[Federal Register Volume 68, Number 44 (Thursday, March 6, 2003)]
[Rules and Regulations]
[Pages 10655-10656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5339]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9045]
RIN 1545-BA34


Earned Income Credit for Taxable Years Beginning After December 
31, 1978

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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[[Page 10656]]

SUMMARY: This document contains final regulations relating to the 
earned income credit. The regulations reflect changes in the law since 
the existing regulations were published in the Federal Register on 
March 13, 1980. Due to subsequent statutory changes in the applicable 
tax law, substantial portions of the regulations are no longer in 
conformity with current law. Accordingly, portions of the existing 
regulations are removed. These regulations apply to individual 
taxpayers claiming the earned income credit.

DATES: Effective Date: These regulations are effective March 6, 2003.

FOR FURTHER INFORMATION CONTACT: Shoshanna Tanner at (202) 622-6080 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR Part 1) under section 32 of the Internal Revenue Code (Code). 
Section 32 allows a refundable credit to low-income taxpayers who meet 
certain income and eligibility requirements. Section 43 (the 
predecessor of section 32) was added to the Code by the Tax Reduction 
Act of 1975 (Pub. L. 94-12, 89 Stat. 26) and made permanent by the 
Revenue Act of 1978 (Pub. L. 95-600, 92 Stat. 2763). Final regulations 
(TD 7683) under section 43 were published in the Federal Register (45 
FR 16174) on March 13, 1980. Section 43 was redesignated as section 32 
by the Tax Reform Act of 1984 (Pub. L. 98-369, 98 Stat. 494). Section 
1.43-2 was redesignated as Sec.  1.32-2 in Treasury Decision 8448 (57 
FR 54919) on November 23, 1992.
    Section 1.32-2(b)(2) of the existing regulations refers to section 
143 for an explanation of the term ``married individual''. The 
provisions of section 143 were reenacted as section 7703 by the Tax 
Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085).
    In addition, portions of the existing regulations are inconsistent 
with changes made by the Omnibus Budget Reconciliation Act of 1990 
(Pub. L. 101-508, 104 Stat. 1388), the Economic Growth and Tax Relief 
Reconciliation Act of 2001 (Pub. L. 107-16, 115 Stat. 38), and various 
other legislative enactments.

Explanation of Provisions

    To comport with the redesignation of section 43 to section 32 and 
Sec. Sec.  1.43-2 to 1.32-2, these final regulations replace references 
to section 43 with references to section 32. Similarly, these 
regulations replace the references to section 143 in Sec.  1.32-2(b)(2) 
with references to section 7703. These regulations also remove the 
inconsistent provisions in the existing regulations.

Special Analyses

    It has been determined that these final regulations are not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It has also been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations. Because no 
notice of proposed rulemaking is required, the provisions of the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply. Pursuant 
to section 7805(f), these regulations were submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on their impact on small business.

Drafting Information

    The principal author of these regulations is Shoshanna Tanner of 
the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and 
Government Entities). However, other personnel from the IRS and 
Department of Treasury participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR Part 1 is amended as follows:

PART 1--INCOME TAXES

    1. The authority for part 1 continues to read in part as follows:

    Authority: 26 U.S.C. 7805 * * *


    2. Section 1.32-2 is amended as follows:
    1. Paragraphs (a), (b)(1), (c)(1), and (d) are removed and 
reserved.
    2. Paragraphs (b)(2), (b)(3), (c)(2), and (e)(2) are revised.
    The revisions read as follows:


Sec.  1.32-2  Earned income credit for taxable years beginning after 
December 31, 1978.

    (a) [Reserved].
    (b) * * * (1) [Reserved].
    (2) Married individuals. No credit is allowed by section 32 in the 
case of an eligible individual who is married (within the meaning of 
section 7703 and the regulations thereunder) unless the individual and 
spouse file a single return jointly (a joint return) for the taxable 
year (see section 6013 and the regulations thereunder relating to joint 
returns of income tax by husband and wife). The requirements of the 
preceding sentence do not apply to an eligible individual who is not 
considered as married under section 7703(b) and the regulations 
thereunder (relating to certain married individuals living apart).
    (3) Length of taxable year. No credit is allowed by section 32 in 
the case of a taxable year covering a period of less than 12 months. 
However, the rule of the preceding sentence does not apply to a taxable 
year closed by reason of the death of the eligible individual.
    (c) * * * (1) [Reserved].
    (2) Earned income. For purposes of this section, earned income is 
computed without regard to any community property laws which may 
otherwise be applicable. Earned income is reduced by any net loss in 
earnings from self-employment. Earned income does not include amounts 
received as a pension, an annuity, unemployment compensation, or 
workmen's compensation, or an amount to which section 871(a) and the 
regulations thereunder apply (relating to income of nonresident alien 
individuals not connected with United States business).
    (d) [Reserved].
    (e) * * * (1) * * *.
    (2) Reconciliation of payments advanced and credit allowed. Any 
additional amount of tax under paragraph (e)(1) of this section is not 
treated as a tax imposed by chapter 1 of the Internal Revenue Code for 
purposes of determining the amount of any credit (other than the earned 
income credit) allowable under part IV, subchapter A, chapter 1 of the 
Internal Revenue Code.

David A. Mader,
Assistant Deputy Commissioner of Internal Revenue.
    Approved: February 11, 2003.
Pamela F. Olson,
Assistant Secretary of the Treasury.
[FR Doc. 03-5339 Filed 3-5-03; 8:45 am]
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