A bill to amend the Internal Revenue Code of 1986 to provide a rebate of up to $765 to individuals for payroll taxes paid in 2001, to provide employers with an income tax credit of up to $765 for payroll taxes paid during the payroll tax holiday period, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Wage Tax Cut Act of 2003''.

SEC. 2. REFUND OF EMPLOYEE PAYROLL TAXES.

    (a) Payment of Refunds.--
            (1) In general.--The Secretary of the Treasury shall pay, 
        out of any money in the Treasury not otherwise appropriated, to 
        each individual an amount equal to the lesser of--
                    (A) $765, or
                    (B) the amount of the individual's social security 
                taxes for 2001.
            (2) Payment in installments.--The Secretary of the Treasury 
        shall make the payment under paragraph (1) in two equal 
        installments--
                    (A) the first of which shall be paid on the date 
                which is 2 months after the date of the enactment of 
                this Act, and
                    (B) the second of which shall be paid on December 
                1, 2003.
        The Secretary may, after notice to the Senate and House of 
        Representatives, make adjustments in the timing of each 
        installment to the extent the adjustments are administratively 
        necessary.
            (3) No interest.--No interest shall be allowed on any 
        payment required by this subsection.
            (4) Certain individuals not eligible.--No payment shall be 
        made under this subsection to--
                    (A) any estate or trust,
                    (B) any nonresident alien, or
                    (C) any individual with respect to whom a deduction 
                under section 151 of such Code is allowable to another 
                taxpayer for a taxable year beginning in 2001.
            (5) Social security taxes.--For purposes of this 
        subsection--
                    (A) In general.--The term ``social security taxes'' 
                has the meaning given such term by section 24(d)(2) of 
                the Internal Revenue Code of 1986.
                    (B) State and local employees not covered by social 
                security system.--In the case of any individual--
                            (i) whose service is not treated as 
                        employment by reason of section 3121(b)(7) of 
                        such Code (relating to exemption for State and 
                        local employees), and
                            (ii) who, without regard to this 
                        subparagraph, has no social security taxes for 
                        2001,
                the term ``social security taxes'' shall include the 
                individual's employee contributions to a governmental 
                pension plan by reason of the service described in 
                clause (i).
    (b) 2002 Refund for Individuals Not Receiving Full 2001 Refund.--
Subchapter B of chapter 65 of the Internal Revenue Code of 1986 
(relating to abatements, credits, and refunds) is amended by adding at 
the end the following new section:

``SEC. 6429. REFUND OF CERTAIN 2002 PAYROLL TAXES.

    ``(a) In General.--Each eligible individual shall be treated as 
having made a payment against the tax imposed by chapter 1 for such 
individual's first taxable year beginning in 2002 in an amount equal to 
the payroll tax refund amount for such taxable year.
    ``(b) Payroll Tax Refund Amount.--For purposes of subsection (a), 
the payroll tax refund amount is the excess (if any) of--
            ``(1) the lesser of--
                    ``(A) $765, or
                    ``(B) the amount of the individual's social 
                security taxes for 2002, over
            ``(2) the amount of the payment to the individual under 
        section 2(a) of the Wage Tax Cut Act of 2003.
    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual other than--
            ``(1) any estate or trust,
            ``(2) any nonresident alien, or
            ``(3) any individual with respect to whom a deduction under 
        section 151 is allowable to another taxpayer for a taxable year 
        beginning in 2002.
    ``(d) Timing of Payments.--In the case of any overpayment 
attributable to this section, the Secretary shall, subject to the 
provisions of this title, refund or credit such overpayment as rapidly 
as possible and, to the extent practicable, before December 31, 2003.
    ``(e) No Interest.--No interest shall be allowed on any overpayment 
attributable to this section.
    ``(f) Social Security Taxes.--For purposes of this section, the 
term `social security taxes' has the meaning given such term by section 
2(a)(5) of the Wage Tax Cut Act of 2003.''
    (c) Clerical Amendment.--The table of sections for subchapter B of 
chapter 65 of such Code is amended by adding at the end the following 
new item:

        ``Sec. 6429. Refund of certain 2002 payroll taxes.''

SEC. 3. REFUND OF EMPLOYER PAYROLL TAXES ON FIRST $10,000 OF WAGES PER 
              EMPLOYEE.

    (a) In General.--Subchapter B of chapter 65 of the Internal Revenue 
Code of 1986 (relating to abatements, credits, and refunds), as amended 
by section 2, is amended by adding at the end the following:

``SEC. 6430. REFUND OF EMPLOYER PAYROLL TAXES ON FIRST $10,000 OF WAGES 
              OF AN EMPLOYEE.

    ``(a) General Rule.--Each employer subject to tax under section 
3111 or 3221(a) with respect to employment during the payroll tax 
holiday period shall be treated as having made a payment against the 
tax imposed by chapter 1 for each taxable year which includes any 
portion of such period in an amount equal to the sum of the payroll tax 
refund amounts determined for all employees of the employer for such 
taxable year.
    ``(b) Payroll Tax Refund Amount.--For purposes of this section, the 
term `payroll tax refund amount' means, with respect to any employee 
for any taxable year of an employer, the excess (if any) of--
            ``(1) the lesser of--
                    ``(A) $765, or
                    ``(B) the amount of the employer's social security 
                taxes paid or incurred with respect to employment of 
                the employee during any portion of the payroll tax 
                holiday period within the taxable year, over
            ``(2) the amount treated as paid by the employer under this 
        section with respect to the employee for any preceding taxable 
        year.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Payroll tax holiday period.--The term `payroll tax 
        holiday period' means the 12-month period beginning with the 
        first month following the date of the enactment of this 
        section. The Secretary may, after notice to the Senate and 
        House of Representatives, delay the beginning of such period if 
        the Secretary determines such delay is administratively 
        necessary to provide adequate notice of the provisions of this 
        section to employers and employees.
            ``(2) Employer payroll taxes.--
                    ``(A) In general.--The term `employer payroll 
                taxes' means the taxes imposed by sections 3111 and 
                3221(a).
                    ``(B) Special rule.--A rule similar to the rule of 
                section 24(d)(2)(C) shall apply for purposes of 
                subparagraph (A).
            ``(3) Employment.--The term `employment' includes services 
        subject to tax under chapter 22 (relating to railroad 
        retirement taxes).
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Common control.--All employers treated as a single 
        employer under subsection (a) or (b) of section 52 shall be 
        treated as a single employer for purposes of this section.
            ``(2) Trade or business requirement.--This section shall 
        not apply to employer payroll taxes paid with respect to an 
        employee unless more than one-half of the employee's 
        remuneration is for services performed in a trade or business 
        of the employer. Any determination under this subparagraph 
        shall be made without regard to subsections (a) and (b) of 
        section 52.''
    (b) Conforming Amendment.--The table of sections for subchapter B 
of chapter 65 of such Code is amended by adding at the end the 
following new item:

                              ``Sec. 6430. Refund of employer payroll 
                                        taxes on first $10,000 of wages 
                                        of an employee.''

Summary: Wage Tax Cut Act of 2003 - Directs the Secretary of the Treasury to pay to each eligible individual the lesser of $765, or the amount of the individual's social security taxes, or payments to a State or local governmental pension plan, for 2001. Amends the Internal Revenue Code to provide a 2002 refund for eligible individuals who did not receive their full 2001 refund, as provided for by this Act. Provides employers with an income tax credit of up to $765 for payroll taxes paid during the payroll tax holiday .