To amend the Internal Revenue Code of 1986 to reduce the marriage penalty by providing for adjustments to the standard deduction, the 15-percent rate bracket, and the earned income credit, to increase the child credit and for other purposes.

Summary: Marriage Penalty and Family Tax Relief Act of 2001 - Amends the Internal Revenue Code to provide that the basic standard deduction on a joint return shall be equal to 200 percent of the dollar amount of an individual who is not married.(Sec. 3) Provides a six-year schedule for making, by 2009, the maximum taxable income in the lowest married bracket equal to double the maximum taxable income in the lowest single filer bracket.Repeals provisions providing for: (1) the reduction in the additional child tax credit for families with three or more children for taxpayers subject to the alternative minimum tax; and (2) the reduction in the earned income credit for taxpayers subject to the alternative minimum tax.Provides, starting in 2008, for increasing the alternative minimum tax exemption amount on joint returns.(Sec. 4) Provides for increases in the earned income credit phaseout amount on a joint return equal to 110 percent of the otherwise applicable amount.Includes in the definition of the term "earned income," for purposes of the earned income credit, only amounts included in gross income.(Sec 5) Provides a schedule for increasing the child tax credit to $1,000 by 2006.Prohibits the child tax credit from exceeding the excess of: (1) the sum of the regular tax liability plus the alternative minimum tax; over (2) the sum of the nonrefundable personal credits (other than the child tax credit) and the foreign tax credit and Puerto Rico and possession tax credit.Extends the availability of the additional credit for families with three or more children to families with fewer than three children.(Sec. 6) States that the amounts transferred to any Social Security Act trust fund shall be determined as if this Act had not been enacted.

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``Marriage Penalty 
and Family Tax Relief Act of 2001''.
    (b) Section 15 Not To Apply.--No amendment made by this Act shall 
be treated as a change in a rate of tax for purposes of section 15 of 
the Internal Revenue Code of 1986.

SEC. 2. ELIMINATION OF MARRIAGE PENALTY IN STANDARD DEDUCTION.

    (a) In General.--Paragraph (2) of section 63(c) of the Internal 
Revenue Code of 1986 (relating to standard deduction) is amended--
            (1) by striking ``$5,000'' in subparagraph (A) and 
        inserting ``200 percent of the dollar amount in effect under 
        subparagraph (C) for the taxable year'';
            (2) by adding ``or'' at the end of subparagraph (B);
            (3) by striking ``in the case of'' and all that follows in 
        subparagraph (C) and inserting ``in any other case.''; and
            (4) by striking subparagraph (D).
    (b) Technical Amendments.--
            (1) Subparagraph (B) of section 1(f)(6) of such Code is 
        amended by striking ``(other than with'' and all that follows 
        through ``shall be applied'' and inserting ``(other than with 
        respect to sections 63(c)(4) and 151(d)(4)(A)) shall be 
        applied''.
            (2) Paragraph (4) of section 63(c) of such Code is amended 
        by adding at the end the following flush sentence:
        ``The preceding sentence shall not apply to the amount referred 
        to in paragraph (2)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 3. PHASEOUT OF MARRIAGE PENALTY IN 15-PERCENT BRACKET.

    (a) In General.--Subsection (f) of section 1 of the Internal 
Revenue Code of 1986 (relating to adjustments in tax tables so that 
inflation will not result in tax increases) is amended by adding at the 
end the following new paragraph:
            ``(8) Phaseout of marriage penalty in 15-percent bracket.--
                    ``(A) In general.--With respect to taxable years 
                beginning after December 31, 2003, in prescribing the 
                tables under paragraph (1)--
                            ``(i) the maximum taxable income in the 
                        lowest 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 the applicable percentage 
                        of the maximum taxable income in the lowest 
                        rate bracket in the table contained in 
                        subsection (c) (after any other adjustment 
                        under this subsection), and
                            ``(ii) the comparable taxable income 
                        amounts in the table contained in subsection 
                        (d) shall be \1/2\ of the amounts determined 
                        under clause (i).
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined in accordance with the following table:

                ``For taxable years beginning
                                                         The applicable
                  in calendar year--
                                                        percentage is--
                    2004...................................        172 
                    2005...................................        178 
                    2006...................................        183 
                    2007...................................        189 
                    2008...................................        195 
                    2009 and thereafter....................       200. 
                    ``(C) Rounding.--If any amount determined under 
                subparagraph (A)(i) is not a multiple of $50, such 
                amount shall be rounded to the next lowest multiple of 
                $50.''.
    (b) Repeal of Reduction of Refundable Tax Credits.--
            (1) Subsection (d) of section 24 of such Code is amended by 
        striking paragraph (2) and redesignating paragraph (3) as 
        paragraph (2).
            (2) Section 32 of such Code is amended by striking 
        subsection (h).
    (c) Increase in Alternative Minimum Tax Exemption Amount for Joint 
Returns.--
            (1) In general.--Subsection (d) of section 55 of such Code 
        is amended by adding at the end the following new paragraph:
            ``(4) Adjustment of exemption amount for joint returns.--
                    ``(A) In general.--The dollar amount applicable 
                under paragraph (1)(A) for 2008 and each even-numbered 
                calendar year thereafter--
                            ``(i) shall be $500 greater than the dollar 
                        amount applicable under paragraph (1)(A) for 
                        the prior even-numbered calendar year, and
                            ``(ii) shall apply to taxable years 
                        beginning in such even-numbered calendar year 
                        and in the succeeding calendar year.
                In no event shall the dollar amount applicable under 
                paragraph (1)(A) exceed twice the dollar amount 
                applicable under paragraph (1)(B).
                    ``(B) Exemption amounts for 2005, 2006, and 2007.--
                The dollar amount applicable under paragraph (1)(A) 
                shall be--
                            ``(i) $46,000 for taxable years beginning 
                        in 2005, and
                            ``(ii) $46,500 for taxable years beginning 
                        in 2006 or 2007.''.
            (2) Conforming amendments.--
                    (A) Paragraph (1) of section 55(d) of such Code is 
                amended by striking ``and'' at the end of subparagraph 
                (B), by striking subparagraph (C), and by inserting 
                after subparagraph (B) the following new subparagraphs:
                    ``(C) 50 percent of the dollar amount applicable 
                under paragraph (1)(A) in the case of a married 
                individual who files a separate return, and
                    ``(D) $22,500 in the case of an estate or trust.''.
                    (B) Subparagraph (C) of section 55(d)(3) of such 
                Code is amended by striking ``paragraph (1)(C)'' and 
                inserting ``subparagraph (C) or (D) of paragraph (1)''.
                    (C) The last sentence of section 55(d)(3) of such 
                Code is amended--
                            (i) by striking ``paragraph (1)(C)(i)'' and 
                        inserting ``paragraph (1)(C)''; and
                            (ii) by striking ``$165,000 or (ii) 
                        $22,500'' and inserting ``the minimum amount of 
                        such income (as so determined) for which the 
                        exemption amount under paragraph (1)(C) is 
                        zero, or (ii) such exemption amount (determined 
                        without regard to this paragraph)''.
    (d) Technical Amendments.--
            (1) Subparagraph (A) of section 1(f)(2) of such Code is 
        amended by inserting ``except as provided in paragraph (8),'' 
        before ``by increasing''.
            (2) The heading for subsection (f) of section 1 of such 
        Code is amended by inserting ``Phaseout of Marriage Penalty in 
        15-Percent Bracket;'' before ``Adjustments''.
    (e) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2003.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to taxable years beginning after December 31, 2001.
            (3) Subsection (c).--The amendments made by subsection (c) 
        shall apply to taxable years beginning after December 31, 2004.

SEC. 4. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT; EARNED INCOME 
              TO INCLUDE ONLY AMOUNTS INCLUDIBLE IN GROSS INCOME.

    (a) In General.--Paragraph (2) of section 32(b) of the Internal 
Revenue Code of 1986 (relating to percentages and amounts) is amended--
            (1) by striking ``Amounts.--The earned'' and inserting 
        ``Amounts.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                earned''; and
            (2) by adding at the end the following new subparagraph:
                    ``(B) Joint returns.--In the case of a joint 
                return, the earned income amount determined under 
                subparagraph (A) shall be 110 percent of the otherwise 
                applicable amount. If any amount determined under the 
                preceding sentence is not a multiple of $10, such 
                amount shall be rounded to the nearest multiple of 
                $10.''.
    (b) Earned Income To Include Only Amounts Includible in Gross 
Income.--Clause (i) of section 32(c)(2)(A) of such Code (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''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 5. MODIFICATIONS TO CHILD TAX CREDIT.

    (a) Increase in Per Child Amount.--Subsection (a) of section 24 of 
the Internal Revenue Code of 1986 (relating to child tax credit) is 
amended to read as follows:
    ``(a) Allowance of Credit.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by this chapter for the taxable year 
        with respect to each qualifying child of the taxpayer an amount 
        equal to the per child amount.
            ``(2) Per child amount.--For purposes of paragraph (1), the 
        per child amount shall be determined as follows:

``In the case of any taxable year   The per child amount is--
        beginning in--
    2001 and 2002.................................              $  600 
    2003..........................................                 700 
    2004..........................................                 800 
    2005..........................................                 900 
    2006 or thereafter............................            1,000.''.
    (b) Credit Allowed Against Alternative Minimum Tax.--
            (1) In general.--Subsection (b) of section 24 of such Code 
        is amended by adding at the end the following new paragraph:
            ``(3) Limitation based on amount of tax.--The credit 
        allowed under subsection (a) for any taxable year shall not 
        exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under this 
                subpart (other than this section) and section 27 for 
                the taxable year.''.
            (2) Conforming amendments.--
                    (A) The heading for section 24(b) of such Code is 
                amended to read as follows: ``Limitations.--''.
                    (B) The heading for section 24(b)(1) of such Code 
                is amended to read as follows: ``Limitation based on 
                adjusted gross income.--''.
                    (C) Section 24(d) of such Code is amended--
                            (i) by striking ``section 26(a)'' each 
                        place it appears and inserting ``subsection 
                        (b)(3)'', and
                            (ii) in paragraph (1)(B) by striking 
                        ``aggregate amount of credits allowed by this 
                        subpart'' and inserting ``amount of credit 
                        allowed by this section''.
                    (D) Paragraph (1) of section 26(a) of such Code is 
                amended by inserting ``(other than section 24)'' after 
                ``this subpart''.
                    (E) Subsection (c) of section 23 of such Code is 
                amended by striking ``and section 1400C'' and inserting 
                ``and sections 24 and 1400C''.
                    (F) Subparagraph (C) of section 25(e)(1) of such 
                Code is amended by inserting ``, 24,'' after ``sections 
                23''.
                    (G) Section 904(h) of such Code is amended by 
                inserting ``(other than section 24)'' after 
                ``chapter''.
                    (H) Subsection (d) of section 1400C of such Code is 
                amended by inserting ``and section 24'' after ``this 
                section''.
    (c) Additional Credit for Families With 3 or More Children 
Available to All Families.--Subsection (d) of section 24 of such Code 
is amended--
            (1) in paragraph (1) by striking ``In the case of a 
        taxpayer with three or more qualifying children for any taxable 
        year, the'' and inserting ``The'', and
            (2) in the subsection heading by striking ``With 3 or More 
        Children'' and inserting ``Paying Social Security Taxes''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2000.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to taxable years beginning after December 31, 2001.

SEC. 6. PROTECTION OF SOCIAL SECURITY AND MEDICARE.

    The amounts transferred to any trust fund under the Social Security 
Act shall be determined as if this Act had not been enacted.

            Passed the House of Representatives March 29, 2001.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.