To amend the Internal Revenue Code to simplify the earned income credit.

Summary: Amends the Internal Revenue Code to allow as an earned income credit an amount equal to the credit percentage of so much of the taxpayer's income for the taxable year as does not exceed $5,714, subject to a phaseout of the current percentage limits.  Eliminates the consideration of the health insurance credit for self-employed individuals as part of the computation of the earned income credit.  Makes such changes effective beginning with taxable years after 1992. 
Directs the Secretary of the Treasury to include certain information to the taxpayer as part of a refund of an overpayment of the earned income credit.

SECTION 1. SIMPLIFICATION OF EARNED INCOME CREDIT.

    (a) General Rule.--Section 32 of the Internal Revenue Code of 1986 
(relating to earned income credit) is amended by striking subsections 
(a) and (b) and inserting the following:
    ``(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 
        credit percentage of so much of the taxpayer's earned income 
        for the taxable year as does not exceed $5,714.
            ``(2) Limitation.--The amount of the credit allowable to a 
        taxpayer under paragraph (1) for any taxable year shall not 
        exceed the excess (if any) of--
                    ``(A) the credit percentage of $5,714, over
                    ``(B) the phaseout percentage of so much of the 
                adjusted gross income (or, if greater, the earned 
                income) of the taxpayer for the taxable year as exceeds 
                $9,000.
    ``(b) Percentages.--For purposes of subsection (a)--
            ``(1) In general.--Except as otherwise provided in this 
        subsection--

      

                                                                        
    ``In the case of an                                    The phaseout 
 eligible individual with:    The credit percentage is:   percentage is:
                                                                        
1 qualifying child.........  23.0......................       16.43     
2 qualifying children......  29.0......................       20.71     
3 or more qualifying                                          23.56     
 children..................  33.01.....................                 
                                                                        

            ``(2) Transitional percentages.--In the case of a taxable 
        year beginning in 1993:

      

                                                                        
    ``In the case of an                                    The phaseout 
 eligible individual with:    The credit percentage is:   percentage is:
                                                                        
1 qualifying child.........  18.5......................      13.21    
2 qualifying children......  23.5......................      16.78    
3 or more qualifying                                                    
 children..................  28.5......................      20.35''    
                                                                        

    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 32(f) is amended by striking 
        ``subsection (b)'' each place it appears and inserting 
        ``subsection (a)(2)''.
            (2) Subparagraph (B) of section 32(i)(2) is amended--
                    (A) by striking ``subsection (b)(1)'' in clause (i) 
                and inserting ``subsection (a)'', and
                    (B) by striking ``subsection (b)(1)(B)(ii)'' in 
                clause (ii) and inserting ``subsection (a)(2)''.
            (3) Paragraph (3) of section 162(l) is amended to read as 
        follows:
            ``(3) Coordination with medical deduction.--Any amount paid 
        by a taxpayer for insurance to which paragraph (1) applies 
        shall not be taken into account in computing the amount 
        allowable to the taxpayer as a deduction under section 
        213(a).''
            (4) Section 213 is amended by striking subsection (f).
            (5) Subparagraph (B) of section 3507(c)(2) is amended by 
        striking clauses (i) and (ii) and inserting the following:
                            ``(i) of not more than the percentage (in 
                        effect under section 32(a)(1) for an eligible 
                        individual with 1 qualifying child) of earned 
                        income not in excess of the amount of earned 
                        income taken into account under section 
                        32(a)(1), which
                            ``(ii) phases out between the amount of 
                        earned income at which the phaseout begins 
                        under subsection (a)(2) of section 32 and the 
                        amount of earned income at which the credit 
                        under section 32 is phased out under such 
                        subsection for an individual with 1 qualifying 
                        child, or''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.

SEC. 2. REQUIRED EXPLANATION OF ADVANCE PAYMENT PROVISIONS.

    (a) General Rule.--Section 3507 of the Internal Revenue Code of 
1986 is amended by adding at the end thereof the following new 
subsection:
    ``(f) Required Explanation of Advance Payment Provisions.--The 
Secretary shall include with any refund of an overpayment of tax made 
to an individual eligible for the credit provided by section 32--
            ``(1) an explanation of the provisions of this section, and
            ``(2) a copy of the form to be used in furnishing an earned 
        income eligibility certificate to the individual's employer.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on December 31, 1993.