications. The 
temporary nature of the provision will necessitate that the IRS 
do this again once the bonus guaranteed deduction expires. The 
IRS will need to modify its programming and training materials.
    Some taxpayers who currently itemize deductions may respond 
to the provision by claiming the new guaranteed deduction (and 
bonus guaranteed deduction) in lieu of itemizing.
    These taxpayers will no longer have to file Schedule A of 
Form 1040, a significant number of which will no longer need to 
engage in the record keeping inherent in itemizing below-the-
line deductions. Moreover, by claiming the new guaranteed 
deduction, such taxpayers may qualify to use simpler versions 
of the Form 1040 (i.e., Form 1040EZ or Form 1040A) that are not 
available to individuals who itemize their deductions. These 
forms simplify the return preparation process by eliminating 
from the Form 1040 those items that do not apply to particular 
taxpayers.
    This reduction in complexity and record keeping also may 
result in a decline in the number of individuals using a tax 
preparation service, or tax preparation software, or a decline 
in the cost of such service or software. The provision also 
should reduce the number of disputes between taxpayers and the 
IRS regarding the substantiation of itemized deductions.

Comments from IRS and Treasury

                        Department of the Treasury,
                                  Internal Revenue Service,
                                     Washington, DC, June 16, 2023.
Mr. Thomas A. Barthold,
Chief of Staff, Joint Committee on Taxation,
Washington, DC.
    Dear Mr. Barthold: I am responding to your letter dated 
June 13, 2023, in which you requested a complexity analysis 
related to the Committee Report for ``H.R. 3936, Tax Cuts for 
Working Families Act, H.R. 3937, Small Business Jobs Act, H.R. 
3938, Build It in America Act.''
    Enclosed are the combined comments of the Internal Revenue 
Service (IRS) and the Department of the Treasury for inclusion 
in the complexity analysis in the Committee Report for ``H.R. 
3936, Tax Cuts for Working Families Act, H.R. 3937, Small 
Business Jobs Act, H.R. 3938, Build It in America Act.''
    Our analysis covers the five provisions that you 
preliminarily identified in your letter: increase in standard 
deduction, increase in threshold for requiring information 
reporting with respect to certain payees, restoration of 
reporting rule for third party network transactions, increase 
in limitations on expensing of depreciable business assets, and 
extension of 100 percent bonus depreciation. Please note that 
for purposes of this complexity analysis, IRS staff assumed 
timely enactment of this legislation. If legislation is not 
enacted before the end of the year, there would be complexity 
for IRS and for taxpayers that is not addressed in this 
response.
    Our comments are based on the description of the provision 
provided in your letter. This analysis does not include the 
administrative cost estimates for the changes that would be 
required. Due to the short turnaround time, our comments are 
provisional and subject to change upon a more complete and in-
depth analysis of the provisions.
    I hope this information is helpful. If you have any 
questions, please feel free to contact me, or your staff may 
contact Scott Landes, Chief, Legislation and Reports Branch, 
Office of Legislative Affairs, at 202-317-6985.
            Sincerely,
                                          Daniel I. Werfel,
                                                      Commissioner.

 COMPLEXITY ANALYSIS OF H.R. 3936, TAX CUTS FOR WORKING FAMILIES ACT, 
 H.R. 3937, SMALL BUSINESS JOBS ACT, H.R. 3938, BUILD IT IN AMERICA ACT


                   1. INCREASE IN STANDARD DEDUCTION

    The bill renames the standard deduction as the guaranteed 
deduction and adds an additional bonus guaranteed deduction for 
2024 and 2025. For taxable years beginning in 2024, the amount 
of the bonus guaranteed deduction is $2,000 for an unmarried 
individual (other than a head of household or a surviving 
spouse) and a married individual filing a separate return, 
$3,000 for a head of household, and $4,000 for married 
individuals filing a joint return and a surviving spouse. For 
taxable years beginning in 2025, these amounts are indexed for 
inflation.
    The bonus guaranteed deduction is phased out at a five-
percent rate for taxpayers with modified AGI above certain 
thresholds. This threshold is $200,000 for an unmarried 
individual (other than a head of household or a surviving 
spouse) and a married individual filing a separate return, 
$300,000 for a head of household, and $400,000 for married 
individuals filing a joint return and a surviving spouse.

IRS and Treasury comments

     Forms, instructions and publications would need to 
be updated, including computational worksheets for computing 
the phase out. Updates would be needed on an annual basis to 
index for inflation.
     IT programming for return processing would need to 
be updated, including additional programming to add the 
``bonus'' deduction and check the phase out amount. Programming 
needed on an annual basis to index for inflation.
     Internal Revenue Manuals and employee training 
would need to be updated.
     Training materials for new employees would need to 
be updated.
     Internal communications would be shared with all 
employees.
     Communications would be needed for external 
stakeholders, including awareness of the increase in the 
standard deduction, phase out of the bonus based on modified 
AGI and effect on itemized deductions (less stakeholders will 
need to itemize).
     IRS.gov updates would need to be provided.

   2. INCREASE IN THRESHOLD FOR REQUIRING INFORMATION REPORTING WITH 
                       RESPECT TO CERTAIN PAYEES

    The bill increases the information reporting threshold 
under sections 6041 and 6041A to $5,000 in a calendar year, 
with the threshold amount (including the threshold for 
reporting of direct sales) to be indexed annually for inflation 
in calendar years after 2024. The bill also makes a conforming 
change to the dollar threshold in section 3406 with respect to 
information reporting required under sections 6041 and 6041A to 
align with the new $5,000 reporting threshold.

IRS and Treasury comments

     Potential for reducing payor recordkeeping and 
filing burden (for some payors, the reduction in burden could 
be significant).
     Forms, instructions and publications would need to 
be updated. Updates would be needed on an annual basis to index 
for inflation.
     IT programming, including penalty regimes, would 
need to be reviewed and updated to reflect the threshold 
increase.
     Internal Revenue Manuals and employee training 
would need to be updated.
     Training materials for new employees would need to 
be updated.
     Internal communications would be shared with all 
employees.
     External communications would be necessary to 
communicate changes. Communication would need to be 
considerable (due to significance of changes) and as early as 
possible for stakeholder planning purposes. Communication also 
would need to address perceptions that the change to the 
reporting threshold changes the tax consequences of any taxable 
amounts no longer reported to IRS.
     IRS.gov updates would need to be provided.
     IRS efforts to identify nonfilers could be 
affected, as IRS would receive less payor information reports.

 3. RESTORATION OF REPORTING RULE FOR THIRD PARTY NETWORK TRANSACTIONS

    The bill reverts to the previous de minimis reporting 
exception for third party settlement organizations. A third 
party settlement organization is not required to report unless 
the aggregate value of third party network transactions with 
respect to a participating payee for the year exceeds $20,000 
and the aggregate number of such transactions with respect to a 
participating payee exceeds 200.

IRS and Treasury comments

     Potential for reducing payor recordkeeping and 
filing burden (for some payors, the reduction in burden could 
be significant).
     Forms, instructions and publications would need to 
be updated.
     IT programming would need to be reviewed and 
updated to reflect the return to previous reporting 
requirements.
     Internal Revenue Manuals and employee training 
would need to be updated.
     Training materials for new employees would need to 
be updated.
     Internal communications would be shared with all 
employees.
     External communications would be necessary to 
communicate changes. Communication would need to be 
considerable (due to significance of changes) and as early as 
possible for stakeholder planning purposes. Communication also 
would need to address perceptions that the change to the 
reporting requirements changes the tax consequences of any 
taxable amounts no longer reported to IRS.
     IRS.gov updates would need to be provided.
     IRS efforts to identify nonfilers could be 
affected, as IRS would receive less payor information reports.

 4. INCREASE IN LIMITATIONS ON EXPENSING OF DEPRECIABLE BUSINESS ASSETS

    The bill provides that the maximum amount a taxpayer may 
expense, for property placed in service in taxable years 
beginning after 2023, is $2,500,000 of the cost of qualifying 
property placed in service for the taxable year. The $2,500,000 
amount is reduced (but not below zero) by the amount by which 
the cost of qualifying property placed in service during the 
taxable year exceeds $4,000,000. The $2,500,000 and $4,000,000 
amounts are indexed for inflation for taxable years beginning 
after 2024.

IRS and Treasury comments

     The maximum amount a taxpayer may expense for a 
taxable year and the expansion of the definition of qualified 
real property qualifying for section 179 would have no 
significant impact on Form 4562 or any other tax forms. The 
Instructions for Form 4562, Publication 946, and other 
instructions and publications would be revised to reflect the 
extension.
     Internal Revenue Manuals and employee training 
would be updated.
     Internal communications would be shared with all 
employees.
     Programming changes would be required by this 
provision due to inflation adjustment to the limits.
     Guidance would be needed to address fiscal filers.

             5. EXTENSION OF 100 PERCENT BONUS DEPRECIATION

    The bill extends the 100-percent additional first-year 
depreciation deduction for three years, generally through 2025 
(through 2026 for longer production period property and certain 
aircraft).
    The bill retains the 20-percent additional first-year 
depreciation deduction for qualified property placed in 
service, and specified plants planted or grafted, in 2026 (2027 
for longer production period property and certain aircraft).

IRS and Treasury comments

     The extension of the time period and modification 
for property eligible for additional first-year depreciation 
would have no significant impact on Form 4562 or any other tax 
forms. The Instructions for Form 4562, Publication 946, and 
other instructions and publications would be revised to reflect 
the extension and modification.
     Internal Revenue Manuals and employee training 
would be updated.
     Internal communications would be shared with all 
employees.
     No programming changes would be required by this 
provision.
     Guidance would be needed to address fiscal filers.

              E. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    With respect to the requirement of clause 3(e) of rule XIII 
of the Rules of the House of Representatives, changes in 
existing law made by the bill, as reported, are shown as 
follows:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--DETERMINATION OF TAX LIABILITY

           *       *       *       *       *       *       *


PART I--TAX ON INDIVIDUALS

           *       *       *       *       *       *       *



SEC. 1. TAX IMPOSED.

  (a) Married individuals filing joint returns and surviving 
spouses.--There is hereby imposed on the taxable income of--
          (1) every married individual (as defined in section 
        7703) who makes a single return jointly with his spouse 
        under section 6013, and
          (2) every surviving spouse (as defined in section 
        2(a)),
a tax determined in accordance with the following table:
  (b) Heads of households.--There is hereby imposed on the 
taxable income of every head of a household (as defined in 
section 2(b)) a tax determined in accordance with the following 
table:
  (c) Unmarried individuals (other than surviving spouses and 
heads of households).--There is hereby imposed on the taxable 
income of every individual (other than a surviving spouse as 
defined in section 2(a) or the head of a household as defined 
in section 2(b)) who is not a married individual (as defined in 
section 7703) a tax determined in accordance with the following 
table:
  (d) Married individuals filing separate returns.--There is 
hereby imposed on the taxable income of every married 
individual (as defined in section 7703) who does not make a 
single return jointly with his spouse under section 6013, a tax 
determined in accordance with the following table:
  (e) Estates and trusts.--There is hereby imposed on the 
taxable income of--
          (1) every estate, and
          (2) every trust,
taxable under this subsection a tax determined in accordance 
with the following table:
  (f) Phaseout of marriage penalty in 15-percent bracket; 
adjustments in tax tables so that inflation will not result in 
tax increases.--
          (1) In general.--Not later than December 15 of 1993, 
        and each subsequent calendar year, the Secretary shall 
        prescribe tables which shall apply in lieu of the 
        tables contained in subsections (a), (b), (c), (d), and 
        (e) with respect to taxable years beginning in the 
        succeeding calendar year.
          (2) Method of prescribing tables.--The table which 
        under paragraph (1) is to apply in lieu of the table 
        contained in subsection (a), (b), (c), (d), or (e), as 
        the case may be, with respect to taxable years 
        beginning in any calendar year shall be prescribed--
                  (A) except as provided in paragraph (8), by 
                increasing the minimum and maximum dollar 
                amounts for each bracket for which a tax is 
                imposed under such table by the cost-of-living 
                adjustment for such calendar year, determined--
                          (i) except as provided in clause 
                        (ii), by substituting ``1992'' for 
                        ``2016'' in paragraph (3)(A)(ii), and
                          (ii) in the case of adjustments to 
                        the dollar amounts at which the 36 
                        percent rate bracket begins or at which 
                        the 39.6 percent rate bracket begins, 
                        by substituting ``1993'' for ``2016'' 
                        in paragraph (3)(A)(ii),
                  (B) by not changing the rate applicable to 
                any rate bracket as adjusted under subparagraph 
                (A), and
                  (C) by adjusting the amounts setting forth 
                the tax to the extent necessary to reflect the 
                adjustments in the rate brackets.
          (3) Cost-of-living adjustment.--For purposes of this 
        subsection--
                  (A) In general.--The cost-of-living 
                adjustment for any calendar year is the 
                percentage (if any) by which--
                          (i) the C-CPI-U for the preceding 
                        calendar year, exceeds
                          (ii) the CPI for calendar year 2016, 
                        multiplied by the amount determined 
                        under subparagraph (B).
                  (B) Amount determined.--The amount determined 
                under this clause is the amount obtained by 
                dividing--
                          (i) the C-CPI-U for calendar year 
                        2016, by
                          (ii) the CPI for calendar year 2016.
                  (C) Special rule for adjustments with a base 
                year after 2016.--For purposes of any provision 
                of this title which provides for the 
                substitution of a year after 2016 for ``2016'' 
                in subparagraph (A)(ii), subparagraph (A) shall 
                be applied by substituting ``the C-CPI-U for 
                calendar year 2016'' for ``the CPI for calendar 
                year 2016'' and all that follows in clause (ii) 
                thereof.
          (4) CPI for any calendar year.--For purposes of 
        paragraph (3), the CPI for any calendar year is the 
        average of the Consumer Price Index as of the close of 
        the 12-month period ending on August 31 of such 
        calendar year.
          (5) Consumer Price Index.--For purposes of paragraph 
        (4), the term ``Consumer Price Index'' means the last 
        Consumer Price Index for all-urban consumers published 
        by the Department of Labor. For purposes of the 
        preceding sentence, the revision of the Consumer Price 
        Index which is most consistent with the Consumer Price 
        Index for calendar year 1986 shall be used.
          (6) C-CPI-U.--For purposes of this subsection--
                  (A) In general.--The term ``C-CPI-U'' means 
                the Chained Consumer Price Index for All Urban 
                Consumers (as published by the Bureau of Labor 
                Statistics of the Department of Labor). The 
                values of the Chained Consumer Price Index for 
                All Urban Consumers taken into account for 
                purposes of determining the cost-of-living 
                adjustment for any calendar year under this 
                subsection shall be the latest values so 
                published as of the date on which such Bureau 
                publishes the initial value of the Chained 
                Consumer Price Index for All Urban Consumers 
                for the month of August for the preceding 
                calendar year.
                  (B) Determination for calendar year.--The C-
                CPI-U for any calendar year is the average of 
                the C-CPI-U as of the close of the 12-month 
                period ending on August 31 of such calendar 
                year.
          (7) Rounding.--
                  (A) In general.--If any increase determined 
                under paragraph (2)(A), section 63(c)(4), 
                section 68(b)(2) or section 151(d)(4) is not a 
                multiple of $50, such increase shall be rounded 
                to the next lowest multiple of $50.
                  (B) Table for married individuals filing 
                separately.--In the case of a married 
                individual filing a separate return, 
                subparagraph (A) (other than with respect to 
                sections 63(c)(4) and 151(d)(4)(A)) shall be 
                applied by substituting ``$25'' for ``$50'' 
                each place it appears.
          (8) Elimination of marriage penalty in 15-percent 
        bracket.--With respect to taxable years beginning after 
        December 31, 2003, in prescribing the tables under 
        paragraph (1)--
                  (A) the maximum taxable income in the 15-
                percent rate bracket in the table contained in 
                subsection (a) (and the minimum taxable income 
                in the next higher taxable income bracket in 
                such table) shall be 200 percent of the maximum 
                taxable income in the 15-percent rate bracket 
                in the table contained in subsection (c) (after 
                any other adjustment under this subsection), 
                and
                  (B) the comparable taxable income amounts in 
                the table contained in subsection (d) shall be 
                1/2 of the amounts determined under 
                subparagraph (A).
  (g) Certain unearned income of children taxed as if parent's 
income.--
          (1) In general.--In the case of any child to whom 
        this subsection applies, the tax imposed by this 
        section shall be equal to the greater of--
                  (A) the tax imposed by this section without 
                regard to this subsection, or
                  (B) the sum of--
                          (i) the tax which would be imposed by 
                        this section if the taxable income of 
                        such child for the taxable year were 
                        reduced by the net unearned income of 
                        such child, plus
                          (ii) such child's share of the 
                        allocable parental tax.
          (2) Child to whom subsection applies.--This 
        subsection shall apply to any child for any taxable 
        year if--
                  (A) such child--
                          (i) has not attained age 18 before 
                        the close of the taxable year, or
                          (ii)(I) has attained age 18 before 
                        the close of the taxable year and meets 
                        the age requirements of section 
                        152(c)(3) (determined without regard to 
                        subparagraph (B) thereof), and
                          (II) whose earned income (as defined 
                        in section 911(d)(2)) for such taxable 
                        year does not exceed one-half of the 
                        amount of the individual's support 
                        (within the meaning of section 
                        152(c)(1)(D) after the application of 
                        section 152(f)(5) (without regard to 
                        subparagraph (A) thereof)) for such 
                        taxable year,
                  (B) either parent of such child is alive at 
                the close of the taxable year, and
                  (C) such child does not file a joint return 
                for the taxable year.
          (3) Allocable parental tax.--For purposes of this 
        subsection--
                  (A) In general.--The term ``allocable 
                parental tax'' means the excess of--
                          (i) the tax which would be imposed by 
                        this section on the parent's taxable 
                        income if such income included the net 
                        unearned income of all children of the 
                        parent to whom this subsection applies, 
                        over
                          (ii) the tax imposed by this section 
                        on the parent without regard to this 
                        subsection.
                For purposes of clause (i), net unearned income 
                of all children of the parent shall not be 
                taken into account in computing any exclusion, 
                deduction, or credit of the parent.
                  (B) Child's share.--A child's share of any 
                allocable parental tax of a parent shall be 
                equal to an amount which bears the same ratio 
                to the total allocable parental tax as the 
                child's net unearned income bears to the 
                aggregate net unearned income of all children 
                of such parent to whom this subsection applies.
                  (C) Special rule where parent has different 
                taxable year.--Except as provided in 
                regulations, if the parent does not have the 
                same taxable year as the child, the allocable 
                parental tax shall be determined on the basis 
                of the taxable year of the parent ending in the 
                child's taxable year.
          (4) Net unearned income.--For purposes of this 
        subsection--
                  (A) In general.--The term ``net unearned 
                income'' means the excess of--
                          (i) the portion of the adjusted gross 
                        income for the taxable year which is 
                        not attributable to earned income (as 
                        defined in section 911(d)(2)), over
                          (ii) the sum of--
                                  (I) the amount in effect for 
                                the taxable year under section 
                                63(c)(5)(A) (relating to 
                                limitation on [standard 
                                deduction] guaranteed deduction 
                                in the case of certain 
                                dependents), plus
                                  (II) the greater of the 
                                amount described in subclause 
                                (I) or, if the child itemizes 
                                his deductions for the taxable 
                                year, the amount of the 
                                itemized deductions allowed by 
                                this chapter for the taxable 
                                year which are directly 
                                connected with the production 
                                of the portion of adjusted 
                                gross income referred to in 
                                clause (i).
                  (B) Limitation based on taxable income.--The 
                amount of the net unearned income for any 
                taxable year shall not exceed the individual's 
                taxable income for such taxable year.
                  (C) Treatment of distributions from qualified 
                disability trusts.--For purposes of this 
                subsection, in the case of any child who is a 
                beneficiary of a qualified disability trust (as 
                defined in section 642(b)(2)(C)(ii)), any 
                amount included in the income of such child 
                under sections 652 and 662 during a taxable 
                year shall be considered earned income of such 
                child for such taxable year.
          (5) Special rules for determining parent to whom 
        subsection applies.--For purposes of this subsection, 
        the parent whose taxable income shall be taken into 
        account shall be--
                  (A) in the case of parents who are not 
                married (within the meaning of section 7703), 
                the custodial parent (within the meaning of 
                section 152(e)) of the child, and
                  (B) in the case of married individuals filing 
                separately, the individual with the greater 
                taxable income.
          (6) Providing of parent's TIN.--The parent of any 
        child to whom this subsection applies for any taxable 
        year shall provide the TIN of such parent to such child 
        and such child shall include such TIN on the child's 
        return of tax imposed by this section for such taxable 
        year.
          (7) Election to claim certain unearned income of 
        child on parent's return.--
                  (A) In general.--If--
                          (i) any child to whom this subsection 
                        applies has gross income for the 
                        taxable year only from interest and 
                        dividends (including Alaska Permanent 
                        Fund dividends),
                          (ii) such gross income is more than 
                        the amount described in paragraph 
                        (4)(A)(ii)(I) and less than 10 times 
                        the amount so described,
                          (iii) no estimated tax payments for 
                        such year are made in the name and TIN 
                        of such child, and no amount has been 
                        deducted and withheld under section 
                        3406, and
                          (iv) the parent of such child (as 
                        determined under paragraph (5)) elects 
                        the application of subparagraph (B),
                such child shall be treated (other than for 
                purposes of this paragraph) as having no gross 
                income for such year and shall not be required 
                to file a return under section 6012.
                  (B) Income included on parent's return.--In 
                the case of a parent making the election under 
                this paragraph--
                          (i) the gross income of each child to 
                        whom such election applies (to the 
                        extent the gross income of such child 
                        exceeds twice the amount described in 
                        paragraph (4)(A)(ii)(I)) shall be 
                        included in such parent's gross income 
                        for the taxable year,
                          (ii) the tax imposed by this section 
                        for such year with respect to such 
                        parent shall be the amount equal to the 
                        sum of--
                                  (I) the amount determined 
                                under this section after the 
                                application of clause (i), plus
                                  (II) for each such child, 10 
                                percent of the lesser of the 
                                amount described in paragraph 
                                (4)(A)(ii)(I) or the excess of 
                                the gross income of such child 
                                over the amount so described, 
                                and
                          (iii) any interest which is an item 
                        of tax preference under section 
                        57(a)(5) of the child shall be treated 
                        as an item of tax preference of such 
                        parent (and not of such child).
                  (C) Regulations.--The Secretary shall 
                prescribe such regulations as may be necessary 
                or appropriate to carry out the purposes of 
                this paragraph.
  (h) Maximum capital gains rate.--
          (1) In general.--If a taxpayer has a net capital gain 
        for any taxable year, the tax imposed by this section 
        for such taxable year shall not exceed the sum of--
                  (A) a tax computed at the rates and in the 
                same manner as if this subsection had not been 
                enacted on the greater of--
                          (i) taxable income reduced by the net 
                        capital gain; or
                          (ii) the lesser of--
                                  (I) the amount of taxable 
                                income taxed at a rate below 25 
                                percent; or
                                  (II) taxable income reduced 
                                by the adjusted net capital 
                                gain;
                  (B) 0 percent of so much of the adjusted net 
                capital gain (or, if less, taxable income) as 
                does not exceed the excess (if any) of--
                          (i) the amount of taxable income 
                        which would (without regard to this 
                        paragraph) be taxed at a rate below 25 
                        percent, over
                          (ii) the taxable income reduced by 
                        the adjusted net capital gain;
                  (C) 15 percent of the lesser of--
                          (i) so much of the adjusted net 
                        capital gain (or, if less, taxable 
                        income) as exceeds the amount on which 
                        a tax is determined under subparagraph 
                        (B), or
                          (ii) the excess of--
                                  (I) the amount of taxable 
                                income which would (without 
                                regard to this paragraph) be 
                                taxed at a rate below 39.6 
                                percent, over
                                  (II) the sum of the amounts 
                                on which a tax is determined 
                                under subparagraphs (A) and 
                                (B),
                  (D) 20 percent of the adjusted net capital 
                gain (or, if less, taxable income) in excess of 
                the sum of the amounts on which tax is 
                determined under subparagraphs (B) and (C),
                  (E) 25 percent of the excess (if any) of--
                          (i) the unrecaptured section 1250 
                        gain (or, if less, the net capital gain 
                        (determined without regard to paragraph 
                        (11))), over
                          (ii) the excess (if any) of--
                                  (I) the sum of the amount on 
                                which tax is determined under 
                                subparagraph (A) plus the net 
                                capital gain, over
                                  (II) taxable income; and
                  (F) 28 percent of the amount of taxable 
                income in excess of the sum of the amounts on 
                which tax is determined under the preceding 
                subparagraphs of this paragraph.
          (2) Net capital gain taken into account as investment 
        income.--For purposes of this subsection, the net 
        capital gain for any taxable year shall be reduced (but 
        not below zero) by the amount which the taxpayer takes 
        into account as investment income under section 
        163(d)(4)(B)(iii).
          (3) Adjusted net capital gain.--For purposes of this 
        subsection, the term ``adjusted net capital gain'' 
        means the sum of--
                  (A) net capital gain (determined without 
                regard to paragraph (11)) reduced (but not 
                below zero) by the sum of--
                          (i) unrecaptured section 1250 gain, 
                        and
                          (ii) 28-percent rate gain, plus
                  (B) qualified dividend income (as defined in 
                paragraph (11)).
          (4) 28-percent rate gain.--For purposes of this 
        subsection, the term ``28-percent rate gain'' means the 
        excess (if any) of--
                  (A) the sum of--
                          (i) collectibles gain; and
                          (ii) section 1202 gain, over
                  (B) the sum of--
                          (i) collectibles loss;
                          (ii) the net short-term capital loss; 
                        and
                          (iii) the amount of long-term capital 
                        loss carried under section 
                        1212(b)(1)(B) to the taxable year.
          (5) Collectibles gain and loss.--For purposes of this 
        subsection--
                  (A) In general.--The terms ``collectibles 
                gain'' and ``collectibles loss'' mean gain or 
                loss (respectively) from the sale or exchange 
                of a collectible (as defined in section 408(m) 
                without regard to paragraph (3) thereof) which 
                is a capital asset held for more than 1 year 
                but only to the extent such gain is taken into 
                account in computing gross income and such loss 
                is taken into account in computing taxable 
                income.
                  (B) Partnerships, etc..--For purposes of 
                subparagraph (A), any gain from the sale of an 
                interest in a partnership, S corporation, or 
                trust which is attributable to unrealized 
                appreciation in the value of collectibles shall 
                be treated as gain from the sale or exchange of 
                a collectible. Rules similar to the rules of 
                section 751 shall apply for purposes of the 
                preceding sentence.
          (6) Unrecaptured section 1250 gain.--For purposes of 
        this subsection--
                  (A) In general.--The term ``unrecaptured 
                section 1250 gain'' means the excess (if any) 
                of--
                          (i) the amount of long-term capital 
                        gain (not otherwise treated as ordinary 
                        income) which would be treated as 
                        ordinary income if section 1250(b)(1) 
                        included all depreciation and the 
                        applicable percentage under section 
                        1250(a) were 100 percent, over
                          (ii) the excess (if any) of--
                                  (I) the amount described in 
                                paragraph (4)(B); over
                                  (II) the amount described in 
                                paragraph (4)(A).
                  (B) Limitation with respect to section 1231 
                property.--The amount described in subparagraph 
                (A)(i) from sales, exchanges, and conversions 
                described in section 1231(a)(3)(A) for any 
                taxable year shall not exceed the net section 
                1231 gain (as defined in section 1231(c)(3)) 
                for such year.
          (7) Section 1202 gain.--For purposes of this 
        subsection, the term ``section 1202 gain'' means the 
        excess of--
                  (A) the gain which would be excluded from 
                gross income under section 1202 but for the 
                percentage limitation in section 1202(a), over
                  (B) the gain excluded from gross income under 
                section 1202.
          (8) Coordination with recapture of net ordinary 
        losses under section 1231.--If any amount is treated as 
        ordinary income under section 1231(c), such amount 
        shall be allocated among the separate categories of net 
        section 1231 gain (as defined in section 1231(c)(3)) in 
        such manner as the Secretary may by forms or 
        regulations prescribe.
          (9) Regulations.--The Secretary may prescribe such 
        regulations as are appropriate (including regulations 
        requiring reporting) to apply this subsection in the 
        case of sales and exchanges by pass-thru entities and 
        of interests in such entities.
          (10) Pass-thru entity defined.--For purposes of this 
        subsection, the term ``pass-thru entity'' means--
                  (A) a regulated investment company;
                  (B) a real estate investment trust;
                  (C) an S corporation;
                  (D) a partnership;
                  (E) an estate or trust;
                  (F) a common trust fund; and
                  (G) a qualified electing fund (as defined in 
                section 1295).
          (11) Dividends taxed as net capital gain.--
                  (A) In general.--For purposes of this 
                subsection, the term ``net capital gain'' means 
                net capital gain (determined without regard to 
                this paragraph) increased by qualified dividend 
                income.
                  (B) Qualified dividend income.--For purposes 
                of this paragraph--
                          (i) In general.--The term ``qualified 
                        dividend income'' means dividends 
                        received during the taxable year from--
                                  (I) domestic corporations, 
                                and
                                  (II) qualified foreign 
                                corporations.
                          (ii) Certain dividends excluded.--
                        Such term shall not include--
                                  (I) any dividend from a 
                                corporation which for the 
                                taxable year of the corporation 
                                in which the distribution is 
                                made, or the preceding taxable 
                                year, is a corporation exempt 
                                from tax under section 501 or 
                                521,
                                  (II) any amount allowed as a 
                                deduction under section 591 
                                (relating to deduction for 
                                dividends paid by mutual 
                                savings banks, etc.), and
                                  (III) any dividend described 
                                in section 404(k).
                          (iii) Coordination with section 
                        246(c).--Such term shall not include 
                        any dividend on any share of stock--
                                  (I) with respect to which the 
                                holding period requirements of 
                                section 246(c) are not met 
                                (determined by substituting in 
                                section 246(c) ``60 days'' for 
                                ``45 days'' each place it 
                                appears and by substituting 
                                ``121-day period'' for ``91-day 
                                period''), or
                                  (II) to the extent that the 
                                taxpayer is under an obligation 
                                (whether pursuant to a short 
                                sale or otherwise) to make 
                                related payments with respect 
                                to positions in substantially 
                                similar or related property.
                  (C) Qualified foreign corporations.--
                          (i) In general.--Except as otherwise 
                        provided in this paragraph, the term 
                        ``qualified foreign corporation'' means 
                        any foreign corporation if--
                                  (I) such corporation is 
                                incorporated in a possession of 
                                the United States, or
                                  (II) such corporation is 
                                eligible for benefits of a 
                                comprehensive income tax treaty 
                                with the United States which 
                                the Secretary determines is 
                                satisfactory for purposes of 
                                this paragraph and which 
                                includes an exchange of 
                                information program.
                          (ii) Dividends on stock readily 
                        tradable on United States securities 
                        market.--A foreign corporation not 
                        otherwise treated as a qualified 
                        foreign corporation under clause (i) 
                        shall be so treated with respect to any 
                        dividend paid by such corporation if 
                        the stock with respect to which such 
                        dividend is paid is readily tradable on 
                        an established securities market in the 
                        United States.
                          (iii) Exclusion of dividends of 
                        certain foreign corporations.--Such 
                        term shall not include--
                                  (I) any foreign corporation 
                                which for the taxable year of 
                                the corporation in which the 
                                dividend was paid, or the 
                                preceding taxable year, is a 
                                passive foreign investment 
                                company (as defined in section 
                                1297), and
                                  (II) any corporation which 
                                first becomes a surrogate 
                                foreign corporation (as defined 
                                in section 7874(a)(2)(B)) after 
                                the date of the enactment of 
                                this subclause, other than a 
                                foreign corporation which is 
                                treated as a domestic 
                                corporation under section 
                                7874(b).
                          (iv) Coordination with foreign tax 
                        credit limitation.--Rules similar to 
                        the rules of section 904(b)(2)(B) shall 
                        apply with respect to the dividend rate 
                        differential under this paragraph.
                  (D) Special rules.--
                          (i) Amounts taken into account as 
                        investment income.--Qualified dividend 
                        income shall not include any amount 
                        which the taxpayer takes into account 
                        as investment income under section 
                        163(d)(4)(B).
                          (ii) Extraordinary dividends.--If a 
                        taxpayer to whom this section applies 
                        receives, with respect to any share of 
                        stock, qualified dividend income from 1 
                        or more dividends which are 
                        extraordinary dividends (within the 
                        meaning of section 1059(c)), any loss 
                        on the sale or exchange of such share 
                        shall, to the extent of such dividends, 
                        be treated as long-term capital loss.
                          (iii) Treatment of dividends from 
                        regulated investment companies and real 
                        estate investment trusts.--A dividend 
                        received from a regulated investment 
                        company or a real estate investment 
                        trust shall be subject to the 
                        limitations prescribed in sections 854 
                        and 857.
  (i) Rate reductions after 2000.--
          (1) 10-percent rate bracket.--
                  (A) In general.--In the case of taxable years 
                beginning after December 31, 2000--
                          (i) the rate of tax under subsections 
                        (a), (b), (c), and (d) on taxable 
                        income not over the initial bracket 
                        amount shall be 10 percent, and
                          (ii) the 15 percent rate of tax shall 
                        apply only to taxable income over the 
                        initial bracket amount but not over the 
                        maximum dollar amount for the 15-
                        percent rate bracket.
                  (B) Initial bracket amount.--For purposes of 
                this paragraph, the initial bracket amount is--
                          (i) $14,000 in the case of subsection 
                        (a),
                          (ii) $10,000 in the case of 
                        subsection (b), and
                          (iii) 1/2 the amount applicable under 
                        clause (i) (after adjustment, if any, 
                        under subparagraph (C)) in the case of 
                        subsections (c) and (d).
                  (C) Inflation adjustment.--In prescribing the 
                tables under subsection (f) which apply with 
                respect to taxable years beginning in calendar 
                years after 2003--
                          (i) the cost-of-living adjustment 
                        shall be determined under subsection 
                        (f)(3) by substituting ``2002'' for 
                        ``2016'' in subparagraph (A)(ii) 
                        thereof, and
                          (ii) the adjustments under clause (i) 
                        shall not apply to the amount referred 
                        to in subparagraph (B)(iii).
                If any amount after adjustment under the 
                preceding sentence is not a multiple of $50, 
                such amount shall be rounded to the next lowest 
                multiple of $50.
          (2) 25-, 28-, and 33-percent rate brackets.--The 
        tables under subsections (a), (b), (c), (d), and (e) 
        shall be applied--
                  (A) by substituting ``25%'' for ``28%'' each 
                place it appears (before the application of 
                subparagraph (B)),
                  (B) by substituting ``28%'' for ``31%'' each 
                place it appears, and
                  (C) by substituting ``33%'' for ``36%'' each 
                place it appears.
          (3) Modifications to income tax brackets for high-
        income taxpayers.--
                  (A) 35-percent rate bracket.--In the case of 
                taxable years beginning after December 31, 
                2012--
                          (i) the rate of tax under subsections 
                        (a), (b), (c), and (d) on a taxpayer's 
                        taxable income in the highest rate 
                        bracket shall be 35 percent to the 
                        extent such income does not exceed an 
                        amount equal to the excess of--
                                  (I) the applicable threshold, 
                                over
                                  (II) the dollar amount at 
                                which such bracket begins, and
                          (ii) the 39.6 percent rate of tax 
                        under such subsections shall apply only 
                        to the taxpayer's taxable income in 
                        such bracket in excess of the amount to 
                        which clause (i) applies.
                  (B) Applicable threshold.--For purposes of 
                this paragraph, the term ``applicable 
                threshold'' means--
                          (i) $450,000 in the case of 
                        subsection (a),
                          (ii) $425,000 in the case of 
                        subsection (b),
                          (iii) $400,000 in the case of 
                        subsection (c), and
                          (iv) 1/2 the amount applicable under 
                        clause (i) (after adjustment, if any, 
                        under subparagraph (C)) in the case of 
                        subsection (d).
                  (C) Inflation adjustment.--For purposes of 
                this paragraph, with respect to taxable years 
                beginning in calendar years after 2013, each of 
                the dollar amounts under clauses (i), (ii), and 
                (iii) of subparagraph (B) shall be adjusted in 
                the same manner as under paragraph (1)(C)(i), 
                except that subsection (f)(3)(A)(ii) shall be 
                applied by substituting ``2012'' for ``2016''.
          (4) Adjustment of tables.--The Secretary shall adjust 
        the tables prescribed under subsection (f) to carry out 
        this subsection.
  (j) Modifications for taxable years 2018 through 2025.--
          (1) In general.--In the case of a taxable year 
        beginning after December 31, 2017, and before January 
        1, 2026--
                  (A) subsection (i) shall not apply, and
                  (B) this section (other than subsection (i)) 
                shall be applied as provided in paragraphs (2) 
                through (6).
          (2) Rate tables.--
                  (A) Married individuals filing joint returns 
                and surviving spouses.--The following table 
                shall be applied in lieu of the table contained 
                in subsection (a):
                  (B) Heads of households.--The following table 
                shall be applied in lieu of the table contained 
                in subsection (b):
                  (C) Unmarried individuals other than 
                surviving spouses and heads of households.--The 
                following table shall be applied in lieu of the 
                table contained in subsection (c):
                  (D) Married individuals filing separate 
                returns.--The following table shall be applied 
                in lieu of the table contained in subsection 
                (d):
                  (E) Estates and trusts.--The following table 
                shall be applied in lieu of the table contained 
                in subsection (e):
                  (F) References to rate tables.--Any reference 
                in this title to a rate of tax under subsection 
                (c) shall be treated as a reference to the 
                corresponding rate bracket under subparagraph 
                (C) of this paragraph, except that the 
                reference in section 3402(q)(1) to the third 
                lowest rate of tax applicable under subsection 
                (c) shall be treated as a reference to the 
                fourth lowest rate of tax under subparagraph 
                (C).
          (3) Adjustments.--
                  (A) No adjustment in 2018.--The tables 
                contained in paragraph (2) shall apply without 
                adjustment for taxable years beginning after 
                December 31, 2017, and before January 1, 2019.
                  (B) Subsequent years.--For taxable years 
                beginning after December 31, 2018, the 
                Secretary shall prescribe tables which shall 
                apply in lieu of the tables contained in 
                paragraph (2) in the same manner as under 
                paragraphs (1) and (2) of subsection (f) 
                (applied without regard to clauses (i) and (ii) 
                of subsection (f)(2)(A)), except that in 
                prescribing such tables--
                          (i) subsection (f)(3) shall be 
                        applied by substituting ``calendar year 
                        2017'' for ``calendar year 2016'' in 
                        subparagraph (A)(ii) thereof,
                          (ii) subsection (f)(7)(B) shall apply 
                        to any unmarried individual other than 
                        a surviving spouse or head of 
                        household, and
                          (iii) subsection (f)(8) shall not 
                        apply.
          [(4) Repealed. Pub. L. 116-94, div. O, title V, Sec.  
        501(a), Dec. 20, 2019, 133 Stat. 3180].--
          (5) Application of current income tax brackets to 
        capital gains brackets.--
                  (A) In general.--Section 1(h)(1) shall be 
                applied--
                          (i) by substituting ``below the 
                        maximum zero rate amount'' for ``which 
                        would (without regard to this 
                        paragraph) be taxed at a rate below 25 
                        percent'' in subparagraph (B)(i), and
                          (ii) by substituting ``below the 
                        maximum 15-percent rate amount'' for 
                        ``which would (without regard to this 
                        paragraph) be taxed at a rate below 
                        39.6 percent'' in subparagraph 
                        (C)(ii)(I).
                  (B) Maximum amounts defined.--For purposes of 
                applying section 1(h) with the modifications 
                described in subparagraph (A)--
                          (i) Maximum zero rate amount.--The 
                        maximum zero rate amount shall be--
                                  (I) in the case of a joint 
                                return or surviving spouse, 
                                $77,200,
                                  (II) in the case of an 
                                individual who is a head of 
                                household (as defined in 
                                section 2(b)), $51,700,
                                  (III) in the case of any 
                                other individual (other than an 
                                estate or trust), an amount 
                                equal to 1/2 of the amount in 
                                effect for the taxable year 
                                under subclause (I), and
                                  (IV) in the case of an estate 
                                or trust, $2,600.
                          (ii) Maximum 15-percent rate 
                        amount.--The maximum 15-percent rate 
                        amount shall be--
                                  (I) in the case of a joint 
                                return or surviving spouse, 
                                $479,000 (1/2 such amount in 
                                the case of a married 
                                individual filing a separate 
                                return),
                                  (II) in the case of an 
                                individual who is the head of a 
                                household (as defined in 
                                section 2(b)), $452,400,
                                  (III) in the case of any 
                                other individual (other than an 
                                estate or trust), $425,800, and
                                  (IV) in the case of an estate 
                                or trust, $12,700.
                  (C) Inflation adjustment.--In the case of any 
                taxable year beginning after 2018, each of the 
                dollar amounts in clauses (i) and (ii) of 
                subparagraph (B) 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 2017'' for ``calendar 
                        year 2016'' in subparagraph (A)(ii) 
                        thereof.
                If any increase under this subparagraph is not 
                a multiple of $50, such increase shall be 
                rounded to the next lowest multiple of $50.
          (6) Section 15 not to apply.--Section 15 shall not 
        apply to any change in a rate of tax by reason of this 
        subsection.

           *       *       *       *       *       *       *


PART VI--ALTERNATIVE MINIMUM TAX

           *       *       *       *       *       *       *



SEC. 56. ADJUSTMENTS IN COMPUTING ALTERNATIVE MINIMUM TAXABLE INCOME.

  (a) Adjustments applicable to all taxpayers.--In determining 
the amount of the alternative minimum taxable income for any 
taxable year the following treatment shall apply (in lieu of 
the treatment applicable for purposes of computing the regular 
tax):
          (1) Depreciation.--
                  (A) In general.--
                          (i) Property other than certain 
                        personal property.--Except as provided 
                        in clause (ii), the depreciation 
                        deduction allowable under section 167 
                        with respect to any tangible property 
                        placed in service after December 31, 
                        1986, shall be determined under the 
                        alternative system of section 168(g). 
                        In the case of property placed in 
                        service after December 31, 1998, the 
                        preceding sentence shall not apply but 
                        clause (ii) shall continue to apply.
                          (ii) 150-percent declining balance 
                        method for certain property.--The 
                        method of depreciation used shall be--
                                  (I) the 150 percent declining 
                                balance method,
                                  (II) switching to the 
                                straight line method for the 
                                1st taxable year for which 
                                using the straight line method 
                                with respect to the adjusted 
                                basis as of the beginning of 
                                the year will yield a higher 
                                allowance.
                 The preceding sentence shall not apply to any 
                section 1250 property (as defined in section 
                1250(c)) (and the straight line method shall be 
                used for such section 1250 property) or to any 
                other property if the depreciation deduction 
                determined under section 168 with respect to 
                such other property for purposes of the regular 
                tax is determined by using the straight line 
                method.
                  (B) Exception for certain property.--This 
                paragraph shall not apply to property described 
                in paragraph (1), (2), (3), or (4) of section 
                168(f), or in section 168(e)(3)(C)(iv).
                  (C) Coordination with transitional rules.--
                          (i) In general.--This paragraph shall 
                        not apply to property placed in service 
                        after December 31, 1986, to which the 
                        amendments made by section 201 of the 
                        Tax Reform Act of 1986 do not apply by 
                        reason of section 203, 204, or 251(d) 
                        of such Act.
                          (ii) Treatment of certain property 
                        placed in service before 1987.--This 
                        paragraph shall apply to any property 
                        to which the amendments made by section 
                        201 of the Tax Reform Act of 1986 apply 
                        by reason of an election under section 
                        203(a)(1)(B) of such Act without regard 
                        to the requirement of subparagraph (A) 
                        that the property be placed in service 
                        after December 31, 1986.
                  (D) Normalization rules.--With respect to 
                public utility property described in section 
                168(i)(10), the Secretary shall prescribe the 
                requirements of a normalization method of 
                accounting for this section.
          (2) Mining exploration and development costs.--
                  (A) In general.--With respect to each mine or 
                other natural deposit (other than an oil, gas, 
                or geothermal well) of the taxpayer, the amount 
                allowable as a deduction under section 616(a) 
                or 617(a) (determined without regard to section 
                291(b)) in computing the regular tax for costs 
                paid or incurred after December 31, 1986, shall 
                be capitalized and amortized ratably over the 
                10-year period beginning with the taxable year 
                in which the expenditures were made.
                  (B) Loss allowed.--If a loss is sustained 
                with respect to any property described in 
                subparagraph (A), a deduction shall be allowed 
                for the expenditures described in subparagraph 
                (A) for the taxable year in which such loss is 
                sustained in an amount equal to the lesser of--
                          (i) the amount allowable under 
                        section 165(a) for the expenditures if 
                        they had remained capitalized, or
                          (ii) the amount of such expenditures 
                        which have not previously been 
                        amortized under subparagraph (A).
          (3) Treatment of certain long-term contracts.--In the 
        case of any long-term contract entered into by the 
        taxpayer on or after March 1, 1986, the taxable income 
        from such contract shall be determined under the 
        percentage of completion method of accounting (as 
        modified by section 460(b)). For purposes of the 
        preceding sentence, in the case of a contract described 
        in section 460(e)(1), the percentage of the contract 
        completed shall be determined under section 460(b)(1) 
        by using the simplified procedures for allocation of 
        costs prescribed under section 460(b)(3). The first 
        sentence of this paragraph shall not apply to any home 
        construction contract (as defined in section 
        460(e)(6)).
          (4) Alternative tax net operating loss deduction.--
        The alternative tax net operating loss deduction shall 
        be allowed in lieu of the net operating loss deduction 
        allowed under section 172.
          (5) Pollution control facilities.--In the case of any 
        certified pollution control facility placed in service 
        after December 31, 1986, the deduction allowable under 
        section 169 (without regard to section 291) shall be 
        determined under the alternative system of section 
        168(g). In the case of such a facility placed in 
        service after December 31, 1998, such deduction shall 
        be determined under section 168 using the straight line 
        method.
          (6) Adjusted basis.--The adjusted basis of any 
        property to which paragraph (1) or (5) applies (or with 
        respect to which there are any expenditures to which 
        paragraph (2) or subsection (b)(2) applies) shall be 
        determined on the basis of the treatment prescribed in 
        paragraph (1), (2), or (5), or subsection (b)(2), 
        whichever applies.
          (7) Section 87 not applicable.--Section 87 (relating 
        to alcohol fuel credit) shall not apply.
  (b) Adjustments applicable to individuals.--In determining 
the amount of the alternative minimum taxable income of any 
taxpayer (other than a corporation), the following treatment 
shall apply (in lieu of the treatment applicable for purposes 
of computing the regular tax):
          (1) Limitation on deductions.--
                  (A) In general.--No deduction shall be 
                allowed--
                          (i) for any miscellaneous itemized 
                        deduction (as defined in section 
                        67(b)), or
                          (ii) for any taxes described in 
                        paragraph (1), (2), or (3) of section 
                        164(a) or clause (ii) of section 
                        164(b)(5)(A).
                Clause (ii) shall not apply to any amount 
                allowable in computing adjusted gross income.
                  (B) Interest.--In determining the amount 
                allowable as a deduction for interest, 
                subsections (d) and (h) of section 163 shall 
                apply, except that--
                          (i) in lieu of the exception under 
                        section 163(h)(2)(D), the term 
                        ``personal interest'' shall not include 
                        any qualified housing interest (as 
                        defined in subsection (e)),
                          (ii) interest on any specified 
                        private activity bond (and any amount 
                        treated as interest on a specified 
                        private activity bond under section 
                        57(a)(5)(B)), and any deduction 
                        referred to in section 57(a)(5)(A), 
                        shall be treated as includible in gross 
                        income (or as deductible) for purposes 
                        of applying section 163(d),
                          (iii) in lieu of the exception under 
                        section 163(d)(3)(B)(i), the term 
                        ``investment interest'' shall not 
                        include any qualified housing interest 
                        (as defined in subsection (e)), and
                          (iv) the adjustments of this section 
                        and sections 57 and 58 shall apply in 
                        determining net investment income under 
                        section 163(d).
                  (C) Treatment of certain recoveries.--No 
                recovery of any tax to which subparagraph 
                (A)(ii) applied shall be included in gross 
                income for purposes of determining alternative 
                minimum taxable income.
                  (D)  [Standard deduction] Guaranteed 
                deduction and deduction for personal exemptions 
                not allowed.--The [standard deduction] 
                guaranteed deduction under section 63(c), the 
                deduction for personal exemptions under section 
                151, and the deduction under section 642(b) 
                shall not be allowed.
                  (E) Section 68 not applicable.--Section 68 
                shall not apply.
          (2) Circulation and research and experimental 
        expenditures.--
                  (A) In general.--The amount allowable as a 
                deduction under section 173 or 174(a) in 
                computing the regular tax for amounts paid or 
                incurred after December 31, 1986, shall be 
                capitalized and--
                          (i) in the case of circulation 
                        expenditures described in section 173, 
                        shall be amortized ratably over the 3-
                        year period beginning with the taxable 
                        year in which the expenditures were 
                        made, or
                          (ii) in the case of research and 
                        experimental expenditures described in 
                        section 174(a), shall be amortized 
                        ratably over the 10-year period 
                        beginning with the taxable year in 
                        which the expenditures were made.
                  (B) Loss allowed.--If a loss is sustained 
                with respect to any property described in 
                subparagraph (A), a deduction shall be allowed 
                for the expenditures described in subparagraph 
                (A) for the taxable year in which such loss is 
                sustained in an amount equal to the lesser of--
                          (i) the amount allowable under 
                        section 165(a) for the expenditures if 
                        they had remained capitalized, or
                          (ii) the amount of such expenditures 
                        which have not previously been 
                        amortized under subparagraph (A).
                  (C) Exception for certain research and 
                experimental expenditures.--If the taxpayer 
                materially participates (within the meaning of 
                section 469(h)) in an activity, this paragraph 
                shall not apply to any amount allowable as a 
                deduction under section 174(a) for expenditures 
                paid or incurred in connection with such 
                activity.
          (3) Treatment of incentive stock options.--Section 
        421 shall not apply to the transfer of stock acquired 
        pursuant to the exercise of an incentive stock option 
        (as defined in section 422). Section 422(c)(2) shall 
        apply in any case where the disposition and the 
        inclusion for purposes of this part are within the same 
        taxable year and such section shall not apply in any 
        other case. The adjusted basis of any stock so acquired 
        shall be determined on the basis of the treatment 
        prescribed by this paragraph.
  (d) Alternative tax net operating loss deduction defined.--
          (1) In general.--For purposes of subsection (a)(4), 
        the term ``alternative tax net operating loss 
        deduction'' means the net operating loss deduction 
        allowable for the taxable year under section 172, 
        except that--
                  (A) the amount of such deduction shall not 
                exceed the sum of--
                          (i) the lesser of--
                                  (I) the amount of such 
                                deduction attributable to net 
                                operating losses (other than 
                                the deduction described in 
                                clause (ii)(I)), or
                                  (II) 90 percent of 
                                alternative minimum taxable 
                                income determined without 
                                regard to such deduction and 
                                the deduction under section 
                                199,1 plus
                          (ii) the lesser of--
                                  (I) the amount of such 
                                deduction attributable to an 
                                applicable net operating loss 
                                with respect to which an 
                                election is made under section 
                                172(b)(1)(H) (as in effect 
                                before its repeal by the Tax 
                                Increase Prevention Act of 
                                2014), or
                                  (II) alternative minimum 
                                taxable income determined 
                                without regard to such 
                                deduction and the deduction 
                                under section 199 1 
                                reduced by the amount 
                                determined under clause (i), 
                                and
                  (B) in determining the amount of such 
                deduction--
                          (i) the net operating loss (within 
                        the meaning of section 172(c)) for any 
                        loss year shall be adjusted as provided 
                        in paragraph (2), and
                          (ii) appropriate adjustments in the 
                        application of section 172(b)(2) shall 
                        be made to take into account the 
                        limitation of subparagraph (A).
          (2) Adjustments to net operating loss computation.--
                  (A) Post-1986 loss years.--In the case of a 
                loss year beginning after December 31, 1986, 
                the net operating loss for such year under 
                section 172(c) shall--
                          (i) be determined with the 
                        adjustments provided in this section 
                        and section 58, and
                          (ii) be reduced by the items of tax 
                        preference determined under section 57 
                        for such year.
                An item of tax preference shall be taken into 
                account under clause (ii) only to the extent 
                such item increased the amount of the net 
                operating loss for the taxable year under 
                section 172(c).
                  (B) Pre-1987 years.--In the case of loss 
                years beginning before January 1, 1987, the 
                amount of the net operating loss which may be 
                carried over to taxable years beginning after 
                December 31, 1986, for purposes of paragraph 
                (2), shall be equal to the amount which may be 
                carried from the loss year to the first taxable 
                year of the taxpayer beginning after December 
                31, 1986.
  (e) Qualified housing interest.--For purposes of this part--
          (1) In general.--The term ``qualified housing 
        interest'' means interest which is qualified residence 
        interest (as defined in section 163(h)(3)) and is paid 
        or accrued during the taxable year on indebtedness 
        which is incurred in acquiring, constructing, or 
        substantially improving any property which--
                  (A) is the principal residence (within the 
                meaning of section 121) of the taxpayer at the 
                time such interest accrues, or
                  (B) is a qualified dwelling which is a 
                qualified residence (within the meaning of 
                section 163(h)(4)).
        Such term also includes interest on any indebtedness 
        resulting from the refinancing of indebtedness meeting 
        the requirements of the preceding sentence; but only to 
        the extent that the amount of the indebtedness 
        resulting from such refinancing does not exceed the 
        amount of the refinanced indebtedness immediately 
        before the refinancing.
          (2) Qualified dwelling.--The term ``qualified 
        dwelling'' means any--
                  (A) house,
                  (B) apartment,
                  (C) condominium, or
                  (D) mobile home not used on a transient basis 
                (within the meaning of section 
                7701(a)(19)(C)(v)),
        including all structures or other property appurtenant 
        thereto.
          (3) Special rule for indebtedness incurred before 
        July 1, 1982.--The term ``qualified housing interest'' 
        includes interest which is qualified residence interest 
        (as defined in section 163(h)(3)) and is paid or 
        accrued on indebtedness which--
                  (A) was incurred by the taxpayer before July 
                1, 1982, and
                  (B) is secured by property which, at the time 
                such indebtedness was incurred, was--
                          (i) the principal residence (within 
                        the meaning of section 121) of the 
                        taxpayer, or
                          (ii) a qualified dwelling used by the 
                        taxpayer (or any member of his family 
                        (within the meaning of section 
                        267(c)(4))).

           *       *       *       *       *       *       *


Subchapter B--COMPUTATION OF TAXABLE INCOME

           *       *       *       *       *       *       *


  PART I--DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE 
INCOME, ETC.

           *       *       *       *       *       *       *



SEC. 63. TAXABLE INCOME DEFINED.

  (a) In general.--Except as provided in subsection (b), for 
purposes of this subtitle, the term ``taxable income'' means 
gross income minus the deductions allowed by this chapter 
(other than the [standard deduction] guaranteed deduction).
  (b) Individuals who do not itemize their deductions.--In the 
case of an individual who does not elect to itemize his 
deductions for the taxable year, for purposes of this subtitle, 
the term ``taxable income'' means adjusted gross income, 
minus--
          (1) the [standard deduction] guaranteed deduction,
          (2) the deduction for personal exemptions provided in 
        section 151,
          (3) any deduction provided in section 199A, and
          (4) the deduction provided in section 170(p).
  (c)  [Standard deduction] Guaranteed Deduction.--For purposes 
of this subtitle--
          (1) In general.--Except as otherwise provided in this 
        subsection, the term ``[standard deduction] guaranteed 
        deduction'' means the sum of--
                  (A) the basic [standard deduction] guaranteed 
                deduction, and
                  (B) the additional [standard deduction] 
                guaranteed deduction.
          (2) Basic [standard deduction] guaranteed 
        deduction.--For purposes of paragraph (1), the basic 
        [standard deduction] guaranteed deduction is--
                  (A) 200 percent of the dollar amount in 
                effect under subparagraph (C) for the taxable 
                year in the case of--
                          (i) a joint return, or
                          (ii) a surviving spouse (as defined 
                        in section 2(a)),
                  (B) $4,400 in the case of a head of household 
                (as defined in section 2(b)), or
                  (C) $3,000 in any other case.
          (3) Additional [standard deduction] guaranteed 
        deduction for aged and blind.--For purposes of 
        paragraph (1), the additional [standard deduction] 
        guaranteed deduction is the sum of each additional 
        amount to which the taxpayer is entitled under 
        subsection (f).
          (4) Adjustments for inflation.--In the case of any 
        taxable year beginning in a calendar year after 1988, 
        each dollar amount contained in paragraph (2)(B), 
        (2)(C), or (5) or subsection (f) 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, by substituting 
                for ``calendar year 2016'' in subparagraph 
                (A)(ii) thereof--
                          (i) ``calendar year 1987'' in the 
                        case of the dollar amounts contained in 
                        paragraph (2)(B), (2)(C), or (5)(A) or 
                        subsection (f), and
                          (ii) ``calendar year 1997'' in the 
                        case of the dollar amount contained in 
                        paragraph (5)(B).
          (5) Limitation on basic [standard deduction] 
        guaranteed deduction in the case of certain 
        dependents.--In the case of an individual with respect 
        to whom a deduction under section 151 is allowable to 
        another taxpayer for a taxable year beginning in the 
        calendar year in which the individual's taxable year 
        begins, the basic [standard deduction] guaranteed 
        deduction applicable to such individual for such 
        individual's taxable year shall not exceed the greater 
        of--
                  (A) $500, or
                  (B) the sum of $250 and such individual's 
                earned income.
          (6) Certain individuals, etc., not eligible for 
        [standard deduction] guaranteed deduction.--In the case 
        of--
                  (A) a married individual filing a separate 
                return where either spouse itemizes deductions,
                  (B) a nonresident alien individual,
                  (C) an individual making a return under 
                section 443(a)(1) for a period of less than 12 
                months on account of a change in his annual 
                accounting period, or
                  (D) an estate or trust, common trust fund, or 
                partnership,
        the [standard deduction] guaranteed deduction shall be 
        zero.
          (7) Special rules for taxable years 2018 through 
        2025.--In the case of a taxable year beginning after 
        December 31, 2017, and before January 1, 2026--
                  (A) Increase in [standard deduction] 
                guaranteed deduction.--Paragraph (2) shall be 
                applied--
                          (i) by substituting ``$18,000'' for 
                        ``$4,400'' in subparagraph (B), and
                          (ii) by substituting ``$12,000'' for 
                        ``$3,000'' in subparagraph (C).
                  (B) Adjustment for inflation.--
                          (i) In general.--Paragraph (4) shall 
                        not apply to the dollar amounts 
                        contained in paragraphs (2)(B) and 
                        (2)(C).
                          (ii) Adjustment of increased 
                        amounts.--In the case of a taxable year 
                        beginning after 2018, the $18,000 and 
                        $12,000 amounts in subparagraph (A) 
                        shall each be 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 the 
                                calendar year in which the 
                                taxable year begins, determined 
                                by substituting ``2017'' for 
                                ``2016'' in subparagraph 
                                (A)(ii) thereof.
                 If any increase under this clause is not a 
                multiple of $50, such increase shall be rounded 
                to the next lowest multiple of $50.
          (8) Bonus guaranteed deduction for taxable years 2024 
        and 2025.--
                  (A) In general.--In the case of a taxable 
                year beginning after December 31, 2023, and 
                before January 1, 2026, the guaranteed 
                deduction shall be increased by the amount of 
                the bonus guaranteed deduction.
                  (B) Bonus guaranteed deduction.--For purposes 
                of this paragraph, the bonus guaranteed 
                deduction is--
                          (i) twice the dollar amount in effect 
                        under clause (iii) in the case of a 
                        joint return or a surviving spouse (as 
                        defined in section 2(a)),
                          (ii) $3,000 in the case of a head of 
                        household, and
                          (iii) $2,000 in any other case.
                  (C) Adjustment for inflation.--In the case of 
                a taxable year beginning after 2024, the dollar 
                amounts in clauses (ii) and (iii) of 
                subparagraph (B) shall each be 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 
                        the calendar year in which the taxable 
                        year begins, determined by substituting 
                        ``2023'' for ``2016'' in subparagraph 
                        (A)(ii) thereof.
                 If any increase under this subparagraph is not 
                a multiple of $50, such increase shall be 
                rounded to the next lowest multiple of $50.
                  (D) Limitation on bonus guaranteed deduction 
                based on modified adjusted gross income.--
                          (i) In general.--The bonus guaranteed 
                        deduction determined under subparagraph 
                        (B) shall be reduced (but not below 
                        zero) by 5 percent of so much of the 
                        taxpayer's modified adjusted gross 
                        income as exceeds the threshold amount. 
                        For purposes of the preceding sentence, 
                        the term ``modified adjusted gross 
                        income'' means adjusted gross income 
                        increased by any amount excluded from 
                        gross income under section 911, 931, or 
                        933.
                          (ii) Threshold amount.--For purposes 
                        of clause (i), the threshold amount 
                        is--
                                  (I) $400,000 in the case of a 
                                joint return or a surviving 
                                spouse (as defined in section 
                                2(a)),
                                  (II) $300,000 in the case of 
                                a head of household, and
                                  (III) $200,000 in any other 
                                case.
                  (E) Bonus guaranteed deduction not allowed to 
                dependents.--In the case of any individual with 
                respect to whom paragraph (5) applies for any 
                taxable year, subparagraph (A) shall not apply.
  (d) Itemized deductions.--For purposes of this subtitle, the 
term ``itemized deductions'' means the deductions allowable 
under this chapter other than--
          (1) the deductions allowable in arriving at adjusted 
        gross income, and
          (2) any deduction referred to in any paragraph of 
        subsection (b).
  (e) Election to itemize.--
          (1) In general.--Unless an individual makes an 
        election under this subsection for the taxable year, no 
        itemized deduction shall be allowed for the taxable 
        year. For purposes of this subtitle, the determination 
        of whether a deduction is allowable under this chapter 
        shall be made without regard to the preceding sentence.
          (2) Time and manner of election.--Any election under 
        this subsection shall be made on the taxpayer's return, 
        and the Secretary shall prescribe the manner of 
        signifying such election on the return.
          (3) Change of election.--Under regulations prescribed 
        by the Secretary, a change of election with respect to 
        itemized deductions for any taxable year may be made 
        after the filing of the return for such year. If the 
        spouse of the taxpayer filed a separate return for any 
        taxable year corresponding to the taxable year of the 
        taxpayer, the change shall not be allowed unless, in 
        accordance with such regulations--
                  (A) the spouse makes a change of election 
                with respect to itemized deductions, for the 
                taxable year covered in such separate return, 
                consistent with the change of treatment sought 
                by the taxpayer, and
                  (B) the taxpayer and his spouse consent in 
                writing to the assessment (within such period 
                as may be agreed on with the Secretary) of any 
                deficiency, to the extent attributable to such 
                change of election, even though at the time of 
                the filing of such consent the assessment of 
                such deficiency would otherwise be prevented by 
                the operation of any law or rule of law.
        This paragraph shall not apply if the tax liability of 
        the taxpayer's spouse for the taxable year 
        corresponding to the taxable year of the taxpayer has 
        been compromised under section 7122.
  (f) Aged or blind additional amounts.--
          (1) Additional amounts for the aged.--The taxpayer 
        shall be entitled to an additional amount of $600--
                  (A) for himself if he has attained age 65 
                before the close of his taxable year, and
                  (B) for the spouse of the taxpayer if the 
                spouse has attained age 65 before the close of 
                the taxable year and an additional exemption is 
                allowable to the taxpayer for such spouse under 
                section 151(b).
          (2) Additional amount for blind.--The taxpayer shall 
        be entitled to an additional amount of $600--
                  (A) for himself if he is blind at the close 
                of the taxable year, and
                  (B) for the spouse of the taxpayer if the 
                spouse is blind as of the close of the taxable 
                year and an additional exemption is allowable 
                to the taxpayer for such spouse under section 
                151(b).
        For purposes of subparagraph (B), if the spouse dies 
        during the taxable year the determination of whether 
        such spouse is blind shall be made as of the time of 
        such death.
          (3) Higher amount for certain unmarried 
        individuals.--In the case of an individual who is not 
        married and is not a surviving spouse, paragraphs (1) 
        and (2) shall be applied by substituting ``$750'' for 
        ``$600''.
          (4) Blindness defined.--For purposes of this 
        subsection, an individual is blind only if his central 
        visual acuity does not exceed 20/200 in the better eye 
        with correcting lenses, or if his visual acuity is 
        greater than 20/200 but is accompanied by a limitation 
        in the fields of vision such that the widest diameter 
        of the visual field subtends an angle no greater than 
        20 degrees.
  (g) Marital status.--For purposes of this section, marital 
status shall be determined under section 7703.

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 Subchapter N--TAX BASED ON INCOME FROM SOURCES WITHIN OR WITHOUT THE 
UNITED STATES

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PART I--SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN INCOME

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SEC. 861. INCOME FROM SOURCES WITHIN THE UNITED STATES.

  (a) Gross income from sources within United States.--The 
following items of gross income shall be treated as income from 
sources within the United States:
          (1) Interest.--Interest from the United States or the 
        District of Columbia, and interest on bonds, notes, or 
        other interest-bearing obligations of noncorporate 
        residents or domestic corporations not including--
                  (A) interest--
                          (i) on deposits with a foreign branch 
                        of a domestic corporation or a domestic 
                        partnership if such branch is engaged 
                        in the commercial banking business, and
                          (ii) on amounts satisfying the 
                        requirements of subparagraph (B) of 
                        section 871(i)(3) which are paid by a 
                        foreign branch of a domestic 
                        corporation or a domestic partnership, 
                        and
                  (B) in the case of a foreign partnership, 
                which is predominantly engaged in the active 
                conduct of a trade or business outside the 
                United States, any interest not paid by a trade 
                or business engaged in by the partnership in 
                the United States and not allocable to income 
                which is effectively connected (or treated as 
                effectively connected) with the conduct of a 
                trade or business in the United States.
          (2) Dividends.--The amount received as dividends--
                  (A) from a domestic corporation, or
                  (B) from a foreign corporation unless less 
                than 25 percent of the gross income from all 
                sources of such foreign corporation for the 3-
                year period ending with the close of its 
                taxable year preceding the declaration of such 
                dividends (or for such part of such period as 
                the corporation has been in existence) was 
                effectively connected (or treated as 
                effectively connected other than income 
                described in section 884(d)(2)) with the 
                conduct of a trade or business within the 
                United States; but only in an amount which 
                bears the same ratio to such dividends as the 
                gross income of the corporation for such period 
                which was effectively connected (or treated as 
                effectively connected other than income 
                described in section 884(d)(2)) with the 
                conduct of a trade or business within the 
                United States bears to its gross income from 
                all sources; but dividends (other than 
                dividends for which a deduction is allowable 
                under section 245(b)) from a foreign 
                corporation shall, for purposes of subpart A of 
                part III (relating to foreign tax credit), be 
                treated as income from sources without the 
                United States to the extent (and only to the 
                extent) exceeding the amount which is 100/50th 
                of the amount of the deduction allowable under 
                section 245 in respect of such dividends, or
                  (C) from a foreign corporation to the extent 
                that such amount is required by section 243(e) 
                (relating to certain dividends from foreign 
                corporations) to be treated as dividends from a 
                domestic corporation which is subject to 
                taxation under this chapter, and to such extent 
                subparagraph (B) shall not apply to such 
                amount, or
                  (D) from a DISC or former DISC (as defined in 
                section 992(a)) except to the extent 
                attributable (as determined under regulations 
                prescribed by the Secretary) to qualified 
                export receipts described in section 993(a)(1) 
                (other than interest and gains described in 
                section 995(b)(1)).
        In the case of any dividend from a 20-percent owned 
        corporation (as defined in section 243(c)(2)), 
        subparagraph (B) shall be applied by substituting 
        ``100/65th'' for ``100/50th''.
          (3) Personal services.--Compensation for labor or 
        personal services performed in the United States; 
        except that compensation for labor or services 
        performed in the United States shall not be deemed to 
        be income from sources within the United States if--
                  (A) the labor or services are performed by a 
                nonresident alien individual temporarily 
                present in the United States for a period or 
                periods not exceeding a total of 90 days during 
                the taxable year,
                  (B) such compensation does not exceed $3,000 
                in the aggregate, and
                  (C) the compensation is for labor or services 
                performed as an employee of or under a contract 
                with--
                          (i) a nonresident alien, foreign 
                        partnership, or foreign corporation, 
                        not engaged in trade or business within 
                        the United States, or
                          (ii) an individual who is a citizen 
                        or resident of the United States, a 
                        domestic partnership, or a domestic 
                        corporation, if such labor or services 
                        are performed for an office or place of 
                        business maintained in a foreign 
                        country or in a possession of the 
                        United States by such individual, 
                        partnership, or corporation.
        In addition, compensation for labor or services 
        performed in the United States shall not be deemed to 
        be income from sources within the United States if the 
        labor or services are performed by a nonresident alien 
        individual in connection with the individual's 
        temporary presence in the United States as a regular 
        member of the crew of a foreign vessel engaged in 
        transportation between the United States and a foreign 
        country or a possession of the United States.
          (4) Rentals and royalties.--Rentals or royalties from 
        property located in the United States or from any 
        interest in such property, including rentals or 
        royalties for the use of or for the privilege of using 
        in the United States patents, copyrights, secret 
        processes and formulas, good will, trade-marks, trade 
        brands, franchises, and other like property.
          (5) Disposition of United States real property 
        interest.--Gains, profits, and income from the 
        disposition of a United States real property interest 
        (as defined in section 897(c)).
          (6) Sale or exchange of inventory property.--Gains, 
        profits, and income derived from the purchase of 
        inventory property (within the meaning of section 
        865(i)(1)) without the United States (other than within 
        a possession of the United States) and its sale or 
        exchange within the United States.
          (7) Amounts received as underwriting income (as 
        defined in section 832(b)(3)) derived from the issuing 
        (or reinsuring) of any insurance or annuity contract--
                  (A) in connection with property in, liability 
                arising out of an activity in, or in connection 
                with the lives or health of residents of, the 
                United States, or
                  (B) in connection with risks not described in 
                subparagraph (A) as a result of any arrangement 
                whereby another corporation receives a 
                substantially equal amount of premiums or other 
                consideration in respect to issuing (or 
                reinsuring) any insurance or annuity contract 
                in connection with property in, liability 
                arising out of activity in, or in connection 
                with the lives or health of residents of, the 
                United States.
          (8) Social security benefits.--Any social security 
        benefit (as defined in section 86(d)).
          (9) Guarantees.--Amounts received, directly or 
        indirectly, from--
                  (A) a noncorporate resident or domestic 
                corporation for the provision of a guarantee of 
                any indebtedness of such resident or 
                corporation, or
                  (B) any foreign person for the provision of a 
                guarantee of any indebtedness of such person, 
                if such amount is connected with income which 
                is effectively connected (or treated as 
                effectively connected) with the conduct of a 
                trade or business in the United States.
  (b) Taxable income from sources within United States.--From 
the items of gross income specified in subsection (a) as being 
income from sources within the United States there shall be 
deducted the expenses, losses, and other deductions properly 
apportioned or allocated thereto and a ratable part of any 
expenses, losses, or other deductions which cannot definitely 
be allocated to some item or class of gross income. The 
remainder, if any, shall be included in full as taxable income 
from sources within the United States. In the case of an 
individual who does not itemize deductions, an amount equal to 
the [standard deduction] guaranteed deduction shall be 
considered a deduction which cannot definitely be allocated to 
some item or class of gross income.
  (c) Special rule for application of subsection (a)(2)(B).--
For purposes of subsection (a)(2)(B), if the foreign 
corporation has no gross income from any source for the 3-year 
period (or part thereof) specified, the requirements of such 
subsection shall be applied with respect to the taxable year of 
such corporation in which the payment of the dividend is made.
  (d) Income from certain railroad rolling stock treated as 
income from sources within the United States.--
          (1) General rule.--For purposes of subsection (a) and 
        section 862(a), if--
                  (A) a taxpayer leases railroad rolling stock 
                which is section 1245 property (as defined in 
                section 1245(a)(3)) to a domestic common 
                carrier by railroad or a corporation which is 
                controlled, directly or indirectly, by one or 
                more such common carriers, and
                  (B) the use under such lease is expected to 
                be use within the United States,
        all amounts includible in gross income by the taxpayer 
        with respect to such railroad rolling stock (including 
        gain from sale or other disposition of such railroad 
        rolling stock) shall be treated as income from sources 
        within the United States. The requirements of 
        subparagraph (B) of the preceding sentence shall be 
        treated as satisfied if the only expected use outside 
        the United States is use by a person (whether or not a 
        United States person) in Canada or Mexico on a 
        temporary basis which is not expected to exceed a total 
        of 90 days in any taxable year.
          (2) Paragraph (1) not to apply where lessor is a 
        member of controlled group which includes a railroad.--
        Paragraph (1) shall not apply to a lease between two 
        members of the same controlled group of corporations 
        (as defined in section 1563) if any member of such 
        group is a domestic common carrier by railroad or a 
        switching or terminal company all of whose stock is 
        owned by one or more domestic common carriers by 
        railroad.
          (3) Denial of foreign tax credit.--No credit shall be 
        allowed under section 901 for any payments to foreign 
        countries with respect to any amount received by the 
        taxpayer with respect to railroad rolling stock which 
        is subject to paragraph (1).
  (e) Cross reference.--For treatment of interest paid by the 
branch of a foreign corporation, see section 884(f).

SEC. 862. INCOME FROM SOURCES WITHOUT THE UNITED STATES.

  (a) Gross income from sources without United States.--The 
following items of gross income shall be treated as income from 
sources without the United States:
          (1) interest other than that derived from sources 
        within the United States as provided in section 
        861(a)(1);
          (2) dividends other than those derived from sources 
        within the United States as provided in section 
        861(a)(2);
          (3) compensation for labor or personal services 
        performed without the United States;
          (4) rentals or royalties from property located 
        without the United States or from any interest in such 
        property, including rentals or royalties for the use of 
        or for the privilege of using without the United States 
        patents, copyrights, secret processes and formulas, 
        good will, trade-marks, trade brands, franchises, and 
        other like properties;
          (5) gains, profits, and income from the sale or 
        exchange of real property located without the United 
        States;
          (6) gains, profits, and income derived from the 
        purchase of inventory property (within the meaning of 
        section 865(i)(1)) within the United States and its 
        sale or exchange without the United States;
          (7) underwriting income other than that derived from 
        sources within the United States as provided in section 
        861(a)(7);
          (8) gains, profits, and income from the disposition 
        of a United States real property interest (as defined 
        in section 897(c)) when the real property is located in 
        the Virgin Islands; and
          (9) amounts received, directly or indirectly, from a 
        foreign person for the provision of a guarantee of 
        indebtedness of such person other than amounts which 
        are derived from sources within the United States as 
        provided in section 861(a)(9).
  (b) Taxable income from sources without United States.--From 
the items of gross income specified in subsection (a) there 
shall be deducted the expenses, losses, and other deductions 
properly apportioned or allocated thereto, and a ratable part 
of any expenses, losses, or other deductions which cannot 
definitely be allocated to some item or class of gross income. 
The remainder, if any, shall be treated in full as taxable 
income from sources without the United States. In the case of 
an individual who does not itemize deductions, an amount equal 
to the [standard deduction] guaranteed deduction shall be 
considered a deduction which cannot definitely be allocated to 
some item or class of gross income.

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Subchapter V--TITLE 11 CASES

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SEC. 1398. RULES RELATING TO INDIVIDUALS' TITLE 11 CASES.

  (a) Cases to which section applies.--Except as provided in 
subsection (b), this section shall apply to any case under 
chapter 7 (relating to liquidations) or chapter 11 (relating to 
reorganizations) of title 11 of the United States Code in which 
the debtor is an individual.
  (b) Exceptions where case is dismissed, etc..--
          (1) Section does not apply where case is dismissed.--
        This section shall not apply if the case under chapter 
        7 or 11 of title 11 of the United States Code is 
        dismissed.
          (2) Section does not apply at partnership level.--For 
        purposes of subsection (a), a partnership shall not be 
        treated as an individual, but the interest in a 
        partnership of a debtor who is an individual shall be 
        taken into account under this section in the same 
        manner as any other interest of the debtor.
  (c) Computation and payment of tax; basic [standard 
deduction] Guaranteed deduction.--
          (1) Computation and payment of tax.--Except as 
        otherwise provided in this section, the taxable income 
        of the estate shall be computed in the same manner as 
        for an individual. The tax shall be computed on such 
        taxable income and shall be paid by the trustee.
          (2) Tax rates.--The tax on the taxable income of the 
        estate shall be determined under subsection (d) of 
        section 1.
          (3) Basic [standard deduction] guaranteed 
        deduction.--In the case of an estate which does not 
        itemize deductions, the basic [standard deduction] 
        guaranteed deduction for the estate for the taxable 
        year shall be the same as for a married individual 
        filing a separate return for such year.
  (d) Taxable year of debtors.--
          (1) General rule.--Except as provided in paragraph 
        (2), the taxable year of the debtor shall be determined 
        without regard to the case under title 11 of the United 
        States Code to which this section applies.
          (2) Election to terminate debtor's year when case 
        commences.--
                  (A) In general.--Notwithstanding section 442, 
                the debtor may (without the approval of the 
                Secretary) elect to treat the debtor's taxable 
                year which includes the commencement date as 2 
                taxable years--
                          (i) the first of which ends on the 
                        day before the commencement date, and
                          (ii) the second of which begins on 
                        the commencement date.
                  (B) Spouse may join in election.--In the case 
                of a married individual (within the meaning of 
                section 7703), the spouse may elect to have the 
                debtor's election under subparagraph (A) also 
                apply to the spouse, but only if the debtor and 
                the spouse file a joint return for the taxable 
                year referred to in subparagraph (A)(i).
                  (C) No election where debtor has no assets.--
                No election may be made under subparagraph (A) 
                by a debtor who has no assets other than 
                property which the debtor may treat as exempt 
                property under section 522 of title 11 of the 
                United States Code.
                  (D) Time for making election.--An election 
                under subparagraph (A) or (B) may be made only 
                on or before the due date for filing the return 
                for the taxable year referred to in 
                subparagraph (A)(i). Any such election, once 
                made, shall be irrevocable.
                  (E) Returns.--A return shall be made for each 
                of the taxable years specified in subparagraph 
                (A).
                  (F) Annualization.--For purposes of 
                subsections (b), (c), and (d) of section 443, a 
                return filed for either of the taxable years 
                referred to in subparagraph (A) shall be 
                treated as a return made under paragraph (1) of 
                subsection (a) of section 443.
          (3) Commencement date defined.--For purposes of this 
        subsection, the term ``commencement date'' means the 
        day on which the case under title 11 of the United 
        States Code to which this section applies commences.
  (e) Treatment of income, deductions, and credits.--
          (1) Estate's share of debtor's income.--The gross 
        income of the estate for each taxable year shall 
        include the gross income of the debtor to which the 
        estate is entitled under title 11 of the United States 
        Code. The preceding sentence shall not apply to any 
        amount received or accrued by the debtor before the 
        commencement date (as defined in subsection (d)(3)).
          (2) Debtor's share of debtor's income.--The gross 
        income of the debtor for any taxable year shall not 
        include any item to the extent that such item is 
        included in the gross income of the estate by reason of 
        paragraph (1).
          (3) Rule for making determinations with respect to 
        deductions, credits, and employment taxes.--Except as 
        otherwise provided in this section, the determination 
        of whether or not any amount paid or incurred by the 
        estate--
                  (A) is allowable as a deduction or credit 
                under this chapter, or
                  (B) is wages for purposes of subtitle C,
        shall be made as if the amount were paid or incurred by 
        the debtor and as if the debtor were still engaged in 
        the trades and businesses, and in the activities, the 
        debtor was engaged in before the commencement of the 
        case.
  (f) Treatment of transfers between debtor and estate.--
          (1) Transfer to estate not treated as disposition.--A 
        transfer (other than by sale or exchange) of an asset 
        from the debtor to the estate shall not be treated as a 
        disposition for purposes of any provision of this title 
        assigning tax consequences to a disposition, and the 
        estate shall be treated as the debtor would be treated 
        with respect to such asset.
          (2) Transfer from estate to debtor not treated as 
        disposition.--In the case of a termination of the 
        estate, a transfer (other than by sale or exchange) of 
        an asset from the estate to the debtor shall not be 
        treated as a disposition for purposes of any provision 
        of this title assigning tax consequences to a 
        disposition, and the debtor shall be treated as the 
        estate would be treated with respect to such asset.
  (g) Estate succeeds to tax attributes of debtor.--The estate 
shall succeed to and take into account the following items 
(determined as of the first day of the debtor's taxable year in 
which the case commences) of the debtor--
          (1) Net operating loss carryovers.--The net operating 
        loss carryovers determined under section 172.
          (2) Charitable contributions carryovers.--The 
        carryover of excess charitable contributions determined 
        under section 170(d)(1).
          (3) Recovery of tax benefit items.--Any amount to 
        which section 111 (relating to recovery of tax benefit 
        items) applies.
          (4) Credit carryovers, etc..--The carryovers of any 
        credit, and all other items which, but for the 
        commencement of the case, would be required to be taken 
        into account by the debtor with respect to any credit.
          (5) Capital loss carryovers.--The capital loss 
        carryover determined under section 1212.
          (6) Basis, holding period, and character of assets.--
        In the case of any asset acquired (other than by sale 
        or exchange) by the estate from the debtor, the basis, 
        holding period, and character it had in the hands of 
        the debtor.
          (7) Method of accounting.--The method of accounting 
        used by the debtor.
          (8) Other attributes.--Other tax attributes of the 
        debtor, to the extent provided in regulations 
        prescribed by the Secretary as necessary or appropriate 
        to carry out the purposes of this section.
  (h) Administration, liquidation, and reorganization expenses; 
carryovers and carrybacks of certain excess expenses.--
          (1) Administration, liquidation, and reorganization 
        expenses.--Any administrative expense allowed under 
        section 503 of title 11 of the United States Code, and 
        any fee or charge assessed against the estate under 
        chapter 123 of title 28 of the United States Code, to 
        the extent not disallowed under any other provision of 
        this title, shall be allowed as a deduction.
          (2) Carryback and carryover of excess administrative 
        costs, etc., to estate taxable years.--
                  (A) Deduction allowed.--There shall be 
                allowed as a deduction for the taxable year an 
                amount equal to the aggregate of (i) the 
                administrative expense carryovers to such year, 
                plus (ii) the administrative expense carrybacks 
                to such year.
                  (B) Administrative expense loss, etc..--If a 
                net operating loss would be created or 
                increased for any estate taxable year if 
                section 172(c) were applied without the 
                modification contained in paragraph (4) of 
                section 172(d), then the amount of the net 
                operating loss so created (or the amount of the 
                increase in the net operating loss) shall be an 
                administrative expense loss for such taxable 
                year which shall be an administrative expense 
                carryback to each of the 3 preceding taxable 
                years and an administrative expense carryover 
                to each of the 7 succeeding taxable years.
                  (C) Determination of amount carried to each 
                taxable year.--The portion of any 
                administrative expense loss which may be 
                carried to any other taxable year shall be 
                determined under section 172(b)(2), except that 
                for each taxable year the computation under 
                section 172(b)(2) with respect to the net 
                operating loss shall be made before the 
                computation under this paragraph.
                  (D) Administrative expense deductions allowed 
                only to estate.--The deductions allowable under 
                this chapter solely by reason of paragraph (1), 
                and the deduction provided by subparagraph (A) 
                of this paragraph, shall be allowable only to 
                the estate.
  (i) Debtor succeeds to tax attributes of estate.--In the case 
of a termination of an estate, the debtor shall succeed to and 
take into account the items referred to in paragraphs (1), (2), 
(3), (4), (5), and (6) of subsection (g) in a manner similar to 
that provided in such paragraphs (but taking into account that 
the transfer is from the estate to the debtor instead of from 
the debtor to the estate). In addition, the debtor shall 
succeed to and take into account the other tax attributes of 
the estate, to the extent provided in regulations prescribed by 
the Secretary as necessary or appropriate to carry out the 
purposes of this section.
  (j) Other special rules.--
          (1) Change of accounting period without approval.--
        Notwithstanding section 442, the estate may change its 
        annual accounting period one time without the approval 
        of the Secretary.
          (2) Treatment of certain carrybacks.--
                  (A) Carrybacks from estate.--If any carryback 
                year of the estate is a taxable year before the 
                estate's first taxable year, the carryback to 
                such carryback year shall be taken into account 
                for the debtor's taxable year corresponding to 
                the carryback year.
                  (B) Carrybacks from debtor's activities.--The 
                debtor may not carry back to a taxable year 
                before the debtor's taxable year in which the 
                case commences any carryback from a taxable 
                year ending after the case commences.
                  (C) Carryback and carryback year defined.--
                For purposes of this paragraph--
                          (i) Carryback.--The term 
                        ``carryback'' means a net operating 
                        loss carryback under section 172 or a 
                        carryback of any credit provided by 
                        part IV of subchapter A.
                          (ii) Carryback year.--The term 
                        ``carryback year'' means the taxable 
                        year to which a carryback is carried.

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Subtitle C--Employment Taxes

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CHAPTER 24--COLLECTION OF INCOME TAX AT SOURCE ON WAGES

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SEC. 3402. INCOME TAX COLLECTED AT SOURCE.

  (a) Requirement of withholding.--
          (1) In general.--Except as otherwise provided in this 
        section, every employer making payment of wages shall 
        deduct and withhold upon such wages a tax determined in 
        accordance with tables or computational procedures 
        prescribed by the Secretary. Any tables or procedures 
        prescribed under this paragraph shall--
                  (A) apply with respect to the amount of wages 
                paid during such periods as the Secretary may 
                prescribe, and
                  (B) be in such form, and provide for such 
                amounts to be deducted and withheld, as the 
                Secretary determines to be most appropriate to 
                carry out the purposes of this chapter and to 
                reflect the provisions of chapter 1 applicable 
                to such periods.
          (2) Amount of wages.--For purposes of applying tables 
        or procedures prescribed under paragraph (1), the term 
        ``the amount of wages'' means the amount by which the 
        wages exceed the taxpayer's withholding allowance, 
        prorated to the payroll period.
  (b) Percentage method of withholding.--(1) If wages are paid 
with respect to a period which is not a payroll period, the 
withholding allowance allowable with respect to each payment of 
such wages shall be the allowance allowed for a miscellaneous 
payroll period containing a number of days (including Sundays 
and holidays) equal to the number of days in the period with 
respect to which such wages are paid.
  (2) In any case in which wages are paid by an employer 
without regard to any payroll period or other period, the 
withholding allowance allowable with respect to each payment of 
such wages shall be the allowance allowed for a miscellaneous 
payroll period containing a number of days equal to the number 
of days (including Sundays and holidays) which have elapsed 
since the date of the last payment of such wages by such 
employer during the calendar year, or the date of commencement 
of employment with such employer during such year, or January 1 
of such year, whichever is the later.
  (3) In any case in which the period, or the time described in 
paragraph (2), in respect of any wages is less than one week, 
the Secretary, under regulations prescribed by him, may 
authorize an employer to compute the tax to be deducted and 
withheld as if the aggregate of the wages paid to the employee 
during the calendar week were paid for a weekly payroll period.
  (4) In determining the amount to be deducted and withheld 
under this subsection, the wages may, at the election of the 
employer, be computed to the nearest dollar.
  (c) Wage bracket withholding.--(1) At the election of the 
employer with respect to any employee, the employer shall 
deduct and withhold upon the wages paid to such employee a tax 
(in lieu of the tax required to be deducted and withheld under 
subsection (a)) determined in accordance with tables prescribed 
by the Secretary in accordance with paragraph (6).
  (2) If wages are paid with respect to a period which is not a 
payroll period, the amount to be deducted and withheld shall be 
that applicable in the case of a miscellaneous payroll period 
containing a number of days (including Sundays and holidays) 
equal to the number of days in the period with respect to which 
such wages are paid.
  (3) In any case in which wages are paid by an employer 
without regard to any payroll period or other period, the 
amount to be deducted and withheld shall be that applicable in 
the case of a miscellaneous payroll period containing a number 
of days equal to the number of days (including Sundays and 
holidays) which have elapsed since the date of the last payment 
of such wages by such employer during the calendar year, or the 
date of commencement of employment with such employer during 
such year, or January 1 of such year, whichever is the later.
  (4) In any case in which the period, or the time described in 
paragraph (3), in respect of any wages is less than one week, 
the Secretary, under regulations prescribed by him, may 
authorize an employer to determine the amount to be deducted 
and withheld under the tables applicable in the case of a 
weekly payroll period, in which case the aggregate of the wages 
paid to the employee during the calendar week shall be 
considered the weekly wages.
  (5) If the wages exceed the highest wage bracket, in 
determining the amount to be deducted and withheld under this 
subsection, the wages may, at the election of the employer, be 
computed to the nearest dollar.
  (6) In the case of wages paid after December 31, 1969, the 
amount deducted and withheld under paragraph (1) shall be 
determined in accordance with tables prescribed by the 
Secretary. In the tables so prescribed, the amounts set forth 
as amounts of wages and amounts of income tax to be deducted 
and withheld shall be computed on the basis of the table for an 
annual payroll period prescribed pursuant to subsection (a).
  (d) Tax paid by recipient.--If the employer, in violation of 
the provisions of this chapter, fails to deduct and withhold 
the tax under this chapter, and thereafter the tax against 
which such tax may be credited is paid, the tax so required to 
be deducted and withheld shall not be collected from the 
employer; but this subsection shall in no case relieve the 
employer from liability for any penalties or additions to the 
tax otherwise applicable in respect of such failure to deduct 
and withhold.
  (e) Included and excluded wages.--If the remuneration paid by 
an employer to an employee for services performed during one-
half or more of any payroll period of not more than 31 
consecutive days constitutes wages, all the remuneration paid 
by such employer to such employee for such period shall be 
deemed to be wages; but if the remuneration paid by an employer 
to an employee for services performed during more than one-half 
of any such payroll period does not constitute wages, then none 
of the remuneration paid by such employer to such employee for 
such period shall be deemed to be wages.
  (f) Withholding allowance.--
          (1) In general.--Under rules determined by the 
        Secretary, an employee receiving wages shall on any day 
        be entitled to a withholding allowance determined based 
        on--
                  (A) whether the employee is an individual for 
                whom a deduction is allowable with respect to 
                another taxpayer under section 151;
                  (B) if the employee is married, whether the 
                employee's spouse is entitled to an allowance, 
                or would be so entitled if such spouse were an 
                employee receiving wages, under subparagraph 
                (A) or (D), but only if such spouse does not 
                have in effect a withholding allowance 
                certificate claiming such allowance;
                  (C) the number of individuals with respect to 
                whom, on the basis of facts existing at the 
                beginning of such day, there may reasonably be 
                expected to be allowable a credit under section 
                24 (determined after application of subsection 
                (j) thereof) for the taxable year under 
                subtitle A in respect of which amounts deducted 
                and withheld under this chapter in the calendar 
                year in which such day falls are allowed as a 
                credit;
                  (D) any additional amounts to which the 
                employee elects to take into account under 
                subsection (m), but only if the employee's 
                spouse does not have in effect a withholding 
                allowance certificate making such an election;
                  (E) the [standard deduction] guaranteed 
                deduction allowable to such employee (one-half 
                of such [standard deduction] guaranteed 
                deduction in the case of an employee who is 
                married (as determined under section 7703) and 
                whose spouse is an employee receiving wages 
                subject to withholding); and
                  (F) whether the employee has withholding 
                allowance certificates in effect with respect 
                to more than 1 employer.
          (2) Allowance certificates.--
                  (A) On commencement of employment.--On or 
                before the date of the commencement of 
                employment with an employer, the employee shall 
                furnish the employer with a signed withholding 
                allowance certificate relating to the 
                withholding allowance claimed by the employee, 
                which shall in no event exceed the amount to 
                which the employee is entitled.
                  (B) Change of status.--If, on any day during 
                the calendar year, an employee's withholding 
                allowance is in excess of the withholding 
                allowance to which the employee would be 
                entitled had the employee submitted a true and 
                accurate withholding allowance certificate to 
                the employer on that day, the employee shall 
                within 10 days thereafter furnish the employer 
                with a new withholding allowance certificate. 
                If, on any day during the calendar year, an 
                employee's withholding allowance is greater 
                than the withholding allowance claimed, the 
                employee may furnish the employer with a new 
                withholding allowance certificate relating to 
                the withholding allowance to which the employee 
                is so entitled, which shall in no event exceed 
                the amount to which the employee is entitled on 
                such day.
                  (C) Change of status which affects next 
                calendar year.--If on any day during the 
                calendar year the withholding allowance to 
                which the employee will be, or may reasonably 
                be expected to be, entitled at the beginning of 
                the employee's next taxable year under subtitle 
                A is different from the allowance to which the 
                employee is entitled on such day, the employee 
                shall, in such cases and at such times as the 
                Secretary shall by regulations prescribe, 
                furnish the employer with a withholding 
                allowance certificate relating to the 
                withholding allowance which the employee claims 
                with respect to such next taxable year, which 
                shall in no event exceed the withholding 
                allowance to which the employee will be, or may 
                reasonably be expected to be, so entitled.
          (3) When certificate takes effect.--
                  (A) First certificate furnished.--A 
                withholding allowance certificate furnished the 
                employer in cases in which no previous such 
                certificate is in effect shall take effect as 
                of the beginning of the first payroll period 
                ending, or the first payment of wages made 
                without regard to a payroll period, on or after 
                the date on which such certificate is so 
                furnished.
                  (B) Furnished to take place of existing 
                certificate.--
                          (i) In general.--Except as provided 
                        in clauses (ii) and (iii), a 
                        withholding allowance certificate 
                        furnished to the employer in cases in 
                        which a previous such certificate is in 
                        effect shall take effect as of the 
                        beginning of the 1st payroll period 
                        ending (or the 1st payment of wages 
                        made without regard to a payroll 
                        period) on or after the 30th day after 
                        the day on which such certificate is so 
                        furnished.
                          (ii) Employer may elect earlier 
                        effective date.--At the election of the 
                        employer, a certificate described in 
                        clause (i) may be made effective 
                        beginning with any payment of wages 
                        made on or after the day on which the 
                        certificate is so furnished and before 
                        the 30th day referred to in clause (i).
                          (iii) Change of status which affects 
                        next year.--Any certificate furnished 
                        pursuant to paragraph (2)(C) shall not 
                        take effect, and may not be made 
                        effective, with respect to any payment 
                        of wages made in the calendar year in 
                        which the certificate is furnished.
          (4) Period during which certificate remains in 
        effect.--A withholding allowance certificate which 
        takes effect under this subsection, or which on 
        December 31, 1954, was in effect under the 
        corresponding subsection of prior law, shall continue 
        in effect with respect to the employer until another 
        such certificate takes effect under this subsection.
          (5) Form and contents of certificate.--Withholding 
        allowance certificates shall be in such form and 
        contain such information as the Secretary may by 
        regulations prescribe.
          (6) Exemption of certain nonresident aliens.--
        Notwithstanding the provisions of paragraph (1), a 
        nonresident alien individual (other than an individual 
        described in section 3401(a)(6)(A) or (B)) shall be 
        entitled to only one withholding exemption.
          (7) Allowance where certificate with another employer 
        is in effect.--If a withholding allowance certificate 
        is in effect with respect to one employer, an employee 
        shall not be entitled under a certificate in effect 
        with any other employer to any withholding allowance 
        which he has claimed under such first certificate.
  (g) Overlapping pay periods, and payment by agent or 
fiduciary.--If a payment of wages is made to an employee by an 
employer--
          (1) with respect to a payroll period or other period, 
        any part of which is included in a payroll period or 
        other period with respect to which wages are also paid 
        to such employee by such employer, or
          (2) without regard to any payroll period or other 
        period, but on or prior to the expiration of a payroll 
        period or other period with respect to which wages are 
        also paid to such employee by such employer, or
          (3) with respect to a period beginning in one and 
        ending in another calendar year, or
          (4) through an agent, fiduciary, or other person who 
        also has the control, receipt, custody, or disposal of, 
        or pays, the wages payable by another employer to such 
        employee,
the manner of withholding and the amount to be deducted and 
withheld under this chapter shall be determined in accordance 
with regulations prescribed by the Secretary under which the 
withholding allowance allowed to the employee in any calendar 
year shall approximate the withholding allowance allowable with 
respect to an annual payroll period.
  (h) Alternative methods of computing amount to be withheld.--
The Secretary may, under regulations prescribed by him, 
authorize--
          (1) Withholding on basis of average wages.--An 
        employer--
                  (A) to estimate the wages which will be paid 
                to any employee in any quarter of the calendar 
                year,
                  (B) to determine the amount to be deducted 
                and withheld upon each payment of wages to such 
                employee during such quarter as if the 
                appropriate average of the wages so estimated 
                constituted the actual wages paid, and
                  (C) to deduct and withhold upon any payment 
                of wages to such employee during such quarter 
                (and, in the case of tips referred to in 
                subsection (k), within 30 days thereafter) such 
                amount as may be necessary to adjust the amount 
                actually deducted and withheld upon the wages 
                of such employee during such quarter to the 
                amount required to be deducted and withheld 
                during such quarter without regard to this 
                subsection.
          (2) Withholding on basis of annualized wages.--An 
        employer to determine the amount of tax to be deducted 
        and withheld upon a payment of wages to an employee for 
        a payroll period by--
                  (A) multiplying the amount of an employee's 
                wages for a payroll period by the number of 
                such payroll periods in the calendar year,
                  (B) determining the amount of tax which would 
                be required to be deducted and withheld upon 
                the amount determined under subparagraph (A) if 
                such amount constituted the actual wages for 
                the calendar year and the payroll period of the 
                employee were an annual payroll period, and
                  (C) dividing the amount of tax determined 
                under subparagraph (B) by the number of payroll 
                periods (described in subparagraph (A)) in the 
                calendar year.
          (3) Withholding on basis of cumulative wages.--An 
        employer, in the case of any employee who requests to 
        have the amount of tax to be withheld from his wages 
        computed on the basis of his cumulative wages, to--
                  (A) add the amount of the wages to be paid to 
                the employee for the payroll period to the 
                total amount of wages paid by the employer to 
                the employee during the calendar year,
                  (B) divide the aggregate amount of wages 
                computed under subparagraph (A) by the number 
                of payroll periods to which such aggregate 
                amount of wages relates,
                  (C) compute the total amount of tax that 
                would have been required to be deducted and 
                withheld under subsection (a) if the average 
                amount of wages (as computed under subparagraph 
                (B)) had been paid to the employee for the 
                number of payroll periods to which the 
                aggregate amount of wages (computed under 
                subparagraph (A)) relates,
                  (D) determine the excess, if any, of the 
                amount of tax computed under subparagraph (C) 
                over the total amount of tax deducted and 
                withheld by the employer from wages paid to the 
                employee during the calendar year, and
                  (E) deduct and withhold upon the payment of 
                wages (referred to in subparagraph (A)) to the 
                employee an amount equal to the excess (if any) 
                computed under subparagraph (D).
          (4) Other methods.--An employer to determine the 
        amount of tax to be deducted and withheld upon the 
        wages paid to an employee by any other method which 
        will require the employer to deduct and withhold upon 
        such wages substantially the same amount as would be 
        required to be deducted and withheld by applying 
        subsection (a) or (c), either with respect to a payroll 
        period or with respect to the entire taxable year.
  (i) Changes in withholding.--
          (1) In general.--The Secretary may by regulations 
        provide for increases in the amount of withholding 
        otherwise required under this section in cases where 
        the employee requests such changes.
          (2) Treatment as tax.--Any increased withholding 
        under paragraph (1) shall for all purposes be 
        considered tax required to be deducted and withheld 
        under this chapter.
  (j) Noncash remuneration to retail commission salesman.--In 
the case of remuneration paid in any medium other than cash for 
services performed by an individual as a retail salesman for a 
person, where the service performed by such individual for such 
person is ordinarily performed for remuneration solely by way 
of cash commission an employer shall not be required to deduct 
or withhold any tax under this subchapter with respect to such 
remuneration, provided that such employer files with the 
Secretary such information with respect to such remuneration as 
the Secretary may by regulation prescribe.
  (k) Tips.--In the case of tips which constitute wages, 
subsection (a) shall be applicable only to such tips as are 
included in a written statement furnished to the employer 
pursuant to section 6053(a), and only to the extent that the 
tax can be deducted and withheld by the employer, at or after 
the time such statement is so furnished and before the close of 
the calendar year in which such statement is furnished, from 
such wages of the employee (excluding tips, but including funds 
turned over by the employee to the employer for the purpose of 
such deduction and withholding) as are under the control of the 
employer; and an employer who is furnished by an employee a 
written statement of tips (received in a calendar month) 
pursuant to section 6053(a) to which paragraph (16)(B) of 
section 3401(a) is applicable may deduct and withhold the tax 
with respect to such tips from any wages of the employee 
(excluding tips) under his control, even though at the time 
such statement is furnished the total amount of the tips 
included in statements furnished to the employer as having been 
received by the employee in such calendar month in the course 
of his employment by such employer is less than $20. Such tax 
shall not at any time be deducted and withheld in an amount 
which exceeds the aggregate of such wages and funds (including 
funds turned over under section 3102(c)(2) or section 
3202(c)(2)) minus any tax required by section 3102(a) or 
section 3202(a) to be collected from such wages and funds.
  (l) Determination and disclosure of marital status.--
          (1) Determination of status by employer.--For 
        purposes of applying the tables in subsections (a) and 
        (c) to a payment of wages, the employer shall treat the 
        employee as a single person unless there is in effect 
        with respect to such payment of wages a withholding 
        allowance certificate furnished to the employer by the 
        employee after the date of the enactment of this 
        subsection indicating that the employee is married.
          (2) Disclosure of status by employee.--An employee 
        shall be entitled to furnish the employer with a 
        withholding allowance certificate indicating he is 
        married only if, on the day of such furnishing, he is 
        married (determined with the application of the rules 
        in paragraph (3)). An employee whose marital status 
        changes from married to single shall, at such time as 
        the Secretary may by regulations prescribe, furnish the 
        employer with a new withholding allowance certificate.
          (3) Determination of marital status.--For purposes of 
        paragraph (2), an employee shall on any day be 
        considered--
                  (A) as not married, if (i) he is legally 
                separated from his spouse under a decree of 
                divorce or separate maintenance, or (ii) either 
                he or his spouse is, or on any preceding day 
                within the calendar year was, a nonresident 
                alien; or
                  (B) as married, if (i) his spouse (other than 
                a spouse referred to in subparagraph (A)) died 
                within the portion of his taxable year which 
                precedes such day, or (ii) his spouse died 
                during one of the two taxable years immediately 
                preceding the current taxable year and, on the 
                basis of facts existing at the beginning of 
                such day, the employee reasonably expects, at 
                the close of his taxable year, to be a 
                surviving spouse (as defined in section 2(a)).
  (m) Withholding allowances.--Under regulations prescribed by 
the Secretary, an employee shall be entitled to an additional 
withholding allowance or additional reductions in withholding 
under this subsection. In determining the additional 
withholding allowance or the amount of additional reductions in 
withholding under this subsection, the employee may take into 
account (to the extent and in the manner provided by such 
regulations)--
          (1) estimated itemized deductions allowable under 
        chapter 1 and the estimated deduction allowed under 
        section 199A (other than the deductions referred to in 
        section 151 and other than the deductions required to 
        be taken into account in determining adjusted gross 
        income under section 62(a)),
          (2) estimated tax credits allowable under chapter 1, 
        and
          (3) such additional deductions (including the 
        additional [standard deduction] guaranteed deduction 
        under section 63(c)(3) for the aged and blind) and 
        other items as may be specified by the Secretary in 
        regulations.
  (n) Employees incurring no income tax liability.--
Notwithstanding any other provision of this section, an 
employer shall not be required to deduct and withhold any tax 
under this chapter upon a payment of wages to an employee if 
there is in effect with respect to such payment a withholding 
allowance certificate (in such form and containing such other 
information as the Secretary may prescribe) furnished to the 
employer by the employee certifying that the employee--
          (1) incurred no liability for income tax imposed 
        under subtitle A for his preceding taxable year, and
          (2) anticipates that he will incur no liability for 
        income tax imposed under subtitle A for his current 
        taxable year.
The Secretary shall by regulations provide for the coordination 
of the provisions of this subsection with the provisions of 
subsection (f).
  (o) Extension of withholding to certain payments other than 
wages.--
          (1) General rule.--For purposes of this chapter (and 
        so much of subtitle F as relates to this chapter)--
                  (A) any supplemental unemployment 
                compensation benefit paid to an individual,
                  (B) any payment of an annuity to an 
                individual, if at the time the payment is made 
                a request that such annuity be subject to 
                withholding under this chapter is in effect, 
                and
                  (C) any payment to an individual of sick pay 
                which does not constitute wages (determined 
                without regard to this subsection), if at the 
                time the payment is made a request that such 
                sick pay be subject to withholding under this 
                chapter is in effect,
        shall be treated as if it were a payment of wages by an 
        employer to an employee for a payroll period.
          (2) Definitions.--
                  (A) Supplemental unemployment compensation 
                benefits.--For purposes of paragraph (1), the 
                term ``supplemental unemployment compensation 
                benefits'' means amounts which are paid to an 
                employee, pursuant to a plan to which the 
                employer is a party, because of an employee's 
                involuntary separation from employment (whether 
                or not such separation is temporary), resulting 
                directly from a reduction in force, the 
                discontinuance of a plant or operation, or 
                other similar conditions, but only to the 
                extent such benefits are includible in the 
                employee's gross income.
                  (B) Annuity.--For purposes of this 
                subsection, the term ``annuity'' means any 
                amount paid to an individual as a pension or 
                annuity.
                  (C) Sick pay.--For purposes of this 
                subsection, the term ``sick pay'' means any 
                amount which--
                          (i) is paid to an employee pursuant 
                        to a plan to which the employer is a 
                        party, and
                          (ii) constitutes remuneration or a 
                        payment in lieu of remuneration for any 
                        period during which the employee is 
                        temporarily absent from work on account 
                        of sickness or personal injuries.
          (3) Amount withheld from annuity payments or sick 
        pay.--If a payee makes a request that an annuity or any 
        sick pay be subject to withholding under this chapter, 
        the amount to be deducted and withheld under this 
        chapter from any payment to which such request applies 
        shall be an amount (not less than a minimum amount 
        determined under regulations prescribed by the 
        Secretary) specified by the payee in such request. The 
        amount deducted and withheld with respect to a payment 
        which is greater or less than a full payment shall bear 
        the same relation to the specified amount as such 
        payment bears to a full payment.
          (4) Request for withholding.--A request that an 
        annuity or any sick pay be subject to withholding under 
        this chapter--
                  (A) shall be made by the payee in writing to 
                the person making the payments and shall 
                contain the social security number of the 
                payee,
                  (B) shall specify the amount to be deducted 
                and withheld from each full payment, and
                  (C) shall take effect--
                          (i) in the case of sick pay, with 
                        respect to payments made more than 7 
                        days after the date on which such 
                        request is furnished to the payor, or
                          (ii) in the case of an annuity, at 
                        such time (after the date on which such 
                        request is furnished to the payor) as 
                        the Secretary shall by regulations 
                        prescribe.
        Such a request may be changed or terminated by 
        furnishing to the person making the payments a written 
        statement of change or termination which shall take 
        effect in the same manner as provided in subparagraph 
        (C). At the election of the payor, any such request (or 
        statement of change or revocation) may take effect 
        earlier than as provided in subparagraph (C).
          (5) Special rule for sick pay paid pursuant to 
        certain collective-bargaining agreements.--In the case 
        of any sick pay paid pursuant to a collective-
        bargaining agreement between employee representatives 
        and one or more employers which contains a provision 
        specifying that this paragraph is to apply to sick pay 
        paid pursuant to such agreement and contains a 
        provision for determining the amount to be deducted and 
        withheld from each payment of such sick pay--
                  (A) the requirement of paragraph (1)(C) that 
                a request for withholding be in effect shall 
                not apply, and
                  (B) except as provided in subsection (n), the 
                amounts to be deducted and withheld under this 
                chapter shall be determined in accordance with 
                such agreement.
        The preceding sentence shall not apply with respect to 
        sick pay paid pursuant to any agreement to any 
        individual unless the social security number of such 
        individual is furnished to the payor and the payor is 
        furnished with such information as is necessary to 
        determine whether the payment is pursuant to the 
        agreement and to determine the amount to be deducted 
        and withheld.
          (6) Coordination with withholding on designated 
        distributions under section 3405.--This subsection 
        shall not apply to any amount which is a designated 
        distribution (within the meaning of section 
        3405(e)(1)).
  (p) Voluntary withholding agreements.--
          (1) Certain Federal payments.--
                  (A) In general.--If, at the time a specified 
                Federal payment is made to any person, a 
                request by such person is in effect that such 
                payment be subject to withholding under this 
                chapter, then for purposes of this chapter and 
                so much of subtitle F as relates to this 
                chapter, such payment shall be treated as if it 
                were a payment of wages by an employer to an 
                employee.
                  (B) Amount withheld.--The amount to be 
                deducted and withheld under this chapter from 
                any payment to which any request under 
                subparagraph (A) applies shall be an amount 
                equal to the percentage of such payment 
                specified in such request. Such a request shall 
                apply to any payment only if the percentage 
                specified is 7 percent, any percentage 
                applicable to any of the 3 lowest income 
                brackets in the table under section 1(c),1 
                or such other percentage as is permitted under 
                regulations prescribed by the Secretary.
                  (C) Specified Federal payments.--For purposes 
                of this paragraph, the term ``specified Federal 
                payment'' means--
                          (i) any payment of a social security 
                        benefit (as defined in section 86(d)),
                          (ii) any payment referred to in the 
                        second sentence of section 451(d) 
                        1 which is treated as 
                        insurance proceeds,
                          (iii) any amount which is includible 
                        in gross income under section 77(a), 
                        and
                          (iv) any other payment made pursuant 
                        to Federal law which is specified by 
                        the Secretary for purposes of this 
                        paragraph.
                  (D) Requests for withholding.--Rules similar 
                to the rules that apply to annuities under 
                subsection (o)(4) shall apply to requests under 
                this paragraph and paragraph (2).
          (2) Voluntary withholding on unemployment benefits.--
        If, at the time a payment of unemployment compensation 
        (as defined in section 85(b)) is made to any person, a 
        request by such person is in effect that such payment 
        be subject to withholding under this chapter, then for 
        purposes of this chapter and so much of subtitle F as 
        relates to this chapter, such payment shall be treated 
        as if it were a payment of wages by an employer to an 
        employee. The amount to be deducted and withheld under 
        this chapter from any payment to which any request 
        under this paragraph applies shall be an amount equal 
        to 10 percent of such payment.
          (3) Authority for other voluntary withholding.--The 
        Secretary is authorized by regulations to provide for 
        withholding--
                  (A) from remuneration for services performed 
                by an employee for the employee's employer 
                which (without regard to this paragraph) does 
                not constitute wages, and
                  (B) from any other type of payment with 
                respect to which the Secretary finds that 
                withholding would be appropriate under the 
                provisions of this chapter,
        if the employer and employee, or the person making and 
        the person receiving such other type of payment, agree 
        to such withholding. Such agreement shall be in such 
        form and manner as the Secretary may by regulations 
        prescribe. For purposes of this chapter (and so much of 
        subtitle F as relates to this chapter), remuneration or 
        other payments with respect to which such agreement is 
        made shall be treated as if they were wages paid by an 
        employer to an employee to the extent that such 
        remuneration is paid or other payments are made during 
        the period for which the agreement is in effect.
  (q) Extension of withholding to certain gambling winnings.--
          (1) General rule.--Every person, including the 
        Government of the United States, a State, or a 
        political subdivision thereof, or any instrumentalities 
        of the foregoing, making any payment of winnings which 
        are subject to withholding shall deduct and withhold 
        from such payment a tax in an amount equal to the 
        product of the third lowest rate of tax applicable 
        under section 1(c) 1 and such payment.
          (2) Exemption where tax otherwise withheld.--In the 
        case of any payment of winnings which are subject to 
        withholding made to a nonresident alien individual or a 
        foreign corporation, the tax imposed under paragraph 
        (1) shall not apply to any such payment subject to tax 
        under section 1441(a) (relating to withholding on 
        nonresident aliens) or tax under section 1442(a) 
        (relating to withholding on foreign corporations).
          (3) Winnings which are subject to withholding.--For 
        purposes of this subsection, the term ``winnings which 
        are subject to withholding'' means proceeds from a 
        wager determined in accordance with the following:
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), proceeds of more 
                than $5,000 from a wagering transaction, if the 
                amount of such proceeds is at least 300 times 
                as large as the amount wagered.
                  (B) State-conducted lotteries.--Proceeds of 
                more than $5,000 from a wager placed in a 
                lottery conducted by an agency of a State 
                acting under authority of State law, but only 
                if such wager is placed with the State agency 
                conducting such lottery, or with its authorized 
                employees or agents.
                  (C) Sweepstakes, wagering pools, certain 
                parimutuel pools, jai alai, and lotteries.--
                Proceeds of more than $5,000 from--
                          (i) a wager placed in a sweepstakes, 
                        wagering pool, or lottery (other than a 
                        wager described in subparagraph (B)), 
                        or
                          (ii) a wagering transaction in a 
                        parimutuel pool with respect to horse 
                        races, dog races, or jai alai if the 
                        amount of such proceeds is at least 300 
                        times as large as the amount wagered.
          (4) Rules for determining proceeds from a wager.--For 
        purposes of this subsection--
                  (A) proceeds from a wager shall be determined 
                by reducing the amount received by the amount 
                of the wager, and
                  (B) proceeds which are not money shall be 
                taken into account at their fair market value.
          (5) Exemption for bingo, keno, and slot machines.--
        The tax imposed under paragraph (1) shall not apply to 
        winnings from a slot machine, keno, and bingo.
          (6) Statement by recipient.--Every person who is to 
        receive a payment of winnings which are subject to 
        withholding shall furnish the person making such 
        payment a statement, made under the penalties of 
        perjury, containing the name, address, and taxpayer 
        identification number of the person receiving the 
        payment and of each person entitled to any portion of 
        such payment.
          (7) Coordination with other sections.--For purposes 
        of sections 3403 and 3404 and for purposes of so much 
        of subtitle F (except section 7205) as relates to this 
        chapter, payments to any person of winnings which are 
        subject to withholding shall be treated as if they were 
        wages paid by an employer to an employee.
  (r) Extension of withholding to certain taxable payments of 
Indian casino profits.--
          (1) In general.--Every person, including an Indian 
        tribe, making a payment to a member of an Indian tribe 
        from the net revenues of any class II or class III 
        gaming activity conducted or licensed by such tribe 
        shall deduct and withhold from such payment a tax in an 
        amount equal to such payment's proportionate share of 
        the annualized tax.
          (2) Exception.--The tax imposed by paragraph (1) 
        shall not apply to any payment to the extent that the 
        payment, when annualized, does not exceed an amount 
        equal to the sum of--
                  (A) the basic [standard deduction] guaranteed 
                deduction (as defined in section 63(c)) for an 
                individual to whom section 63(c)(2)(C) 1 
                applies, and
                  (B) the exemption amount (as defined in 
                section 151(d)).
          (3) Annualized tax.--For purposes of paragraph (1), 
        the term ``annualized tax'' means, with respect to any 
        payment, the amount of tax which would be imposed by 
        section 1(c) 1 (determined without regard to 
        any rate of tax in excess of the fourth lowest rate of 
        tax applicable under section 1(c) 1 ) on an 
        amount of taxable income equal to the excess of--
                  (A) the annualized amount of such payment, 
                over
                  (B) the amount determined under paragraph 
                (2).
          (4) Classes of gaming activities, etc..--For purposes 
        of this subsection, terms used in paragraph (1) which 
        are defined in section 4 of the Indian Gaming 
        Regulatory Act (25 U.S.C. 2701 et seq.), as in effect 
        on the date of the enactment of this subsection, shall 
        have the respective meanings given such terms by such 
        section.
          (5) Annualization.--Payments shall be placed on an 
        annualized basis under regulations prescribed by the 
        Secretary.
          (6) Alternate withholding procedures.--At the 
        election of an Indian tribe, the tax imposed by this 
        subsection on any payment made by such tribe shall be 
        determined in accordance with such tables or 
        computational procedures as may be specified in 
        regulations prescribed by the Secretary (in lieu of in 
        accordance with paragraphs (2) and (3)).
          (7) Coordination with other sections.--For purposes 
        of this chapter and so much of subtitle F as relates to 
        this chapter, payments to any person which are subject 
        to withholding under this subsection shall be treated 
        as if they were wages paid by an employer to an 
        employee.
  (s) Exemption from withholding for any vehicle fringe 
benefit.--
          (1) Employer election not to withhold.--The employer 
        may elect not to deduct and withhold any tax under this 
        chapter with respect to any vehicle fringe benefit 
        provided to any employee if such employee is notified 
        by the employer of such election (at such time and in 
        such manner as the Secretary shall by regulations 
        prescribe). The preceding sentence shall not apply to 
        any vehicle fringe benefit unless the amount of such 
        benefit is included by the employer on a statement 
        timely furnished under section 6051.
          (2) Employer must furnish W-2.--Any vehicle fringe 
        benefit shall be treated as wages from which amounts 
        are required to be deducted and withheld under this 
        chapter for purposes of section 6051.
          (3) Vehicle fringe benefit.--For purposes of this 
        subsection, the term ``vehicle fringe benefit'' means 
        any fringe benefit--
                  (A) which constitutes wages (as defined in 
                section 3401), and
                  (B) which consists of providing a highway 
                motor vehicle for the use of the employee.
  (t) Rate of withholding for certain stock.--In the case of 
any qualified stock (as defined in section 83(i)(2)) with 
respect to which an election is made under section 83(i)--
          (1) the rate of tax under subsection (a) shall not be 
        less than the maximum rate of tax in effect under 
        section 1, and
          (2) such stock shall be treated for purposes of 
        section 3501(b) in the same manner as a non-cash fringe 
        benefit.

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Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *


Subchapter A--RETURNS AND RECORDS

           *       *       *       *       *       *       *


PART II--TAX RETURNS OR STATEMENTS

           *       *       *       *       *       *       *



Subpart B--INCOME TAX RETURNS

           *       *       *       *       *       *       *



SEC. 6012. PERSONS REQUIRED TO MAKE RETURNS OF INCOME.

  (a) General rule.--Returns with respect to income taxes under 
subtitle A shall be made by the following:
          (1)(A) Every individual having for the taxable year 
        gross income which equals or exceeds the exemption 
        amount, except that a return shall not be required of 
        an individual--
                  (i) who is not married (determined by 
                applying section 7703), is not a surviving 
                spouse (as defined in section 2(a)), is not a 
                head of a household (as defined in section 
                2(b)), and for the taxable year has gross 
                income of less than the sum of the exemption 
                amount plus the basic [standard deduction] 
                guaranteed deduction applicable to such an 
                individual,
                  (ii) who is a head of a household (as so 
                defined) and for the taxable year has gross 
                income of less than the sum of the exemption 
                amount plus the basic [standard deduction] 
                guaranteed deduction applicable to such an 
                individual,
                  (iii) who is a surviving spouse (as so 
                defined) and for the taxable year has gross 
                income of less than the sum of the exemption 
                amount plus the basic [standard deduction] 
                guaranteed deduction applicable to such an 
                individual, or
                  (iv) who is entitled to make a joint return 
                and whose gross income, when combined with the 
                gross income of his spouse, is, for the taxable 
                year, less than the sum of twice the exemption 
                amount plus the basic [standard deduction] 
                guaranteed deduction applicable to a joint 
                return, but only if such individual and his 
                spouse, at the close of the taxable year, had 
                the same household as their home.
        Clause (iv) shall not apply if for the taxable year 
        such spouse makes a separate return or any other 
        taxpayer is entitled to an exemption for such spouse 
        under section 151(c).
          (B) The amount specified in clause (i), (ii), or 
        (iii) of subparagraph (A) shall be increased by the 
        amount of 1 additional [standard deduction] guaranteed 
        deduction (within the meaning of section 63(c)(3)) in 
        the case of an individual entitled to such deduction by 
        reason of section 63(f)(1)(A) (relating to individuals 
        age 65 or more), and the amount specified in clause 
        (iv) of subparagraph (A) shall be increased by the 
        amount of the additional [standard deduction] 
        guaranteed deduction for each additional [standard 
        deduction] guaranteed deduction to which the individual 
        or his spouse is entitled by reason of section 
        63(f)(1).
          (C) The exception under subparagraph (A) shall not 
        apply to any individual--
                  (i) who is described in section 63(c)(5) and 
                who has--
                          (I) income (other than earned income) 
                        in excess of the sum of the amount in 
                        effect under section 63(c)(5)(A) plus 
                        the additional [standard deduction] 
                        guaranteed deduction (if any) to which 
                        the individual is entitled, or
                          (II) total gross income in excess of 
                        the [standard deduction] guaranteed 
                        deduction, or
                  (ii) for whom the [standard deduction] 
                guaranteed deduction is zero under section 
                63(c)(6).
          (D) For purposes of this subsection--
                  (i) The terms ``[standard deduction] 
                guaranteed deduction'', ``basic [standard 
                deduction] guaranteed deduction'' and 
                ``additional [standard deduction] guaranteed 
                deduction'' have the respective meanings given 
                such terms by section 63(c).
                  (ii) The term ``exemption amount'' has the 
                meaning given such term by section 151(d). In 
                the case of an individual described in section 
                151(d)(2), the exemption amount shall be zero.
          (2) Every corporation subject to taxation under 
        subtitle A;
          (3) Every estate the gross income of which for the 
        taxable year is $600 or more;
          (4) Every trust having for the taxable year any 
        taxable income, or having gross income of $600 or over, 
        regardless of the amount of taxable income;
          (5) Every estate or trust of which any beneficiary is 
        a nonresident alien;
          (6) Every political organization (within the meaning 
        of section 527(e)(1)), and every fund treated under 
        section 527(g) as if it constituted a political 
        organization, which has political organization taxable 
        income (within the meaning of section 527(c)(1)) for 
        the taxable year;
          (7) Every homeowners association (within the meaning 
        of section 528(c)(1)) which has homeowners association 
        taxable income (within the meaning of section 528(d)) 
        for the taxable year; and
          (8) Every estate of an individual under chapter 7 or 
        11 of title 11 of the United States Code (relating to 
        bankruptcy) the gross income of which for the taxable 
        year is not less than the sum of the exemption amount 
        plus the basic [standard deduction] guaranteed 
        deduction under section 63(c)(2)(C);
except that subject to such conditions, limitations, and 
exceptions and under such regulations as may be prescribed by 
the Secretary, nonresident alien individuals subject to the tax 
imposed by section 871 and foreign corporations subject to the 
tax imposed by section 881 may be exempted from the requirement 
of making returns under this section.
  (b) Returns made by fiduciaries and receivers.--
          (1) Returns of decedents.--If an individual is 
        deceased, the return of such individual required under 
        subsection (a) shall be made by his executor, 
        administrator, or other person charged with the 
        property of such decedent.
          (2) Persons under a disability.--If an individual is 
        unable to make a return required under subsection (a), 
        the return of such individual shall be made by a duly 
        authorized agent, his committee, guardian, fiduciary or 
        other person charged with the care of the person or 
        property of such individual. The preceding sentence 
        shall not apply in the case of a receiver appointed by 
        authority of law in possession of only a part of the 
        property of an individual.
          (3) Receivers, trustees and assignees for 
        corporations.--In a case where a receiver, trustee in a 
        case under title 11 of the United States Code, or 
        assignee, by order of a court of competent 
        jurisdiction, by operation of law or otherwise, has 
        possession of or holds title to all or substantially 
        all the property or business of a corporation, whether 
        or not such property or business is being operated, 
        such receiver, trustee, or assignee shall make the 
        return of income for such corporation in the same 
        manner and form as corporations are required to make 
        such returns.
          (4) Returns of estates and trusts.--Returns of an 
        estate, a trust, or an estate of an individual under 
        chapter 7 or 11 of title 11 of the United States Code 
        shall be made by the fiduciary thereof.
          (5) Joint fiduciaries.--Under such regulations as the 
        Secretary may prescribe, a return made by one of two or 
        more joint fiduciaries shall be sufficient compliance 
        with the requirements of this section. A return made 
        pursuant to this paragraph shall contain a statement 
        that the fiduciary has sufficient knowledge of the 
        affairs of the person for whom the return is made to 
        enable him to make the return, and that the return is, 
        to the best of his knowledge and belief, true and 
        correct.
          (6) IRA share of partnership income.--In the case of 
        a trust which is exempt from taxation under section 
        408(e), for purposes of this section, the trust's 
        distributive share of items of gross income and gain of 
        any partnership to which subchapter C or D of chapter 
        63 applies shall be treated as equal to the trust's 
        distributive share of the taxable income of such 
        partnership.
  (c) Certain income earned abroad or from sale of residence.--
For purposes of this section, gross income shall be computed 
without regard to the exclusion provided for in section 121 
(relating to gain from sale of principal residence) and without 
regard to the exclusion provided for in section 911 (relating 
to citizens or residents of the United States living abroad).
  (d) Tax-exempt interest required to be shown on return.--
Every person required to file a return under this section for 
the taxable year shall include on such return the amount of 
interest received or accrued during the taxable year which is 
exempt from the tax imposed by chapter 1.
  (e) Consolidated returns.--For provisions relating to 
consolidated returns by affiliated corporations, see chapter 6.
  (f) Special rule for taxable years 2018 through 2025.--In the 
case of a taxable year beginning after December 31, 2017, and 
before January 1, 2026, subsection (a)(1) shall not apply, and 
every individual who has gross income for the taxable year 
shall be required to make returns with respect to income taxes 
under subtitle A, except that a return shall not be required 
of--
          (1) an individual who is not married (determined by 
        applying section 7703) and who has gross income for the 
        taxable year which does not exceed the [standard 
        deduction] guaranteed deduction applicable to such 
        individual for such taxable year under section 63, or
          (2) an individual entitled to make a joint return 
        if--
                  (A) the gross income of such individual, when 
                combined with the gross income of such 
                individual's spouse, for the taxable year does 
                not exceed the [standard deduction] guaranteed 
                deduction which would be applicable to the 
                taxpayer for such taxable year under section 63 
                if such individual and such individual's spouse 
                made a joint return,
                  (B) such individual and such individual's 
                spouse have the same household as their home at 
                the close of the taxable year,
                  (C) such individual's spouse does not make a 
                separate return, and
                  (D) neither such individual nor such 
                individual's spouse is an individual described 
                in section 63(c)(5) who has income (other than 
                earned income) in excess of the amount in 
                effect under section 63(c)(5)(A).

SEC. 6013. JOINT RETURNS OF INCOME TAX BY HUSBAND AND WIFE.

  (a) Joint returns.--A husband and wife may make a single 
return jointly of income taxes under subtitle A, even though 
one of the spouses has neither gross income nor deductions, 
except as provided below:
          (1) no joint return shall be made if either the 
        husband or wife at any time during the taxable year is 
        a nonresident alien;
          (2) no joint return shall be made if the husband and 
        wife have different taxable years; except that if such 
        taxable years begin on the same day and end on 
        different days because of the death of either or both, 
        then the joint return may be made with respect to the 
        taxable year of each. The above exception shall not 
        apply if the surviving spouse remarries before the 
        close of his taxable year, nor if the taxable year of 
        either spouse is a fractional part of a year under 
        section 443(a)(1);
          (3) in the case of death of one spouse or both 
        spouses the joint return with respect to the decedent 
        may be made only by his executor or administrator; 
        except that in the case of the death of one spouse the 
        joint return may be made by the surviving spouse with 
        respect to both himself and the decedent if no return 
        for the taxable year has been made by the decedent, no 
        executor or administrator has been appointed, and no 
        executor or administrator is appointed before the last 
        day prescribed by law for filing the return of the 
        surviving spouse. If an executor or administrator of 
        the decedent is appointed after the making of the joint 
        return by the surviving spouse, the executor or 
        administrator may disaffirm such joint return by 
        making, within 1 year after the last day prescribed by 
        law for filing the return of the surviving spouse, a 
        separate return for the taxable year of the decedent 
        with respect to which the joint return was made, in 
        which case the return made by the survivor shall 
        constitute his separate return.
  (b) Joint return after filing separate return.--
          (1) In general.--Except as provided in paragraph (2), 
        if an individual has filed a separate return for a 
        taxable year for which a joint return could have been 
        made by him and his spouse under subsection (a) and the 
        time prescribed by law for filing the return for such 
        taxable year has expired, such individual and his 
        spouse may nevertheless make a joint return for such 
        taxable year. A joint return filed by the husband and 
        wife under this subsection shall constitute the return 
        of the husband and wife for such taxable year, and all 
        payments, credits, refunds, or other repayments made or 
        allowed with respect to the separate return of either 
        spouse for such taxable year shall be taken into 
        account in determining the extent to which the tax 
        based upon the joint return has been paid. If a joint 
        return is made under this subsection, any election 
        (other than the election to file a separate return) 
        made by either spouse in his separate return for such 
        taxable year with respect to the treatment of any 
        income, deduction, or credit of such spouse shall not 
        be changed in the making of the joint return where such 
        election would have been irrevocable if the joint 
        return had not been made. If a joint return is made 
        under this subsection after the death of either spouse, 
        such return with respect to the decedent can be made 
        only by his executor or administrator.
          (2) Limitations for making of election.--The election 
        provided for in paragraph (1) may not be made--
                  (A) after the expiration of 3 years from the 
                last date prescribed by law for filing the 
                return for such taxable year (determined 
                without regard to any extension of time granted 
                to either spouse); or
                  (B) after there has been mailed to either 
                spouse, with respect to such taxable year, a 
                notice of deficiency under section 6212, if the 
                spouse, as to such notice, files a petition 
                with the Tax Court within the time prescribed 
                in section 6213; or
                  (C) after either spouse has commenced a suit 
                in any court for the recovery of any part of 
                the tax for such taxable year; or
                  (D) after either spouse has entered into a 
                closing agreement under section 7121 with 
                respect to such taxable year, or after any 
                civil or criminal case arising against either 
                spouse with respect to such taxable year has 
                been compromised under section 7122.
          (3) When return deemed filed.--
                  (A) Assessment and collection.--For purposes 
                of section 6501 (relating to periods of 
                limitations on assessment and collection), and 
                for purposes of section 6651 (relating to 
                delinquent returns), a joint return made under 
                this subsection shall be deemed to have been 
                filed--
                          (i) Where both spouses filed separate 
                        returns prior to making the joint 
                        return--on the date the last separate 
                        return was filed (but not earlier than 
                        the last date prescribed by law for 
                        filing the return of either spouse);
                          (ii) Where only one spouse filed a 
                        separate return prior to the making of 
                        the joint return, and the other spouse 
                        had less than the exemption amount of 
                        gross income for such taxable year--on 
                        the date of the filing of such separate 
                        return (but not earlier than the last 
                        date prescribed by law for the filing 
                        of such separate return); or
                          (iii) Where only one spouse filed a 
                        separate return prior to the making of 
                        the joint return, and the other spouse 
                        had gross income of the exemption 
                        amount or more for such taxable year--
                        on the date of the filing of such joint 
                        return.
                For purposes of this subparagraph, the term 
                ``exemption amount'' has the meaning given to 
                such term by section 151(d). For purposes of 
                clauses (ii) and (iii), if the spouse whose 
                gross income is being compared to the exemption 
                amount is 65 or over, such clauses shall be 
                applied by substituting ``the sum of the 
                exemption amount and the additional [standard 
                deduction] guaranteed deduction under section 
                63(c)(2) by reason of section 63(f)(1)(A)'' for 
                ``the exemption amount''.
                  (B) Credit or refund.--For purposes of 
                section 6511, a joint return made under this 
                subsection shall be deemed to have been filed 
                on the last date prescribed by law for filing 
                the return for such taxable year (determined 
                without regard to any extension of time granted 
                to either spouse).
          (4) Additional time for assessment.--If a joint 
        return is made under this subsection, the periods of 
        limitations provided in sections 6501 and 6502 on the 
        making of assessments and the beginning of levy or a 
        proceeding in court for collection shall with respect 
        to such return include one year immediately after the 
        date of the filing of such joint return (computed 
        without regard to the provisions of paragraph (3)).
          (5) Additions to the tax and penalties.--
                  (A) Coordination with part II of subchapter A 
                of chapter 68.--For purposes of part II of 
                subchapter A of chapter 68, where the sum of 
                the amounts shown as tax on the separate 
                returns of each spouse is less than the amount 
                shown as tax on the joint return made under 
                this subsection--
                          (i) such sum shall be treated as the 
                        amount shown on the joint return,
                          (ii) any negligence (or disregard of 
                        rules or regulations) on either 
                        separate return shall be treated as 
                        negligence (or such disregard) on the 
                        joint return, and
                          (iii) any fraud on either separate 
                        return shall be treated as fraud on the 
                        joint return.
                  (B) Criminal penalty.--For purposes of 
                section 7206(1) and (2) and section 7207 
                (relating to criminal penalties in the case of 
                fraudulent returns) the term ``return'' 
                includes a separate return filed by a spouse 
                with respect to a taxable year for which a 
                joint return is made under this subsection 
                after the filing of such separate return.
  (c) Treatment of joint return after death of either spouse.--
For purposes of sections 15, 443, and 7851(a)(1)(A), where the 
husband and wife have different taxable years because of the 
death of either spouse, the joint return shall be treated as if 
the taxable years of both spouses ended on the date of the 
closing of the surviving spouse's taxable year.
  (d) Special rules.--For purposes of this section--
          (1) the status as husband and wife of two individuals 
        having taxable years beginning on the same day shall be 
        determined--
                  (A) if both have the same taxable year--as of 
                the close of such year; or
                  (B) if one dies before the close of the 
                taxable year of the other--as of the time of 
                such death;
          (2) an individual who is legally separated from his 
        spouse under a decree of divorce or of separate 
        maintenance shall not be considered as married; and
          (3) if a joint return is made, the tax shall be 
        computed on the aggregate income and the liability with 
        respect to the tax shall be joint and several.
  (f) Joint return where individual is in missing status.--For 
purposes of this section and subtitle A--
          (1) Election by spouse.--If--
                  (A) an individual is in a missing status 
                (within the meaning of paragraph (3)) as a 
                result of service in a combat zone (as 
                determined for purposes of section 112), and
                  (B) the spouse of such individual is 
                otherwise entitled to file a joint return for 
                any taxable year which begins on or before the 
                day which is 2 years after the date designated 
                under section 112 as the date of termination of 
                combatant activities in such zone,
        then such spouse may elect under subsection (a) to file 
        a joint return for such taxable year. With respect to 
        service in the combat zone designated for purposes of 
        the Vietnam conflict, such election may be made for any 
        taxable year while an individual is in missing status.
          (2) Effect of election.--If the spouse of an 
        individual described in paragraph (1)(A) elects to file 
        a joint return under subsection (a) for a taxable year, 
        then, until such election is revoked--
                  (A) such election shall be valid even if such 
                individual died before the beginning of such 
                year, and
                  (B) except for purposes of section 692 
                (relating to income taxes of members of the 
                Armed Forces, astronauts, and victims of 
                certain terrorist attacks on death), the income 
                tax liability of such individual, his spouse, 
                and his estate shall be determined as if he 
                were alive throughout the taxable year.
          (3) Missing status.--For purposes of this 
        subsection--
                  (A) Uniformed services.--A member of a 
                uniformed service (within the meaning of 
                section 101(3) of title 37 of the United States 
                Code) is in a missing status for any period for 
                which he is entitled to pay and allowances 
                under section 552 of such title 37.
                  (B) Civilian employees.--An employee (within 
                the meaning of section 5561(2) of title 5 of 
                the United States Code) is in a missing status 
                for any period for which he is entitled to pay 
                and allowances under section 5562 of such title 
                5.
          (4) Making of election; revocation.--An election 
        described in this subsection with respect to any 
        taxable year may be made by filing a joint return in 
        accordance with subsection (a) and under such 
        regulations as may be prescribed by the Secretary. Such 
        an election may be revoked by either spouse on or 
        before the due date (including extensions) for such 
        taxable year, and, in the case of an executor or 
        administrator, may be revoked by disaffirming as 
        provided in the last sentence of subsection (a)(3).
  (g) Election to treat nonresident alien individual as 
resident of the United States.--
          (1) In general.--A nonresident alien individual with 
        respect to whom this subsection is in effect for the 
        taxable year shall be treated as a resident of the 
        United States--
                  (A) for purposes of chapter 1 for all of such 
                taxable year, and
                  (B) for purposes of chapter 24 (relating to 
                wage withholding) for payments of wages made 
                during such taxable year.
          (2) Individuals with respect to whom this subsection 
        is in effect.--This subsection shall be in effect with 
        respect to any individual who, at the close of the 
        taxable year for which an election under this 
        subsection was made, was a nonresident alien individual 
        married to a citizen or resident of the United States, 
        if both of them made such election to have the benefits 
        of this subsection apply to them.
          (3) Duration of election.--An election under this 
        subsection shall apply to the taxable year for which 
        made and to all subsequent taxable years until 
        terminated under paragraph (4) or (5); except that any 
        such election shall not apply for any taxable year if 
        neither spouse is a citizen or resident of the United 
        States at any time during such year.
          (4) Termination of election.--An election under this 
        subsection shall terminate at the earliest of the 
        following times:
                  (A) Revocation by taxpayers.--If either 
                taxpayer revokes the election, as of the first 
                taxable year for which the last day prescribed 
                by law for filing the return of tax under 
                chapter 1 has not yet occurred.
                  (B) Death.--In the case of the death of 
                either spouse, as of the beginning of the first 
                taxable year of the spouse who survives 
                following the taxable year in which such death 
                occurred; except that if the spouse who 
                survives is a citizen or resident of the United 
                States who is a surviving spouse entitled to 
                the benefits of section 2, the time provided by 
                this subparagraph shall be as of the close of 
                the last taxable year for which such individual 
                is entitled to the benefits of section 2.
                  (C) Legal separation.--In the case of the 
                legal separation of the couple under a decree 
                of divorce or of separate maintenance, as of 
                the beginning of the taxable year in which such 
                legal separation occurs.
                  (D) Termination by Secretary.--At the time 
                provided in paragraph (5).
          (5) Termination by Secretary.--The Secretary may 
        terminate any election under this subsection for any 
        taxable year if he determines that either spouse has 
        failed--
                  (A) to keep such books and records,
                  (B) to grant such access to such books and 
                records, or
                  (C) to supply such other information,
        as may be reasonably necessary to ascertain the amount 
        of liability for taxes under chapter 1 of either spouse 
        for such taxable year.
          (6) Only one election.--If any election under this 
        subsection for any two individuals is terminated under 
        paragraph (4) or (5) for any taxable year, such two 
        individuals shall be ineligible to make an election 
        under this subsection for any subsequent taxable year.
  (h) Joint return, etc., for year in which nonresident alien 
becomes resident of United States.--
          (1) In general.--If--
                  (A) any individual is a nonresident alien 
                individual at the beginning of any taxable year 
                but is a resident of the United States at the 
                close of such taxable year,
                  (B) at the close of such taxable year, such 
                individual is married to a citizen or resident 
                of the United States, and
                  (C) both individuals elect the benefits of 
                this subsection at the time and in the manner 
                prescribed by the Secretary by regulation,
        then the individual referred to in subparagraph (A) 
        shall be treated as a resident of the United States for 
        purposes of chapter 1 for all of such taxable year, and 
        for purposes of chapter 24 (relating to wage 
        withholding) for payments of wages made during such 
        taxable year.
          (2) Only one election.--If any election under this 
        subsection applies for any 2 individuals for any 
        taxable year, such 2 individuals shall be ineligible to 
        make an election under this subsection for any 
        subsequent taxable year.

SEC. 6014. INCOME TAX RETURN--TAX NOT COMPUTED BY TAXPAYER.

  (a) Election by taxpayer.--An individual who does not itemize 
his deductions and who is not described in section 
6012(a)(1)(C)(i), whose gross income is less than $10,000 and 
includes no income other than remuneration for services 
performed by him as an employee, dividends or interest, and 
whose gross income other than wages, as defined in section 
3401(a), does not exceed $100, shall at his election not be 
required to show on the return the tax imposed by section 1. 
Such election shall be made by using the form prescribed for 
purposes of this section. In such case the tax shall be 
computed by the Secretary who shall mail to the taxpayer a 
notice stating the amount determined as payable.
  (b) Regulations.--The Secretary shall prescribe regulations 
for carrying out this section, and such regulations may provide 
for the application of the rules of this section--
          (1) to cases where the gross income includes items 
        other than those enumerated by subsection (a),
          (2) to cases where the gross income from sources 
        other than wages on which the tax has been withheld at 
        the source is more than $100,
          (3) to cases where the gross income is $10,000 or 
        more, or
          (4) to cases where the taxpayer itemizes his 
        deductions or where the taxpayer claims a reduced 
        [standard deduction] guaranteed deduction by reason of 
        section 63(c)(5).
Such regulations shall provide for the application of this 
section in the case of husband and wife, including provisions 
determining when a joint return under this section may be 
permitted or required, whether the liability shall be joint and 
several, and whether one spouse may make return under this 
section and the other without regard to this section.

           *       *       *       *       *       *       *


CHAPTER 64--COLLECTION

           *       *       *       *       *       *       *


Subchapter D--SEIZURE OF PROPERTY FOR COLLECTION OF TAXES

           *       *       *       *       *       *       *


PART II--LEVY

           *       *       *       *       *       *       *



SEC. 6334. PROPERTY EXEMPT FROM LEVY.

  (a) Enumeration.--There shall be exempt from levy--
          (1) Wearing apparel and school books.--Such items of 
        wearing apparel and such school books as are necessary 
        for the taxpayer or for members of his family;
          (2) Fuel, provisions, furniture, and personal 
        effects.--So much of the fuel, provisions, furniture, 
        and personal effects in the taxpayer's household, and 
        of the arms for personal use, livestock, and poultry of 
        the taxpayer, as does not exceed $6,250 in value;
          (3) Books and tools of a trade, business, or 
        profession.--So many of the books and tools necessary 
        for the trade, business, or profession of the taxpayer 
        as do not exceed in the aggregate $3,125 in value.
          (4) Unemployment benefits.--Any amount payable to an 
        individual with respect to his unemployment (including 
        any portion thereof payable with respect to dependents) 
        under an unemployment compensation law of the United 
        States, of any State, or of the District of Columbia or 
        of the Commonwealth of Puerto Rico.
          (5) Undelivered mail.--Mail, addressed to any person, 
        which has not been delivered to the addressee.
          (6) Certain annuity and pension payments.--Annuity or 
        pension payments under the Railroad Retirement Act, 
        benefits under the Railroad Unemployment Insurance Act, 
        special pension payments received by a person whose 
        name has been entered on the Army, Navy, Air Force, and 
        Coast Guard Medal of Honor roll (38 U.S.C. 1562), and 
        annuities based on retired or retainer pay under 
        chapter 73 of title 10 of the United States Code.
          (7) Workmen's compensation.--Any amount payable to an 
        individual as workmen's compensation (including any 
        portion thereof payable with respect to dependents) 
        under a workmen's compensation law of the United 
        States, any State, the District of Columbia, or the 
        Commonwealth of Puerto Rico.
          (8) Judgments for support of minor children.--If the 
        taxpayer is required by judgment of a court of 
        competent jurisdiction, entered prior to the date of 
        levy, to contribute to the support of his minor 
        children, so much of his salary, wages, or other income 
        as is necessary to comply with such judgment.
          (9) Minimum exemption for wages, salary, and other 
        income.--Any amount payable to or received by an 
        individual as wages or salary for personal services, or 
        as income derived from other sources, during any 
        period, to the extent that the total of such amounts 
        payable to or received by him during such period does 
        not exceed the applicable exempt amount determined 
        under subsection (d).
          (10) Certain service-connected disability payments.--
        Any amount payable to an individual as a service-
        connected (within the meaning of section 101(16) of 
        title 38, United States Code) disability benefit 
        under--
                  (A) subchapter II, III, IV, V, or VI of 
                chapter 11 of such title 38, or
                  (B) chapter 13, 21, 23, 31, 32, 34, 35, 37, 
                or 39 of such title 38.
          (11) Certain public assistance payments.--Any amount 
        payable to an individual as a recipient of public 
        assistance under--
                  (A) title IV or title XVI (relating to 
                supplemental security income for the aged, 
                blind, and disabled) of the Social Security 
                Act, or
                  (B) State or local government public 
                assistance or public welfare programs for which 
                eligibility is determined by a needs or income 
                test.
          (12) Assistance under Job Training Partnership Act.--
        Any amount payable to a participant under the Job 
        Training Partnership Act (29 U.S.C. 1501 et seq.) from 
        funds appropriated pursuant to such Act.
          (13) Residences exempt in small deficiency cases and 
        principal residences and certain business assets exempt 
        in absence of certain approval or jeopardy.--
                  (A) Residences in small deficiency cases.--If 
                the amount of the levy does not exceed $5,000--
                          (i) any real property used as a 
                        residence by the taxpayer; or
                          (ii) any real property of the 
                        taxpayer (other than real property 
                        which is rented) used by any other 
                        individual as a residence.
                  (B) Principal residences and certain business 
                assets.--Except to the extent provided in 
                subsection (e)--
                          (i) the principal residence of the 
                        taxpayer (within the meaning of section 
                        121); and
                          (ii) tangible personal property or 
                        real property (other than real property 
                        which is rented) used in the trade or 
                        business of an individual taxpayer.
  (b) Appraisal.--The officer seizing property of the type 
described in subsection (a) shall appraise and set aside to the 
owner the amount of such property declared to be exempt. If the 
taxpayer objects at the time of the seizure to the valuation 
fixed by the officer making the seizure, the Secretary shall 
summon three disinterested individuals who shall make the 
valuation.
  (c) No other property exempt.--Notwithstanding any other law 
of the United States (including section 207 of the Social 
Security Act), no property or rights to property shall be 
exempt from levy other than the property specifically made 
exempt by subsection (a).
  (d) Exempt amount of wages, salary, or other income.--
          (1) Individuals on weekly basis.--In the case of an 
        individual who is paid or receives all of his wages, 
        salary, and other income on a weekly basis, the amount 
        of the wages, salary, and other income payable to or 
        received by him during any week which is exempt from 
        levy under subsection (a)(9) shall be the exempt 
        amount.
          (2) Exempt amount.--For purposes of paragraph (1), 
        the term ``exempt amount'' means an amount equal to--
                  (A) the sum of--
                          (i) the [standard deduction] 
                        guaranteed deduction, and
                          (ii) the aggregate amount of the 
                        deductions for personal exemptions 
                        allowed the taxpayer under section 151 
                        in the taxable year in which such levy 
                        occurs, divided by
                  (B) 52.
        Unless the taxpayer submits to the Secretary a written 
        and properly verified statement specifying the facts 
        necessary to determine the proper amount under 
        subparagraph (A), subparagraph (A) shall be applied as 
        if the taxpayer were a married individual filing a 
        separate return with only 1 personal exemption.
          (3) Individuals on basis other than weekly.--In the 
        case of any individual not described in paragraph (1), 
        the amount of the wages, salary, and other income 
        payable to or received by him during any applicable pay 
        period or other fiscal period (as determined under 
        regulations prescribed by the Secretary) which is 
        exempt from levy under subsection (a)(9) shall be an 
        amount (determined under such regulations) which as 
        nearly as possible will result in the same total 
        exemption from levy for such individual over a period 
        of time as he would have under paragraph (1) if (during 
        such period of time) he were paid or received such 
        wages, salary, and other income on a regular weekly 
        basis.
          (4) Years when personal exemption amount is zero.--
                  (A) In general.--In the case of any taxable 
                year in which the exemption amount under 
                section 151(d) is zero, paragraph (2) shall not 
                apply and for purposes of paragraph (1) the 
                term ``exempt amount'' means an amount equal 
                to--
                          (i) the sum of the amount determined 
                        under subparagraph (B) and the 
                        [standard deduction] guaranteed 
                        deduction, divided by
                          (ii) 52.
                  (B) Amount determined.--For purposes of 
                subparagraph (A), the amount determined under 
                this subparagraph is $4,150 multiplied by the 
                number of the taxpayer's dependents for the 
                taxable year in which the levy occurs.
                  (C) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 
                2018, the $4,150 amount in subparagraph (B) 
                shall be 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 
                        the calendar year in which the taxable 
                        year begins, determined by substituting 
                        ``2017'' for ``2016'' in subparagraph 
                        (A)(ii) thereof.
                If any increase determined under the preceding 
                sentence is not a multiple of $100, such 
                increase shall be rounded to the next lowest 
                multiple of $100.
                  (D) Verified statement.--Unless the taxpayer 
                submits to the Secretary a written and properly 
                verified statement specifying the facts 
                necessary to determine the proper amount under 
                subparagraph (A), subparagraph (A) shall be 
                applied as if the taxpayer were a married 
                individual filing a separate return with no 
                dependents.
  (e) Levy allowed on principal residences and certain business 
assets in certain circumstances.--
          (1) Principal residences.--
                  (A) Approval required.--A principal residence 
                shall not be exempt from levy if a judge or 
                magistrate of a district court of the United 
                States approves (in writing) the levy of such 
                residence.
                  (B) Jurisdiction.--The district courts of the 
                United States shall have exclusive jurisdiction 
                to approve a levy under subparagraph (A).
          (2) Certain business assets.--Property (other than a 
        principal residence) described in subsection (a)(13)(B) 
        shall not be exempt from levy if--
                  (A) a district director or assistant district 
                director of the Internal Revenue Service 
                personally approves (in writing) the levy of 
                such property; or
                  (B) the Secretary finds that the collection 
                of tax is in jeopardy.
        An official may not approve a levy under subparagraph 
        (A) unless the official determines that the taxpayer's 
        other assets subject to collection are insufficient to 
        pay the amount due, together with expenses of the 
        proceedings.
  (f) Levy allowed on certain specified payments.--Any payment 
described in subparagraph (B) or (C) of section 6331(h)(2) 
shall not be exempt from levy if the Secretary approves the 
levy thereon under section 6331(h).
  (g) Inflation adjustment.--
          (1) In general.--In the case of any calendar year 
        beginning after 1999, each dollar amount referred to in 
        paragraphs (2) and (3) of subsection (a) 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, 
                by substituting ``calendar year 1998'' for 
                ``calendar year 2016'' in subparagraph (A)(ii) 
                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.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    The ``Tax Cuts for Working Families Act'' claims to provide 
tax relief to working Americans and their families, a priority 
long championed by Democrats. However, the bill falls short of 
accomplishing that goal.
    Once again, Republicans are leaving behind the lowest-
income taxpayers. According to an analysis by the Institute on 
Taxation and Economic Policy,\1\ the bottom 20 percent of 
households would receive just 2 percent of the benefits of this 
provision. The Joint Committee on Taxation distributional 
analysis reveals that the lion's share of the provision's 
benefits accrue to taxpayers with incomes in excess of 
$100,000. By contrast, the Democrats' expanded child tax credit 
provided families monthly payments of as much as $300 per 
child, resulting in a historically low child poverty rate of 
5.2 percent.\2\ The child tax credit, as enacted in the TCJA, 
leaves the lowest-income taxpayers behind; Republicans' refusal 
to remedy that in this bill--or to even hold a vote on allowing 
the poorest to benefit from the child tax credit during the 
Committee markup--speaks volumes about their priorities.
---------------------------------------------------------------------------
    \1\Institute on Taxation and Economic Policy (June 11, 2023). Trio 
of GOP Tax Bills Would Expand Corporate Tax Breaks While Doing Little 
for Americans Who Most Need Help. https://itep.org/gop-tax-bills-
expand-corporate-tax-breaks/.
    \2\Brookings Institute (March 1, 2023). The antipoverty effects of 
the expanded Child Tax Credit across states: Where were the historic 
reductions felt? https://www.brookings.edu/research/the-antipoverty-
effects-of-the-expanded-child-tax-credit-across-states-where-were-the-
historic-reductions-felt/
#::text=Research%20showed%20that%20child%20poverty,2022).
---------------------------------------------------------------------------
    Additionally, Republicans who are under the impression that 
the bonus ``guaranteed deduction'' somehow alleviates their 
discriminatory SALT cap are misguided. As the Joint Committee 
on Taxation verified during the Committee markup, the bonus 
deduction provides an average benefit of $60 to a taxpayer 
whose SALT deduction is limited by the TCJA's cap. Those who 
live in states with taxes at sufficient levels to adequately 
fund schools and social services will continue to bear the 
burden of the Republicans' obsession with cutting taxes for 
large corporations and the wealthy and well-connected.
                                           Richard E. Neal,
                                                    Ranking Member.

 Ranking Member Richard E. Neal, Opening Statement, Committee on Ways 
         and Means Markup of H.R. 3936, Tuesday, June 13, 2023

    Thank you, Mr. Chairman. The title of this legislation is 
laudable, and a priority Committee Democrats share 
unequivocally. It sadly doesn't live up to its bill, and with 
the proven success of the Child Tax Credit, I cannot accept 
this as an alternative for working families.
    A majority of their Tax Scam 2.0 focuses on restoring 
corporate giveaways to the wealthy and well-connected before 
restoring the tax credits that cut child poverty in half, and 
in this provision, we see that even when Republicans try to cut 
taxes for families, they miss those who need it most. The 
poorest fifth of Americans would receive just 2 percent of the 
benefits of this provision, and on average, that means a tax 
break of just $30 next year.
    As the only change to the individual side of the tax code, 
I must admit it feels like an afterthought. Why ignore one of 
the most important policies for working families if cutting 
taxes for working families is the goal?
    Democrats' expanded Child Tax Credit changed lives in 2021. 
With full refundability, those with the highest need were 
finally able to access this support, which in turn, grew the 
economy and spread opportunity. I'm disappointed we can't unite 
on pulling more children from the lifecycle of poverty.
    With that, I yield back the balance of my time.