Child Tax Credit Improvement Act

Summary: Child Tax Credit Improvement Act  This bill amends the Internal Revenue Code, with respect to the child tax credit, to: (1) allow taxpayers an increased $3,600 tax credit for each young child under the age of six (young child tax credit), subject to specified limitations based on adjusted gross income; (2) require the Department of the Treasury to establish a program to make advance payments of the young child tax credit; (3) modify the refundable portion of the child tax credit; and (4) require annual inflation adjustments for both the child tax credit and the young child tax credit. 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Child Tax Credit Improvement Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) According to the Supplemental Poverty Measure of the 
        Bureau of the Census, the Child tax credit and earned income 
        tax credit lift more children out of poverty than any other 
        Federal policy. According to research published by the Century 
        Foundation, the child tax credit alone now lifts nearly 1 in 8 
        children who would otherwise be poor out of poverty.
            (2) Despite the success of the child tax credit, economists 
        have found that families with young children often receive the 
        smallest child tax credits because they do not yet have enough 
        income to receive the full benefit of the credit.
            (3) Pediatricians and other child development experts have 
        long talked about the critical importance of the earliest years 
        of life.
            (4) Economists have found similar effects of the importance 
        of income in the earliest years with returns to school 
        achievement.
            (5) Young children, including babies and toddlers, are 
        among the poorest people in the country by age.
            (6) Economists have found that large fluctuations in a 
        family's income can be detrimental to the development of young 
        children. Research on scarcity has found it is hard for parents 
        to focus on children if they are worrying about having 
        sufficient income to meet their family's needs.
            (7) Indexing the value of the child tax credit would end 
        the slow erosion of the child tax credit due to inflation.

SEC. 3. YOUNG CHILD TAX CREDIT.

    (a) Special Rule for Young Children.--Section 24 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following:
    ``(h) Young Child Tax Credit.--
            ``(1) In general.--In the case of a young qualifying child, 
        subsection (a) shall be applied for the taxable year (after the 
        application of subsection (i)) by substituting `$3,600' for 
        `$1,000'.
            ``(2) Young qualifying child.--For purposes of paragraph 
        (1), the term `young qualifying child' means a qualifying child 
        who has not attained age 6 as of the close of such taxable 
        year.
            ``(3) Limitation based on adjusted gross income.--For 
        purposes of applying subsection (b) with respect to a young 
        qualifying child, paragraph (1) of subsection (b) shall be 
        applied by substituting `$180' for `$50'.
            ``(4) Credit refundable.--The aggregate credits allowed to 
        a taxpayer under subpart C shall be increased by the credit 
        which would be allowed under this section without regard to 
        this subsection, subsection (d), and the limitation under 
        section 26(a). The amount of the credit allowed under this 
        subsection shall not be treated as a credit allowed under this 
        subpart and shall reduce the amount of credit otherwise 
        allowable under subsection (a) without regard to section 26(a).
            ``(5) Reconciliation of credit and advance credit.--
                    ``(A) In general.--The amount of the credit allowed 
                under subsection (a) by reason of paragraph (1) for any 
                taxable year shall be reduced (but not below zero) by 
                the aggregate amount of any advance payments of such 
                credit under section 7527A for such taxable year.
                    ``(B) Excess advance payments.--If the aggregate 
                amount of advance payments under section 7527A for the 
                taxable year exceeds the amount of the credit allowed 
                under subsection (a) by reason of paragraph (1) for 
                such taxable year (determined without regard to 
                subparagraph (A)), the tax imposed by this chapter for 
                such taxable year shall be increased by the amount of 
                such excess.''.
    (b) Advance Payment of Credit.--Chapter 77 of such Code is amended 
by inserting after section 7527 the following new section:

``SEC. 7527A. ADVANCE PAYMENT OF YOUNG CHILD TAX CREDIT.

    ``(a) In General.--As soon as practicable and not later than 1 year 
after the date of the enactment of this section, the Secretary shall 
establish a program for making advance payments of the credit allowed 
under section 24 by reason of subsection (h) thereof on a monthly 
basis, or as frequently as the Secretary determines to be 
administratively feasible, to taxpayers allowed such credit (determined 
without regard to section 24(h)(5)(A)).
    ``(b) Limitation.--The Secretary may make payments under subsection 
(a) only to the extent that the total amount of such payments made to 
any taxpayer during the taxable year does not exceed the amount 
determined under section 24(h) with respect to such taxpayer 
(determined without regard to subsections (b) and (f) of such section). 
Such program shall make reasonable efforts to apply the limitation of 
section 24(b) with respect to payments made under such program.''.
    (c) Conforming Amendments.--
            (1) Section 6211(b)(4)(A) of such Code is amended by 
        inserting ``24(h),'' after ``24(d),''.
            (2) Section 6402(m) of such Code is amended by inserting 
        ``or (h)'' after ``subsection (d)''.
            (3) The table of sections for chapter 77 of such Code is 
        amended by inserting after the item relating to section 7527 
        the following new item:

``Sec. 7527A. Advance payment of young child tax credit.''.
            (4) Section 1324(b)(2) of title 31, United States Code, is 
        amended by inserting ``24(h),'' before ``25A,''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2016.
            (2) Advance payment program.--The Secretary of the 
        Treasury, or his designee, shall establish the program 
        described in section 7527A of the Internal Revenue Code of 1986 
        (as added by this section) not later than such date.

SEC. 4. MODIFICATIONS OF THE CHILD TAX CREDIT.

    (a) Refundable Portion.--Clause (i) of section 24(d)(1)(B) of the 
Internal Revenue Code of 1986 is amended to read as follows:
                            ``(i) 45 percent of the taxpayer's earned 
                        income (within the meaning of section 32) which 
                        is taken into account in computing taxable 
                        income for the taxable year, or''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to taxable years beginning after December 31, 2016.

SEC. 5. ADJUSTMENTS FOR INFLATION.

    (a) In General.--Section 24 of the Internal Revenue Code of 1986, 
as amended by sections 3 and 4, is amended by adding at the end the 
following new subsection:
    ``(i) Inflation Adjustments.--
            ``(1) Credit amount generally.--In the case of any taxable 
        year beginning in a calendar year after 2016, the $1,000 amount 
        contained in subsection (a) shall 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 2010' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Young child credit amount.--In the case of any 
        taxable year beginning in a calendar year after 2017, the 
        $3,600 amount contained in subsection (h)(1) shall 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 2016' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(3) Rounding.--Any increase determined under paragraph 
        (1) or (2) shall be rounded to the nearest multiple of $50.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to taxable years beginning after December 31, 2016.