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106th CONGRESS
2d Session
H. R. 5524
To amend the Internal Revenue Code of 1986 to strengthen the
effectiveness of the earned income tax credit in reducing child poverty
and promoting work.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 23, 2000
Mr. Cardin (for himself, Mr. Stark, Mr. Menendez, Mr. Levin, Mr. Lewis
of Georgia, Mr. Becerra, Mr. Doggett, and Ms. Roybal-Allard) introduced
the following bill; which was referred to the Committee on Ways and
Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to strengthen the
effectiveness of the earned income tax credit in reducing child poverty
and promoting work.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Tax Relief for Working Families Act
of 2000''.
SEC. 2. INCREASED EARNED INCOME TAX CREDIT FOR 2 OR MORE QUALIFYING
CHILDREN.
(a) In General.--The table in section 32(b)(1)(A) of the Internal
Revenue Code of 1986 (relating to percentages) is amended--
(1) in the second item--
(A) by striking ``or more'', and
(B) by striking ``21.06'' and inserting ``19.06'',
and
(2) by inserting after the second item the following new
item:
``3 or more qualifying children.... 45.................................. 19.06''
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 3. SIMPLIFICATION OF DEFINITION OF EARNED INCOME.
(a) In General.--Section 32(c)(2)(A)(i) of the Internal Revenue
Code of 1986 (defining earned income) is amended by inserting ``, but
only if such amounts are includible in gross income for the taxable
year'' after ``other employee compensation''.
(b) Conforming Amendment.--Section 32(c)(2)(B) of the Internal
Revenue Code of 1986 is amended by striking ``and'' at the end of
clause (iv), by striking the period at the end of clause (v) and
inserting ``, and'', and by adding at the end the following new clause:
``(vi) the requirement under subparagraph
(A)(i) that an amount be includible in gross
income shall not apply if such amount is exempt
from tax under section 7873 or is derived
directly from restricted and allotted land
under the Act of February 8, 1887 (commonly
known as the Indian General Allotment Act) (25
U.S.C. 331 et seq.) or from land held under
Acts or treaties containing an exception
provision similar to the Indian General
Allotment Act.''
(c) Effective Date.--The amendment made by this section shall apply
to amounts received in taxable years beginning after December 31, 2000.
SEC. 4. SIMPLIFICATION OF DEFINITION OF CHILD DEPENDENT.
(a) Removal of Support Test for Certain Individuals.--Section
152(a) of the Internal Revenue Code of 1986 (relating to definition of
dependent) is amended to read as follows:
``(a) General Definition.--For purposes of this subtitle--
``(1) Dependent.--The term `dependent' means--
``(A) any individual described in paragraph (2)
over half of whose support, for the calendar year in
which the taxable year of the taxpayer begins, was
received from the taxpayer (or is treated under
subsection (c) as received from the taxpayer), or
``(B) any individual described in subsection (f).
``(2) Individuals.--An individual is described in this
paragraph if such individual is--
``(A) a brother, sister, stepbrother, or stepsister
of the taxpayer,
``(B) the father or mother of the taxpayer, or an
ancestor of either,
``(C) a stepfather or stepmother of the taxpayer,
``(D) a son or daughter of a brother or sister of
the taxpayer,
``(E) a brother or sister of the father or mother
of the taxpayer,
``(F) a son-in-law, daughter-in-law, father-in-law,
mother-in-law, brother-in-law, or sister-in-law of the
taxpayer, or
``(G) an individual (other than an individual who
at any time during the taxable year was the spouse,
determined without regard to section 7703, of the
taxpayer) who, for the taxable year of the taxpayer,
has as their principal place of abode the home of the
taxpayer and is a member of the taxpayer's
household.''.
(b) Other Modifications.--Section 152 of the Internal Revenue Code
of 1986 is amended by adding at the end the following:
``(f) Subsection (f) Dependents.--
``(1) In general.--An individual is described in this
subsection for the taxable year if such individual--
``(A) bears a relationship to the taxpayer
described in paragraph (2),
``(B) except in the case of an eligible foster
child or as provided in subsection (e), has the same
principal place of abode as the taxpayer for more than
one-half of such taxable year, and
``(C)(i) has not attained the age of 19 at the
close of the calendar year in which the taxable year
begins, or
``(ii) is a student (within the meaning of section
151(c)(4)) who has not attained the age of 24 at the
close of such calendar year.
``(2) Relationship test.--An individual bears a
relationship to the taxpayer described in this paragraph if
such individual is--
``(A) a son or daughter of the taxpayer, or a
descendant of either, or
``(B) a stepson or stepdaughter of the taxpayer.
``(3) Special rules.--
``(A) 2 or more claiming dependent.--Except as
provided in subparagraph (B), if an individual may be
claimed as a dependent by 2 or more taxpayers (but for
this subparagraph) for a taxable year beginning in the
same calendar year, only the taxpayer with the highest
adjusted gross income for such taxable year shall be
allowed the deduction with respect to such individual.
``(B) Release of claim to exemption.--Subparagraph
(A) shall not apply with respect to an individual if--
``(i) the taxpayer with the highest
adjusted gross income under subparagraph (A),
for any calendar year signs a written
declaration (in such manner and form as the
Secretary may by regulations prescribe) that
such taxpayer will not claim such individual as
a dependent for any taxable year beginning in
such calendar year,
``(ii) the other taxpayer provides over
half of such individual's support for the
calendar year in which the taxable year of such
other taxpayer begins, and
``(iii) such other taxpayer attaches such
written declaration to such taxpayer's return
for the taxable year beginning during such
calendar year.''.
(c) Rules Relating to Foster Child.--Section 152(b)(2) (relating to
rules relating to general definition) is amended by striking ``a foster
child'' and all that follows through ``individual)'' and inserting ``an
eligible foster child (as defined in section 32(c)(3)(B)(iii)) of an
individual''.
(d) Exemption From Gross Income Test.--Section 151(c)(3) (relating
to definition of child) is amended by striking ``or stepdaughter'' and
inserting ``stepdaughter, or a descendant of such individual''.
(e) Waiver of Deduction for Divorced Parents.--
(1) In general.--So much of section 152(e) as precedes
paragraph (4) (relating to support test in case of child of
divorced parents, etc.) is amended to read as follows:
``(e) Special Rules for Child of Divorced Parents.--
``(1) Release of claim to exemption.--In the case of a
child (as defined in section 151(c)(3)) of parents--
``(A) who are divorced or legally separated under a
decree of divorce or separate maintenance,
``(B) who are separated under a written separation
agreement, or
``(C) who live apart at all times during the last 6
months of the calendar year,
the custodial parent who is entitled to the deduction under
section 151 for a taxable year with respect to such child may
release such deduction to the noncustodial parent.
``(2) Procedure.--The noncustodial parent may claim a child
described in paragraph (1) as a dependent for the taxable year
if--
``(A) the custodial parent signs a written
declaration (in such manner and form as the Secretary
may by regulations prescribe) that such custodial
parent will not claim such child as a dependent for any
taxable year beginning in such calendar year,
``(B) the custodial parent and the noncustodial
parent provide over half of such child's support for
the calendar year in which the taxable years of such
parents begin, and
``(C) the noncustodial parent attaches such written
declaration to such noncustodial parent's return for
the taxable year beginning during such calendar year.
``(3) Definitions.--For purposes of this subsection--
``(A) Custodial parent.--The term `custodial
parent' means, with regard to an individual, a parent
who has custody of such individual for a greater
portion of the calendar year than the noncustodial
parent.
``(B) Noncustodial parent.--The term `noncustodial
parent' means the parent who is not the custodial
parent.''.
(2) Pre-1985 instruments.--Section 152(e)(4)(A) of such
Code is amended by striking ``A child'' and all that follows
through ``noncustodial parent'' and inserting ``A noncustodial
parent described in paragraph (1) shall be entitled to the
deduction under section 151 for a taxable year with respect to
a child if''.
(f) Conforming Amendments.--
(1) Section 1(g)(5)(A) of the Internal Revenue Code of 1986
is amended by inserting ``as in effect on the day before the
date of the enactment of the Tax Relief for Working Families
Act of 2000'' after ``152(e)''.
(2) Section 2(b)(1)(A)(i) of such Code is amended by
striking ``paragraph (2) or (4) of''.
(3) Section 2(b)(3)(B)(i) of such Code is amended by
striking ``paragraph (9)'' and inserting ``paragraph (2)(G)''.
(4) Section 21(e)(5)(A) of such Code is amended by striking
``paragraph (2) or (4) of''.
(5) Section 21(e)(5) of such Code is amended in the matter
following subclause (B) by inserting ``as in effect on the day
before the date of the enactment of the Tax Relief for Working
Families Act of 2000'' after ``152(e)(1)''.
(6) Section 32(c)(1)(G) of such Code is amended by striking
``(3)(D).'' and inserting ``(1)(C). An individual whose
qualifying child or qualifying children are not taken into
account under subsection (b) solely by reason of paragraph
(3)(D) shall be treated as an eligible individual if such
individual otherwise meets the requirements of subparagraph
(A)(ii).''.
(7) Section 32(c)(3)(B)(ii) of such Code is amended by
striking ``paragraph (2) or (4) of''.
(8) Section 51(i)(1)(C) of such Code is amended by striking
``152(a)(9)'' and inserting ``152(a)(2)(G)''.
(9) Section 152(b) of such Code is amended by striking
``specified in subsection (a)'' and inserting ``specified in
subsection (a)(2) or (f)(2)''.
(10) Section 152(c) of such Code is amended by striking
``(a)'' and inserting ``(a)(1)''.
(11) Section 7703(b)(1) of such Code is amended by striking
``paragraph (2) or (4) of''.
(12) The following provisions of such Code are each amended
by striking ``paragraphs (1) through (8) of section 152(a)''
and inserting ``subparagraphs (A) through (F) of subsection
(a)(2) or subsection (f)(2) of section 152'':
(A) Section 170(g)(3).
(B) Subparagraphs (A) and (B) of section 51(i)(1).
(C) The second sentence of section 213(d)(11).
(D) Section 529(e)(2)(B).
(E) Section 7702B(f)(2)(C)(iii).
(g) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 5. OTHER MODIFICATIONS TO EARNED INCOME TAX CREDIT.
(a) Modification of Joint Return Requirement.--Subsection (d) of
section 32 of the Internal Revenue Code of 1986 is amended to read as
follows:
``(d) Married Individuals.--
``(1) In general.--If the taxpayer is married at the close
of the taxable year, the credit shall be allowed under
subsection (a) only if the taxpayer and his spouse file a joint
return for the taxable year.
``(2) Marital status.--For purposes of paragraph (1), an
individual legally separated from his spouse under a decree of
divorce or of separate maintenance shall not be considered as
married.
``(3) Certain married individuals living apart.--For
purposes of paragraph (1), if--
``(A) an individual --
``(i) is married and files a separate
return, and
``(ii) has a qualifying child who is a son,
daughter, stepson, or stepdaughter of such
individual, and
``(B) during the last 6 months of such taxable
year, such individual and such individual's spouse do
not have the same principal place of abode,
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