103d CONGRESS
2d Session
 H. R. XX
IN THE HOUSE OF REPRESENTATIVES
Mr.   introduced the following bill; which was referred to the Committee
on XXXXXXXXXXXXXXX
A BILL
To amend the Internal Revenue Code of 1986 to provide a tax credit for
families, to reform the marriage penalty, and for other purposes.
  Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
  (a) Short Title.--This Act may be cited as the ``American Dream
Restoration Act''.
  (b) Amendment of 1986 Code.--Except as otherwise expressly provided,
whenever in this Act an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
SEC. 2. FAMILY TAX CREDIT.
  (a) In General.--Subpart C of part IV of subchapter A of chapter 1
(relating to refundable credits) is amended by redesignating section 35
as section 36 and by inserting after section 34 the following new
section:
``SEC. 35. FAMILY TAX CREDIT.
  ``(a) Allowance of Credit.--
  ``(1) In general.--In the case of an eligible individual, there shall
be allowed as a credit against the tax imposed by this subtitle for the
taxable year an amount equal to the amount described in paragraph (2)
multiplied by the number of qualifying children of the taxpayer.
I22  ``(2) Description of amount.--
  ``(A) In general.--The amount described in this paragraph is an amount
equal to $500, reduced (but not below zero) by the applicable reduction
amount.
  ``(B) Applicable reduction amount.--For purposes of subparagraph (A),
the term `applicable reduction amount' means an amount which bears the
same ratio to the amount applicable under subparagraph (A)(i), as--
  ``(i) the excess (if any) of the taxpayer's adjusted gross income over
$200,000, bears to
  ``(ii) $50,000.
  ``(b) Limitation Based on Amount of Tax.--The credit allowed by
subsection (a) for a taxable year shall not exceed the excess (if any)
of--
  ``(1) the sum of--
  ``(A) the tax imposed by this subtitle for the taxable year (reduced
by the credits allowable against such tax other than the credits
allowable under this subpart), and
  ``(B) the taxes imposed by sections 3101 and 3111 on wages received by
the taxpayer during such taxable year, over
  ``(2) the credit allowable for the taxable year under section 32.
  ``(c) Inflation Adjustments.--
  ``(1) In general.--In the case of a taxable year beginning in a
calendar year after 1996, the $500 and $20,000 amounts contained in
subsection (a)(2) shall each be increased by an amount equal to--
  ``(A) such dollar amount, multiplied by
  ``(B) the cost-of-living adjustment determined under section 1(f)(3)
for the calendar year in which the taxable year begins, determined by
substituting `calendar year 1995' for `calendar year 1992' in
subparagraph (B) thereof.
  ``(2) Rounding.--If any amount as adjusted under paragraph (1) is not
a multiple of $50, such amount shall be rounded to the nearest multiple
of $50.
  ``(d) Definitions and Special Rules.--For purposes of this section--
  ``(1) Eligible individual.--The term `eligible individual' has the
meaning given to such term by section 32(c)(1) (determined without
regard to subparagraph (B) thereof).
  ``(2) Qualifying child.--The term `qualifying child' means an
individual who--
  ``(A) is a qualifying child, within the meaning of section 32(c)(3)
(determined without regard to subparagraph (E) thereof), and
  ``(B) has not attained the age of 18 as of the close of the calendar
year in which the taxable year of the taxpayer begins.
  ``(3) Certain other rules apply.--Subsections (d) and (e) of section
32 shall apply.''
  (b) Conforming Amendment.--The table of sections for such subpart C is
amended by striking the item relating to section 35 and inserting the
following new items:
``Sec. 35. Family tax credit.
``Sec. 36. Overpayments of tax.''
  (c) Effective Date.--The amendments made by this section shall apply
to taxable years beginning after December 31, 1995.
SEC. 3. CREDIT TO REDUCE THE MARRIAGE PENALTY.
  (a) In General.--Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits) is amended by inserting
after section 22 the following new section:
``SEC. 23. REDUCTION OF MARRIAGE PENALTY.
  ``(a) Allowance of Credit.--In the case of a qualified married couple,
there are shall be allowed as a credit against the tax imposed by this
chapter for the taxable year an amount equal to the applicable dollar
amount.
  ``(b) Qualified Married Couple.--For purposes of this section, the
term `qualified married couple' means a husband and wife who file a
joint return for the taxable year and who, but for this paragraph, would
be required to pay more in income taxes under this subtitle because of
the fact that they were legally married during such taxable year than
they would be required to pay if they had not been married.
  ``(c) Applicable Dollar Amount.--For purposes of this section, the
term `applicable dollar amount' means, with respect to taxable years
beginning in any calendar year, the amount which the Secretary estimates
will result in a reduction in revenues to the Treasury for such taxable
years of $2,000,000,000. In no event may the applicable dollar amount
with respect to any taxpayer exceed the marriage penalty that such
taxpayer would be required to pay but for this section.''
  (b) Table of Sections.--The table of sections for such subpart A is
amended by inserting after the item relating to section 22 the following
new item:
``Sec. 23. Reduction of marriage penalty.''
  (c) Effective Date.--The amendments made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
SEC. 4. ESTABLISHMENT OF AMERICAN DREAM SAVINGS ACCOUNTS.
  (a) In General.--Subpart A of part I of subchapter D of chapter 1
(relating to pension, profit-sharing, stock bonus plans, etc.) is
amended by inserting after section 408 the following new section:
``SEC. 408A. AMERICAN DREAM SAVINGS ACCOUNTS.
  ``(a) General Rule.--The rules of this section shall apply to any
individual retirement plan which is an American Dream Savings Account.
  ``(b) American Dream Savings Account.--For purposes of this title, the
term `American Dream Savings Account' or `ADS account' means an
individual retirement plan which is designated at the time of the
establishment of the plan as an American Dream Savings Account. Such
designation shall be made in such manner as the Secretary may prescribe.
  ``(c) Contribution Rules.--
  ``(1) No deduction allowed.--No deduction shall be allowed under
section 219 for a contribution to an ADS account.
  ``(2) Contribution limit.--
  ``(A) In general.--The aggregate amount of contributions (other than
rollover contributions) for any taxable year to all ADS accounts
maintained for the benefit of an individual shall not exceed the lesser
of--
  ``(i) $2,000, or
  ``(ii) an amount equal to the compensation includible in the
individual's gross income for such taxable year.
  ``(B) Special rule for certain married individuals.--In the case of a
husband and wife who file a joint return for a taxable year, the sum of
the aggregate amount of contributions (other than rollover
contributions) for such taxable year to all ADS accounts maintained for
the benefit of such husband and wife shall not exceed the lesser of--
  ``(i) $4,000, or
  ``(ii) an amount equal to the compensation includible in their gross
income for such taxable year.
In no event shall the aggregate amount of such contributions for either
individual exceed $2,000 for such taxable year.
  ``(C) Adjustment for inflation.--
  ``(i) In general.--In the case of a taxable year beginning in a
calendar year after 1996, the dollar amounts contained in subparagraphs
(A) and (B) shall each be increased by an amount equal to--
I28  ``(I) such dollar amount, multiplied by
I28  ``(II) the cost-of-living adjustment under section 1(f)(3) for the
calendar year in which the taxable year begins, determined by
substituting `calendar year 1995' for `calendar year 1992' in
subparagraph (B) thereof.
I26  ``(ii) Rounding.--If any amount as adjusted under clause (i) is
not a multiple of $50, such amount shall be rounded to the nearest
multiple of $50.
  ``(D) Tax on excess contributions.--Section 4973 shall be applied
separately with respect to individual retirement plans which are ADS
accounts and individual retirement plans which are not ADS accounts,
except that, for purposes of applying such section with respect to
individual retirement plans which are ADS accounts, excess contributions
shall be considered to be any amounts in excess of the limitation under
subsection (c)(2)(A) or (B), as applicable.
  ``(3) Contributions after age 70\1/2\.--Subsections (a)(6) and (b)(3)
of section 408 (relating to required distributions) and section 4974
(relating to excise tax on certain accumulations in qualified retirement
plans) shall not apply to any ADS account.
  ``(4) Limitations on rollover contributions.--No rollover
contributions may be made to an ADS account unless such rollover
contribution is a contribution of a payment or distribution out of an
individual retirement plan which is not allocable to any amount
transferred to such plan which represented any portion of the balance to
the credit of an employee in a qualified trust (or any income allocable
to such portion).
  ``(d) Distribution Rules.--For purposes of this title--
  ``(1) In general.--In the case of a qualified distribution from an ADS
account--
  ``(A) no portion of such distribution shall be includible in gross
income, and
  ``(B) section 72(t) shall not apply.
  ``(2) Qualified distribution.--For purposes of this subsection--
  ``(A) In general.--The term `qualified distribution' means any payment
or distribution--
  ``(i) made on or after the date on which the individual attains age
59\1/2\,
  ``(ii) made to a beneficiary (or to the estate of the individual) on
or after the death of the individual,
  ``(iii) attributable to the individual's being disabled (within the
meaning of section 72(m)(7)), or
  ``(iv) which is a qualified special purpose distribution (within the
meaning of subsection (e)).
  ``(B) Distributions within 5 years.--No payment or distribution shall
be treated as a qualified distribution if--
  ``(i) it is made within the 5-taxable year period beginning with the
1st taxable year in which the individual made a contribution to an ADS
account (or such individual's spouse made a contribution to an ADS
account) established for such individual, or
  ``(ii) in the case of a payment or distribution properly allocable to
a rollover contribution (or income allocable thereto), it is made within
5 years after the date on which such rollover contribution was made, as
determined under regulations prescribed by the Secretary.
  ``(3) Special rules relating to rollovers.--Section 408(d)(3) shall
apply to any amount paid or distributed out of an individual retirement
plan (other than an ADS account) which is paid into an ADS account
(established for the benefit of the payee or distributee, as the case
may be) before the close of the 60th day after the day on which the
payment or distribution is received, except that--
  ``(A) section 72(t) shall not apply; and
  ``(B) any amount required to be included in gross income by reason of
this paragraph shall be included ratably over the 4-taxable year period
beginning with the taxable year in which the payment or distribution is
made.
  ``(e) Qualified Special Purpose Distribution.--
  ``(1) In general.--For purposes of this section, the term `qualified
special purpose distribution' means any payments or distributions to an
individual from an ADS account--
  ``(A) if such payments or distributions are qualified first-time
homebuyer distributions, or
  ``(B) to the extent such payments or distributions do not exceed--
  ``(i) the qualified higher education expenses of the taxpayer for the
taxable year in which received, and
  ``(ii) the qualified medical expenses of the taxpayer for the taxable
year in which received.
The term `qualified special purpose distribution' shall not include any
payment or distribution to the extent such payment or distribution
reduces the balance of the amounts in ADS accounts of the taxpayer below
$1,000.
  ``(2) Qualified first-time homebuyer distributions.--
  ``(A) In general.--For purposes of this subsection, the term
`qualified first-time homebuyer distribution' means any payment or
distribution received by an individual to the extent such payment or
distribution is used by the individual before the close of the 60th day
after the day on which such payment or distribution is received to pay
qualified acquisition costs with respect to a principal residence for
such individual as a first-time homebuyer.
  ``(B) Qualified acquisition costs.--For purposes of this paragraph,
the term `qualified acquisition costs' means the costs of acquiring,
constructing, or reconstructing a residence. Such term includes any
usual or reasonable settlement, financing, or other closing costs.
  ``(C) First-time homebuyer; other definitions.--For purposes of this
paragraph.--
  ``(i) First-time homebuyer.--The term `first-time homebuyer' means any
individual if such individual (and, if married, such individual's
spouse) had no present ownership interest in a principal residence
during the 3-year period ending on the date of acquisition of the
principal residence to which this paragraph applies.
  ``(ii) Principal residence.--The term `principal residence' has the
same meaning as when used in section 1034.
  ``(iii) Date of acquisition.--The term `date of acquisition' means the
date--
  ``(I) on which a binding contract to acquire the principal residence
to which subparagraph (A) applies is entered into, or
  ``(II) on which construction or reconstruction of such a principal
residence is commenced.
  ``(D) Special rule where delay in acquisition.--If any payment or
distribution out of an ADS account fails to meet the requirements of
subparagraph (A) solely by reason of a delay or cancellation of the
purchase or construction of the residence, the amount of the payment or
distribution may be contributed to an individual retirement plan as
provided in subsection (d)(3)(A)(i) of section 408 (determined by
substituting `120 days' for `60 days' in such section), except that--
  ``(i) subsection (d)(3)(B) of such section shall not be applied to
such contribution, and
  ``(ii) such amount shall not be taken into account in determining
whether subsection (d)(3)(A)(i) of such section applies to any other
amount.
  ``(E) Special rule relating to basis.--The basis of any principal
residence described in subparagraph (A) shall be reduced by any amount
excluded from the gross income of the individual by reason of this
section.
  ``(5) Qualified higher education expenses.--For purposes of this
subsection--
  ``(A) In general.--The term `qualified higher education expenses'
means tuition, fees, books, supplies, and equipment required for the
enrollment or attendance of--
  ``(i) the taxpayer,
  ``(ii) the taxpayer's spouse, or
  ``(iii) the taxpayer's child (as defined in section 151(c)(3)) or
grandchild,
at an eligible educational institution (as defined in section
135(c)(3)).
  ``(B) Coordination with savings bond provisions.--The amount of
qualified higher education expenses for any taxable year shall be
reduced by any amount excludable from gross income under section 135.
  ``(6) Qualified medical expenses.--
  ``(A) In general.--For purposes of this subsection, the term
`qualified medical expenses' means any amounts paid during the taxable
year for medical care which are allowable as a deduction to the
individual under section 213 (without regard to whether the individual
itemized deductions for the taxable year).
  ``(B) Long-term care insurance.--Such term includes premiums paid
during the taxable year for any long-term care insurance contract for
the benefit of the individual or such individual's spouse.
I24  ``(C) Long-term care insurance contract.--For purposes of
subparagraph (B), the term `long-term care insurance contract' means any
insurance contract issued if--
  ``(i) the only insurance protection provided under such contract is
coverage of qualified long-term care services and benefits incidental to
such coverage (as defined under regulations prescribed by the
Secretary),
  ``(ii) the maximum benefit under the policy for expenses incurred for
any day does not exceed $200,
  ``(iii) such contract does not cover expenses incurred for services or
items to the extent that such expenses are reimbursable under title
XVIII of the Social Security Act or would be so reimbursable but for the
application of a deductible or coinsurance amount,
  ``(iv) such contract is guaranteed renewable,
  ``(v) such contract does not have any cash surrender value, and
  ``(vi) all refunds of premiums, and all policyholder dividends or
similar amounts, under such contract are to be applied as a reduction in
future premiums or to increase future benefits.
  ``(f) Rollover Contributions.--For purposes of this section, the term
`rollover contributions' means contributions described in sections
402(c), 403(a)(4), 403(b)(8), and 408(d)(3).''
  (b) Conforming Amendment.--The table of sections for subpart A of part
I of subchapter D of chapter 1 is amended by inserting after the item
relating to section 408 the following new item:
``Sec. 408A. American dream savings accounts.''
  (c) Effective Date.--The amendments made by this section shall apply
to taxable years beginning after December 31, 1995.