To amend the Internal Revenue Code of 1986 to provide a uniform definition of child for purposes of the personal exemption, the dependent care credit, the child tax credit, the earned income credit, and the health insurance refundable credit, and for other purposes.

Summary: Child Definition Simplification Act of 2004 - Amends the Internal Revenue Code to redefine "child" based upon residence, age, and relationship to the taxpayer, for purposes of the personal exemption, the dependent care credit, the child tax credit, the earned income credit, and the health insurance credit. Excludes any means-tested benefits received by a taxpayer under the Social Security Act or other substantially similar government programs from the tests for determining eligibility for the personal exemption and the dependent care credit and for determining marital status.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Child Definition Simplification Act 
of 2004''.

SEC. 2. UNIFORM DEFINITION OF CHILD.

    (a) Personal Exemption.--
            (1) In general.--Section 151 of the Internal Revenue Code 
        of 1986 is amended by redesignating subsections (c) and (d) as 
        subsections (d) and (e), respectively, and by inserting after 
        subsection (b) the following new subsection:
    ``(c) Additional Exemption for Qualifying Children.--
            ``(1) In general.--An exemption of the exemption amount for 
        each qualifying child.
            ``(2) Qualifying child.--For purposes of this section, the 
        term `qualifying child' means, with respect to any taxpayer for 
        any taxable year, an individual--
                    ``(A) who bears a relationship to the taxpayer 
                described in paragraph (3),
                    ``(B) who has the same principal place of abode as 
                the taxpayer for more than \1/2\ of such taxable year, 
                and
                    ``(C) who meets the age requirements of paragraph 
                (4).
        An individual shall not be treated as failing to meet the 
        requirements of subparagraph (B) by reason of time of birth or 
        death or by reason of temporary absences or other circumstances 
        specified in the regulations prescribed by the Secretary.
            ``(3) Relationship test.--
                    ``(A) In general.--For purposes of paragraph 
                (2)(A), an individual bears a relationship to the 
                taxpayer described in this paragraph if such individual 
                is--
                            ``(i) a son, daughter, stepson, or 
                        stepdaughter of the taxpayer or a descendant of 
                        any such relative,
                            ``(ii) a brother, sister, stepbrother, or 
                        stepsister of the taxpayer or a descendant of 
                        any such relative, whom the taxpayer cares for 
                        as the taxpayer's own child, or
                            ``(iii) an eligible foster child of the 
                        taxpayer.
                    ``(B) Adopted child.--For purposes of subparagraph 
                (A), a child who is legally adopted, or who is placed 
                with the taxpayer by an authorized placement agency for 
                adoption by the taxpayer, shall be treated as a child 
                by blood.
                    ``(C) Eligible foster child.--For purposes of 
                subparagraph (A), the term `eligible foster child' 
                means an individual--
                            ``(i) who is placed with the taxpayer by an 
                        authorized placement agency or by judgment, 
                        decree, or other order of any court of 
                        competent jurisdiction, and
                            ``(ii) whom the taxpayer cares for as the 
                        taxpayer's own child.
            ``(4) Age requirements.--For purposes of paragraph (2)(C), 
        an individual meets the requirements of this paragraph if such 
        individual--
                    ``(A) has not attained the age of 19 as of the 
                close of the calendar year in which the taxable year of 
                the taxpayer begins,
                    ``(B) is a student who has not attained the age of 
                24 as of the close of such calendar year, or
                    ``(C) is permanently and totally disabled (as 
                defined in section 22(e)(3)) at any time during the 
                taxable year.
            ``(5) Special rules.--
                    ``(A) Married dependents.--An individual shall not 
                be a qualifying child of a taxpayer if such individual 
                makes a joint return with the individual's spouse under 
                section 6013 for the taxable year beginning in the 
                calendar year in which the taxable year of the taxpayer 
                begins.
                    ``(B) Individuals who support themselves.--An 
                individual shall not be a qualifying child of a 
                taxpayer if such individual provides over half of such 
                individual's own support for the calendar year in which 
                the taxable year of the taxpayer begins.
                    ``(C) Only 1 exemption amount.--An individual who 
                is a qualifying child of any taxpayer shall not be 
                treated as the dependent of any taxpayer for purposes 
                of this part.
            ``(6) Special rule relating to 2 or more claiming 
        qualifying child.--
                    ``(A) In general.--Except as provided in paragraph 
                (7), if an individual would (but for this paragraph) be 
                a qualifying child of 2 or more taxpayers for taxable 
                years beginning in the same calendar year, such 
                individual shall be treated as the qualifying child of 
                the taxpayer who is--
                            ``(i) a parent of the individual, or
                            ``(ii) if none of such taxpayers is a 
                        parent of the individual, the taxpayer with the 
                        highest adjusted gross income for such taxable 
                        year.
                    ``(B) Parents not filing joint returns.--If an 
                individual would (but for this paragraph) be a 
                qualifying child of both parents of such individual and 
                such parents do not file a joint return together, such 
                child shall be treated as the qualifying child of--
                            ``(i) the parent with whom the child 
                        resided for the longest period during the 
                        taxable year, or
                            ``(ii) if the child resides with both 
                        parents for the same length of time during such 
                        taxable year, the parent with the highest 
                        adjusted gross income.
                    ``(C) Foster children.--For purposes of this 
                paragraph, the taxpayer shall be treated as a parent of 
                any eligible foster child who has the same principal 
                place of abode as the taxpayer for more than one-half 
                of such taxable year.
            ``(7) Special rule for certain pre-2006 instruments.--
                    ``(A) In general.--Notwithstanding paragraph (6), a 
                child who has parents who--
                            ``(i) are divorced or legally separated 
                        under a decree of divorce or separate 
                        maintenance,
                            ``(ii) are separated under a written 
                        separation agreement, or
                            ``(iii) live apart at all times during the 
                        last 6 months of the calendar year,
                shall be treated as being the qualifying child of the 
                noncustodial parent for a calendar year if the 
                requirements of subparagraph (B) are met.
                    ``(B) Requirements.--For purposes of subparagraph 
                (A), the requirements of this subparagraph are met if--
                            ``(i) such child would, but for this 
                        paragraph, be the qualifying child of the 
                        custodial parent, and
                            ``(ii) a qualified pre-2006 instrument 
                        between the parents is applicable to such child 
                        for the taxable year beginning in such calendar 
                        year.
                In the case of an agreement executed before January 1, 
                1985, the requirements of this subparagraph are met 
                only if, in addition to meeting the requirements of 
                clauses (i) and (ii), the noncustodial parent provides 
                at least $600 for the support of such child during such 
                calendar year.
                    ``(C) Qualified pre-2006 instrument.--For purposes 
                of this paragraph, the term `qualified pre-2006 
                instrument' means any written declaration referred to 
                in subsection (e)(2) (as in effect on the day before 
                the date of the enactment of the Child Definition 
                Simplification Act of 2004)--
                            ``(i) which is executed before January 1, 
                        2006, and
                            ``(ii) which is not modified on or after 
                        such date in a modification which expressly 
                        provides that this subsection shall not apply 
                        to such declaration.
                    ``(D) Custodial parent and noncustodial parent.--
                For purposes of this subsection--
                            ``(i) Custodial parent.--The term 
                        `custodial parent' means the parent with whom a 
                        child shared the same principal place of abode 
                        for the greater portion of the calendar year.
                            ``(ii) Noncustodial parent.--The term 
                        `noncustodial parent' means the parent who is 
                        not the custodial parent.
                    ``(E) Special rules for support.--For purposes of 
                this subsection--
                            ``(i) amounts expended for the support of a 
                        child or children shall be treated as received 
                        from the noncustodial parent to the extent that 
                        such parent provided amounts for such support, 
                        and
                            ``(ii) in the case of the remarriage of a 
                        parent, support of a child received from the 
                        parent's spouse shall be treated as received 
                        from the parent.''.
            (2) Conforming amendments.--
                    (A) Section 152 of such Code is amended by striking 
                subsection (e) (relating to support test in case of 
                child of divorced parents, etc.).
                    (B) Paragraph (6) of section 1(f) of such Code is 
                amended--
                            (i) in subparagraph (A) by striking 
                        ``151(d)(4)'' and inserting ``151(e)(4)'', and
                            (ii) in subparagraph (B) by striking 
                        ``151(d)(3)(A)'' and inserting 
                        ``151(e)(3)(A)''.
                    (C) Paragraph (5) of section 21(e) of such Code is 
                amended--
                            (i) by striking ``paragraph (2) or (4) of 
                        section 152(e)'' and inserting ``section 
                        151(c)(7)'', and
                            (ii) by striking ``section 152(e)(1)'' and 
                        inserting ``section 151(c)(7)''.
                    (D) Sections 21(e)(6) and 129(c) of such Code are 
                each amended--
                            (i) by striking ``151(c)'' and inserting 
                        ``151(d)'', and
                            (ii) by striking ``151(c)(3)'' and 
                        inserting ``151(d)(3)''.
                    (E) Sections 25B(c)(2)(B), 32(c)(3)(C)(ii), 
                152(d)(2), and 2032A(c)(7)(D) of such Code are each 
                amended by striking ``151(c)(4)'' and inserting 
                ``151(d)(4)''.
                    (F) Sections 72(t)(7)(A)(iii) and 132(h)(2)(B) of 
                such Code are each amended by striking ``151(c)(3)'' 
                and inserting ``151(d)(3)''.
                    (G) Clause (i) of section 642(b)(2)(C) of such Code 
                is amended--
                            (i) by striking ``151(d)'' and inserting 
                        ``151(e)'', and
                            (ii) by striking `` 151(d)(3)(C)(iii)'' and 
                        inserting `` 151(e)(3)(C)(iii)''.
                    (H) Paragraph (1) of section 3402(f) of such Code 
                is amended--
                            (i) in subparagraph (A) by striking 
                        ``151(d)(2)'' and inserting ``151(e)(2)'', and
                            (ii) in subparagraph (C) by striking 
                        ``151(c)'' and inserting ``151(d)''.
                    (I) Subparagraph (B) of section 3402(r)(2) of such 
                Code is amended by striking ``151(d)'' and inserting 
                ``151(e)''.
                    (J) Paragraph (1) of section 6012(a) of such Code 
                is amended--
                            (i) in subparagraph (A) by striking 
                        ``151(c)'' and inserting ``151(d)'', and
                            (ii) in subparagraph (D)(ii)--
                                    (I) by striking ``151(d)'' and 
                                inserting ``151(e)'', and
                                    (II) by striking ``151(d)(2)'' and 
                                inserting ``151(e)(2)''.
                    (K) The last sentence of section 6013(b)(3)(A) of 
                such Code is amended by striking ``151(d)'' and 
                inserting ``151(e)''.
                    (L) Section 7703(b)(1) of such Code is amended by 
                striking ``151(c)(3)'' and inserting ``151(c)(2)''.
    (b) Application of Uniform Definition to Dependent Care Credit.--
            (1) In general.--Section 21(b)(1)(A) of such Code is 
        amended to read as follows:
                    ``(A) a qualifying child of the taxpayer (as 
                defined in section 151(c)) who has not attained age 
                13,''.
            (2) Repeal of maintenance of household test.--Section 
        21(a)(1) of such Code is amended by striking ``who maintains a 
        household which includes as a member'' and inserting ``with 
        respect to whom there are''.
    (c) Application of Uniform Definition to Child Tax Credit.--Section 
24(c)(1) of such Code is amended to read as follows:
            ``(1) In general.--The term `qualifying child' means a 
        qualifying child of the taxpayer (as defined in section 151(c)) 
        who has not attained age 17 as of the close of the calendar 
        year in which the taxable year of the taxpayer begins.''.
    (d) Application of Uniform Definition to Earned Income Credit.--
            (1) In general.--Paragraph (3) of section 32(c) of such 
        Code is amended to read as follows:
            ``(3) Qualifying child.--
                    ``(A) In general.--The term `qualifying child' 
                means a qualifying child of the taxpayer (as defined in 
                section 151(c)).
                    ``(B) Place of abode.--For purposes of subparagraph 
                (A), the requirements of section 151(c)(2)(B) shall be 
                met only if the principal place of abode is in the 
                United States.
                    ``(C) Identification requirements.--
                            ``(i) In general.--A qualifying child shall 
                        not be taken into account under subsection (b) 
                        unless the taxpayer includes the name, age, and 
                        TIN of the qualifying child on the return of 
                        tax for the taxable year.
                            ``(ii) Other methods.--The Secretary may 
                        prescribe other methods for providing the 
                        information described in clause (i).''.
            (2) Conforming amendments.--
                    (A) Section 32(c)(1) of such Code is amended by 
                striking subparagraph (C) and by redesignating 
                subparagraphs (D), (E), (F), and (G) as subparagraphs 
                (C), (D), (E), and (F), respectively.
                    (B) Section 32(c)(4) of such Code is amended by 
                striking ``(3)(E)'' and inserting ``(3)(B)''.
                    (C) Section 32(m) of such Code is amended by 
                striking ``subsections (c)(1)(F)'' and inserting 
                ``subsections (c)(1)(E)''.
    (e) Application of Uniform Definition to Credit for Health 
Insurance Costs of Eligible Individuals.--Section 35(d)(1)(B) of such 
Code is amended to read as follows:
                    ``(B) a qualifying child of the taxpayer (as 
                defined in section 151(c)).''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.
    (g) Regulations.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of the Treasury shall issue 
regulations or other guidance defining place of abode and principal 
place of abode for purposes of sections 151(c), 21, 24, 32, and 35 of 
the Internal Revenue Code of 1986, as amended by this section.

SEC. 3. TREATMENT OF GOVERNMENT BENEFITS IN DETERMINING SUPPORT AND 
              COST OF MAINTAINING HOUSEHOLD.

    (a) Dependency Exemption.--Section 152 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new subsection:
    ``(f) Special Rule Relating to Treatment of Government Benefits in 
Determining Support.--For purposes of this part, any means-tested 
benefits obtained under programs described in section 6103(l)(7) or 
substantially similar government programs shall not be taken into 
account for purposes of determining--
            ``(1) whether over half of the support of an individual for 
        a calendar year is received from a taxpayer, and
            ``(2) whether over half of the cost of maintaining a 
        household is furnished by a taxpayer.''.
    (b) Dependent Care Credit.--Section 21(e)(1) of such Code is 
amended by adding at the end the following: ``Any means-tested benefits 
obtained under programs described in section 6103(l)(7) or 
substantially similar government programs shall not be taken into 
account for purposes of determining whether over half of the cost of 
maintaining a household is furnished by the individual.''.
    (c) Marital Status.--Section 7703 of such Code (relating to 
determination of marital status) is amended by adding at the end the 
following new subsection:
    ``(c) Special Rule Relating to Treatment of Government Benefits in 
Determining Cost of Maintaining Household.--For purposes of subsection 
(b)(2), any means-tested benefits obtained under programs described in 
section 6103(l)(7) or substantially similar government programs shall 
not be taken into account for purposes of determining whether over half 
of the cost of maintaining a household is furnished by the 
individual.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.