I 

108TH CONGRESS 

1ST SESSION H. R. 1640

To amend the Internal Revenue Code of 1986 to allow a married couple 

who operates an unincorporated business as co-owners to file separate 

returns for purposes of the self-employment tax, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 3, 2003

Mr. UDALL of Colorado introduced the following bill; which was referred to 

the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to allow a 

married couple who operates an unincorporated business 

as co-owners to file separate returns for purposes of 

the self-employment tax, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. FINDINGS AND PURPOSE. 

4 (a) FINDINGS.—The Congress finds that—

5 (1) thousands of married couples own and oper6 ate unincorporated businesses that are classified as 

7 partnerships for Federal income tax purposes; but 
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1 (2) the record-keeping and other requirements 

2 applicable to partnerships under Federal tax laws 

3 are so complex and time-consuming that many such 

4 couples instead report the results of their business 

5 operations as if the businesses involved were sole 

6 proprietorships; and 

7 (3) such reporting not only does not meet the 

8 technical requirements of the tax laws, it also can 

9 result in other problems, including the inability of 

10 one spouse to obtain Social Security and Medicare 

11 benefits, the inability of surviving children to obtain 

12 survivor benefits under Social Security, or adverse 

13 consequences for one spouse in the event of divorce. 

14 (b) PURPOSE.—The purpose of this Act is to enable 

15 married couples operating unincorporated businesses to 

16 comply with certain requirements of Federal tax law in 

17 a manner that is more convenient and less likely to result 

18 in adverse consequences in the event of a spouses dis19 ability, the death of the other spouse, or divorce. 

20 SEC. 2. TREATMENT OF BUSINESSES OPERATED BY HUS21 BAND AND WIFE. 

22 (a) IN GENERAL.—Section 761 of the Internal Rev23 enue Code of 1986 is amended by redesignating subsection 

24 (f) as subsection (g) and by inserting after subsection (e) 

25 the following new subsection: 
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1 ‘‘(f) QUALIFIED JOINT BUSINESSES.—

2 ‘‘(1) IN GENERAL.—In the case of a qualified 

3 joint business conducted by a husband and wife who 

4 file a joint return for the taxable year, for purposes 

5 of this title—

6 ‘‘(A) such joint business shall not be treat7 ed as a partnership, 

8 ‘‘(B) all items of income, gain, loss, deduc9 tion, and credit shall be divided between the 

10 spouses in such percentages as the spouses des11 ignate, and 

12 ‘‘(C) each spouse shall take into account 

13 such spouse’s respective share of such items as 

14 if they were attributable to a trade or business 

15 conducted by such spouse as a sole proprietor. 

16 ‘‘(2) QUALIFIED JOINT BUSINESS.—For pur17 poses of this paragraph (1), the term ‘qualified joint 

18 business’ means any joint venture involving the con19 duct of a business if—

20 ‘‘(A) the only members of such joint ven21 ture are a husband and wife, and 

22 ‘‘(B) both spouses elect the application of 

23 this subsection.’’. 

24 (b) NET EARNINGS FROM SELF-EMPLOYMENT.—
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1 (1) Subsection (a) of section 1402 of such Code 

2 (defining net earnings from self-employment) is 

3 amended by striking ‘‘and’’ at the end of paragraph 

4 (14), by striking the period at the end of paragraph 

5 (15) and inserting ‘‘; and’’, and by inserting after 

6 paragraph (15) the following new paragraph: 

7 ‘‘(16) notwithstanding the preceding provisions 

8 of this subsection, each spouse’s share of income or 

9 loss from a qualified joint business (as defined in 

10 section 761(f)(2)) shall be taken into account as 

11 provided in section 761(f) in determining net earn12 ings from self-employment of such spouse.’’. 

13 (2) Subsection (a) of section 211 of the Social 

14 Security Act (defining net earnings from self-em15 ployment) is amended by striking ‘‘and’’ at the end 

16 of paragraph (14), by striking the period at the end 

17 of paragraph (15) and inserting ‘‘; and’’, and by in18 serting after paragraph (15) the following new para19 graph: 

20 ‘‘(16) Notwithstanding the preceding provisions 

21 of this subsection, each spouse’s share of income or 

22 loss from a qualified joint business (as defined in 

23 section 761(f)(2) of the Internal Revenue Code of 

24 1986) shall be taken into account as provided in 
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1 such section 761(f) in determining net earnings from 

2 self-employment of such spouse.’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2003.

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