A bill to amend the Internal Revenue Code of 1986 to simplify the earned income tax credit eligibility requirements regarding filing status, presence of children, investment income, and work and immigrant status.

Summary: Earned Income Tax Credit Simplification Act of 2005 - Amends provisions of the Internal Revenue Code relating to the earned income tax credit to: (1) allow certain married taxpayers filing separate returns and residing with a dependent child to claim such credit; (2) allow certain taxpayers residing in a household with a qualifying child to claim the credit independently as a taxpayer without a qualifying child; (3) eliminate provisions denying the credit for individuals with excessive investment income; and (4) require aliens claiming the credit to have a social security number authorized for employment purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Earned Income Tax Credit 
Simplification Act of 2005''.

SEC. 2. MODIFICATION OF ABANDONED SPOUSE RULE.

    (a) In General.--Section 32(c)(1) of the Internal Revenue Code of 
1986 (relating to eligible individual) is amended by adding at the end 
the following new paragraph:
                    ``(H) Certain married individuals living apart.--
                For purposes of this section, an individual who--
                            ``(i) is married (within the meaning of 
                        section 7703(a)) and files a separate return 
                        for the taxable year,
                            ``(ii) lives with a qualifying child of the 
                        individual for more than one-half of such 
                        taxable year, and
                            ``(iii) during the last 6 months of such 
                        taxable year, does not have the same principal 
                        place of abode as the individual's spouse, 
                        shall not be considered as married.''.
    (b) Conforming Amendments.--
            (1) The last sentence of section 32(c)(1)(A) of the 
        Internal Revenue Code of 1986 is amended by striking ``section 
        7703'' and inserting ``section 7703(a)''.
            (2) Section 32(d) of such Code is amended by striking ``In 
        the case of an individual who is married (within the meaning of 
        section 7703)'' and inserting ``In the case of an individual 
        who is married (within the meaning of section 7703(a)) and is 
        not described in subsection (c)(1)(H)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 3. SIMPLIFICATION OF RULES REGARDING PRESENCE OF QUALIFYING CHILD.

    (a) Taxpayer Eligible for Credit for Worker Without Qualifying 
Child if Qualifying Child Claimed by Another Member of Family.--Section 
32(c)(1) of the Internal Revenue Code of 1986 (relating to eligible 
individual), as amended by this Act, is amended by adding at the end 
the following new paragraph:
                    ``(I) Taxpayer eligible for credit for worker 
                without qualifying child if qualifying child claimed by 
                another member of family.--
                            ``(i) General rule.--Except as provided in 
                        clause (ii), in the case of 2 or more eligible 
                        individuals who may claim for such taxable year 
                        the same individual as a qualifying child, if 
                        such individual is claimed as a qualifying 
                        child by such an eligible individual, then any 
                        other such eligible individual who does not 
                        make such a claim of such child or of any other 
                        qualifying child may be considered an eligible 
                        individual without a qualifying child for 
                        purposes of the credit allowed under this 
                        section for such taxable year.
                            ``(ii) Exception if qualifying child 
                        claimed by parent.--If an individual is claimed 
                        as a qualifying child for any taxable year by 
                        an eligible individual who is a parent of such 
                        child, then no other parent of such child who 
                        does not make such a claim of such child or of 
                        any other qualifying child may be considered an 
                        eligible individual without a qualifying child 
                        for purposes of the credit allowed under this 
                        section for such taxable year.''.
    (b) Taxpayer Eligible for Credit for Worker Without Qualifying 
Child if Qualifying Children Do Not Have Valid Social Security 
Number.--Subparagraph (G) of section 32(c)(1) of the Internal Revenue 
Code of 1986 is amended to read as follows:
                    ``(G) Individuals who do not include tin, etc., of 
                any qualifying child.--In the case of any eligible 
                individual who has one or more qualifying children, if 
                no qualifying child of such individual is taken into 
                account under subsection (b) by reason of paragraph 
                (3)(D), for purposes of the credit allowed under this 
                section, such individual may be considered an eligible 
                individual without a qualifying child.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 4. ELIMINATION OF DISQUALIFIED INVESTMENT INCOME TEST.

    (a) In General.--Section 32 of the Internal Revenue Code of 1986 is 
amended by striking subsection (i).
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2005.

SEC. 5. DEFINITION OF VALID TAXPAYER IDENTIFICATION NUMBER FOR EARNED 
              INCOME CREDIT.

    (a) In General.--Section 32(m) of the Internal Revenue Code of 1986 
is amended to read as follows:
    ``(m) Identification Numbers.--
            ``(1) In general.--Solely for purposes of subsections 
        (c)(1)(E) and (c)(3)(D), a taxpayer identification number means 
        a social security number assigned by the Social Security 
        Administration.
            ``(2) Limitation.--
                    ``(A) In general.--To be eligible for a credit 
                under this section, the return of tax for the taxable 
                year must clearly indicate that any alien with earned 
                income possesses a social security number assigned by 
                the Social Security Administration which is authorized 
                for employment purposes.
                    ``(B) Joint returns.--When a married couple files a 
                joint return, and one spouse's social security number 
                is authorized for employment and the other spouse's 
                social security number is not authorized for employment 
                purposes, a credit under this section is only available 
                if the return of tax for the taxable year clearly 
                indicates that the earned income is attributable only 
                to the spouse whose social security number is 
                authorized for employment purposes.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2005.
    (c) Notice Requirements.--
            (1) In general.--The Secretary of the Treasury shall make 
        reasonable efforts to provide at least 3 months advance 
        notification to households likely to be affected by the 
        amendment made by subsection (a) so that individuals eligible 
        to obtain an employment-authorized social security number may 
        understand what action is needed to preserve their eligibility 
        for the earned income credit under section 32 of the Internal 
        Revenue Code of 1986.
            (2) Response if conditions not satisfied.--If a taxpayer 
        appears to be otherwise eligible for the earned income credit 
        under section 32 of such Code but has not satisfied the 
        conditions of subsection (m)(2) of such section, the Secretary 
        of the Treasury shall send a mathematical or clerical error 
        notice under section 6213(b)(1) of such Code informing the 
        taxpayer of the actions needed to establish eligibility for 
        such credit and of the option of filing an amended tax return 
        if eligibility for such credit cannot be established within the 
        response period for such mathematical or clerical error notice.