79–006

106TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 106–765

MARRIAGE TAX RELIEF RECONCILIATION ACT OF 2000

JULY 19, 2000.—Ordered to be printed

Mr. ARCHER, from the committee of conference,

submitted the following

CONFERENCE REPORT

[To accompany H.R. 4810]

The committee of conference on the disagreeing votes of the

two Houses on the amendment of the Senate to the bill (H.R.

4810), to provide for reconciliation pursuant to section 103(a)(1) of

the concurrent resolution on the budget for fiscal year 2001, having

met, after full and free conference, have agreed to recommend and

do recommend to their respective Houses as follows:

That the House recede from its disagreement to the amendment of the Senate and agree to the same with an amendment as

follows:

In lieu of the matter proposed to be inserted by the Senate

amendment, insert the following:

SECTION 1. SHORT TITLE.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Marriage Tax

Relief Reconciliation Act of 2000’’.

(b) SECTION 15 NOT TO APPLY.—No amendment made by this

Act shall be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.

SEC. 2. ELIMINATION OF MARRIAGE PENALTY IN STANDARD DEDUCTION.

(a) IN GENERAL.—Paragraph (2) of section 63(c) of the Internal

Revenue Code of 1986 (relating to standard deduction) is

amended—

(1) by striking ‘‘$5,000’’ in subparagraph (A) and inserting

‘‘200 percent of the dollar amount in effect under subparagraph

(C) for the taxable year’’,

(2) by adding ‘‘or’’ at the end of subparagraph (B),

(3) by striking ‘‘in the case of’’ and all that follows in subparagraph (C) and inserting ‘‘in any other case.’’, and

(4) by striking subparagraph (D).

(b) TECHNICAL AMENDMENTS.—
2

(1) Subparagraph (B) of section 1(f)(6) of such Code is

amended by striking ‘‘(other than with’’ and all that follows

through ‘‘shall be applied’’ and inserting ‘‘(other than with respect to sections 63(c)(4) and 151(d)(4)(A)) shall be applied’’.

(2) Paragraph (4) of section 63(c) of such Code is amended

by adding at the end the following flush sentence:

‘‘The preceding sentence shall not apply to the amount referred

to in paragraph (2)(A).’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 1999.

SEC. 3. PHASEOUT OF MARRIAGE PENALTY IN 15-PERCENT BRACKET.

(a) IN GENERAL.—Subsection (f) of section 1 of the Internal Revenue Code of 1986 (relating to adjustments in tax tables so that inflation will not result in tax increases) is amended by adding at the

end the following new paragraph:

‘‘(8) PHASEOUT OF MARRIAGE PENALTY IN 15-PERCENT

BRACKET.—

‘‘(A) IN GENERAL.—With respect to taxable years beginning after December 31, 1999, in prescribing the tables

under paragraph (1)—

‘‘(i) the maximum taxable income in the lowest rate

bracket in the table contained in subsection (a) (and

the minimum taxable income in the next higher taxable income bracket in such table) shall be the applicable percentage of the maximum taxable income in

the lowest rate bracket in the table contained in subsection (c) (after any other adjustment under this subsection), and

‘‘(ii) the comparable taxable income amounts in

the table contained in subsection (d) shall be 1⁄2 of the

amounts determined under clause (i).

‘‘(B) APPLICABLE PERCENTAGE.—For purposes of subparagraph (A), the applicable percentage shall be determined in accordance with the following table:

‘‘For taxable years beginning The applicable

in calendar year—

percentage is—

2000 ............................................................................................. 170

2001 ............................................................................................. 173

2002 ............................................................................................. 178

2003 ............................................................................................. 183

2004 and thereafter ................................................................... 200.

‘‘(C) ROUNDING.—If any amount determined under

subparagraph (A)(i) is not a multiple of $50, such amount

shall be rounded to the next lowest multiple of $50.’’.

(b) TECHNICAL AMENDMENTS.—

(1) Subparagraph (A) of section 1(f)(2) of such Code is

amended by inserting ‘‘except as provided in paragraph (8),’’

before ‘‘by increasing’’.

(2) The heading for subsection (f) of section 1 of such Code

is amended by inserting ‘‘PHASEOUT OF MARRIAGE PENALTY IN

15-PERCENT BRACKET;’’ before ‘‘ADJUSTMENTS’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 1999.
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SEC. 4. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT.

(a) IN GENERAL.—Paragraph (2) of section 32(b) of the Internal

Revenue Code of 1986 (relating to percentages and amounts) is

amended—

(1) by striking ‘‘AMOUNTS.—The earned’’ and inserting

‘‘AMOUNTS.—

‘‘(A) IN GENERAL.—Subject to subparagraph (B), the

earned’’, and

(2) by adding at the end the following new subparagraph:

‘‘(B) JOINT RETURNS.—In the case of a joint return, the

phaseout amount determined under subparagraph (A)

shall be increased by $2,000.’’.

(b) INFLATION ADJUSTMENT.—Paragraph (1)(B) of section 32(j)

of such Code (relating to inflation adjustments) is amended to read

as follows:

‘‘(B) the cost-of-living adjustment determined under

section 1(f)(3) for the calendar year in which the taxable

year begins, determined—

‘‘(i) in the case of amounts in subsections (b)(2)(A)

and (i)(1), by substituting ‘calendar year 1995’ for ‘calendar year 1992’ in subparagraph (B) of section 1(f)(3),

and

‘‘(ii) in the case of the $2,000 amount in subsection

(b)(2)(B), by substituting ‘calendar year 1999’ for ‘calendar year 1992’ in subparagraph (B) of section

1(f)(3).’’.

(c) ROUNDING.—Section 32(j)(2)(A) of such Code (relating to

rounding) is amended by striking ‘‘subsection (b)(2)’’ and inserting

‘‘subparagraph (A) of subsection (b)(2) (after being increased under

subparagraph (B) thereof)’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 1999.

SEC. 5. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS

AGAINST REGULAR AND MINIMUM TAX LIABILITY.

(a) IN GENERAL.—Subsection (a) of section 26 of the Internal

Revenue Code of 1986 (relating to limitation based on tax liability;

definition of tax liability) is amended to read as follows:

‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The aggregate

amount of credits allowed by this subpart for the taxable year shall

not exceed the sum of—

‘‘(1) the taxpayer’s regular tax liability for the taxable year

reduced by the foreign tax credit allowable under section 27(a),

and

‘‘(2) the tax imposed for the taxable year by section 55(a).’’.

(b) CONFORMING AMENDMENTS.—

(1) Subsection (d) of section 24 of such Code is amended by

striking paragraph (2) and by redesignating paragraph (3) as

paragraph (2).

(2) Section 32 of such Code is amended by striking subsection (h).

(3) Section 904 of such Code is amended by striking subsection (h) and by redesignating subsections (i), (j), and (k) as

subsections (h), (i), and (j), respectively.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2001.
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SEC. 6. ESTIMATED TAX.

The amendments made by this Act shall not be taken into account under section 6654 of the Internal Revenue Code of 1986 (relating to failure to pay estimated tax) in determining the amount of

any installment required to be paid before October 1, 2000.

SEC. 7. COMPLIANCE WITH BUDGET ACT.

(a) IN GENERAL.—Except as provided in subsection (b), all

amendments made by this Act which are in effect on September 30,

2005, shall cease to apply as of the close of September 30, 2005.

(b) SUNSET FOR CERTAIN PROVISIONS ABSENT SUBSEQUENT

LEGISLATION.—The amendments made by sections 2, 3, 4, and 5 of

this Act shall not apply to any taxable year beginning after December 31, 2004.

And the Senate agree to the same.

BILL ARCHER,

DICK ARMEY,

Managers on the Part of the House.

BILL ROTH,

TRENT LOTT,

Managers on the Part of the Senate.
(5)

JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF

CONFERENCE

The managers on the part of the House and the Senate at the

conference on the disagreeing votes of the two Houses on the

amendment of the Senate to the bill (H.R. 4810), to provide for reconciliation pursuant to section 103(a)(1) of the concurrent resolution on the budget for fiscal year 2001, submit the following joint

statement to the House and the Senate in explanation of the effect

of the action agreed upon by the managers and recommended in

the accompanying conference report:

The Senate amendment struck all of the House bill after the

enacting clause and inserted a substitute text.

The House recedes from its disagreement to the amendment of

the Senate with an amendment that is a substitute for the House

bill and the Senate amendment. The differences between the House

bill, the Senate amendment, and the substitute agreed to in conference are noted below, except for clerical corrections, conforming

changes made necessary by agreements reached by the conferees,

and minor drafting and clerical changes.

I. EXPLANATION OF THE BILL

A. STANDARD DEDUCTION TAX RELIEF (SEC. 2 OF THE HOUSE BILL,

SEC. 2 OF THE SENATE AMENDMENT, AND SEC. 63 OF THE CODE)

PRESENT LAW

Marriage penalty

A married couple generally is treated as one tax unit that must

pay tax on the couple’s total taxable income. Although married couples may elect to file separate returns, the rate schedules and other

provisions are structured so that filing separate returns usually results in a higher tax than filing a joint return. Other rate schedules apply to single individuals and to single heads of households.

A ‘‘marriage penalty’’ exists when the combined tax liability of

a married couple filing a joint return is greater than the sum of

the tax liabilities of each individual computed as if they were not

married. A ‘‘marriage bonus’’ exists when the combined tax liability

of a married couple filing a joint return is less than the sum of the

tax liabilities of each individual computed as if they were not married.

While the size of any marriage penalty or bonus under present

law depends upon the individuals’ incomes, number of dependents,

and itemized deductions, as a general rule married couples whose

incomes are split more evenly than 70–30 suffer a marriage penalty. Married couples whose incomes are largely attributable to one

spouse generally receive a marriage bonus.
6

1The beginning point of the 39.6 percent rate bracket is the same for all taxpayers regardless

of filing status. 2 Additional standard deductions are allowed with respect to any individual who is elderly (age

65 or over) or blind.

Under present law, the amount of the standard deduction and

the tax bracket breakpoints follow certain customary ratios across

filing statuses. The standard deduction and tax bracket

breakpoints for single individuals are roughly 60 percent of those

for married couples filing joint returns.1 Thus, the sum of the

standard deductions for two single individuals exceeds the standard deduction for a married couple filing a joint return.

Basic standard deduction

Taxpayers who do not itemize deductions may choose the basic

standard deduction (and additional standard deductions, if applicable),2 which is subtracted from adjusted gross income (‘‘AGI’’) in arriving at taxable income. The amount of the basic standard deduction varies according to filing status and is indexed for inflation.

For 2000, the amount of the basic standard deduction for each filing status is shown in the following table:

Table 1.—Basic standard deduction amounts

Basic

Filing status standard deduction

Married, joint return ....................................................................................... $7,350

Head of household return ............................................................................... 6,450

Single return .................................................................................................... 4,400

Married, separate return ................................................................................ 3,675

For 2000, the basic standard deduction for joint returns is 1.67

times the basic standard deduction for single returns.

HOUSE BILL

The House bill increases the basic standard deduction for a

married couple filing a joint return to twice the basic standard deduction for a single individual. The basic standard deduction for a

married taxpayer filing a separate return will continue to equal

one-half of the basic standard deduction for a married couple filing

a joint return.

Effective date.—The provision is effective for taxable years beginning after December 31, 2000.

SENATE AMENDMENT

The Senate amendment is the same as the House bill.

CONFERENCE AGREEMENT

The conference agreement follows the House bill and the Senate amendment, with the modification that the provision is effective for taxable years beginning after December 31, 1999. The

agreement further provides that the provision cannot be taken into

account for estimated tax purposes prior to October 1, 2000.
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B. EXPANSION OF THE 15-PERCENT AND 28-PERCENT RATE BRACK- ETS (SEC. 3(a) OF THE HOUSE BILL, SEC. 3(a) OF THE SENATE

AMENDMENT, AND SEC. 1 OF THE CODE)

PRESENT LAW

Rate brackets

To determine regular income tax liability, a taxpayer generally

must apply the tax rate schedules (or the tax tables) to his or her

taxable income. The rate schedules are broken into several ranges

of income, known as income brackets, and the marginal tax rate increases as a taxpayer’s income increases. The income bracket

amounts are indexed for inflation. Separate rate schedules apply

based on an individual’s filing status. In order to limit multiple

uses of a graduated rate schedule within a family, the net unearned income of a child under age 14 may be taxed as if it were

the parent’s income. For 2000, the individual regular income tax

rate schedules are shown below. These rates apply to ordinary income; separate rates apply to capital gains.

Table 2.—Federal individual income tax rates for 2000

If taxable income is: Then income tax equals:

Single individuals

$0–$26,250 .................................. 15 percent of taxable income.

$26,250–$63,550 ......................... $3,937.50, plus 28% of the amount over $26,250.

$63,550–$132,600 ....................... $14,381.50 plus 31% of the amount over $63,550.

$132,600–$288,350 ..................... $35,787 plus 36% of the amount over $132,600.

Over $288,350 ............................. $91,857 plus 39.6% of the amount over $288,350.

Heads of households

$0–$35,150 .................................. 15 percent of taxable income.

$35,150–$90,800 ......................... $5,272.50 plus 28% of the amount over $35,150.

$90,800–$147,050 ....................... $20,854.50 plus 31% of the amount over $90,800.

$147,050–$288,350 ..................... $38,292 plus 36% of the amount over $147,050.

Over $288,350 ............................. $89,160 plus 39.6% of the amount over $288,350.

Married individuals filing joint returns 1

$0–$43,850 .................................. 15 percent of taxable income.

$43,850–$105,950 ....................... $6,577.50 plus 28% of the amount over $43,850.

$105,950–$161,450 ..................... $23,965.50 plus 31% of the amount over $105,950.

$161,450–$288,350 ..................... $41,170.40 plus 36% of the amount over $161,450.

Over $288,350 ............................. $86,854.50 plus 39% of the amount over $288,350.

1Married individuals filing separate returns must apply a separate rate structure with tax rate brackets onehalf the width of those for married individuals filing joint returns.

HOUSE BILL

The House bill increases the size of the 15-percent regular income tax rate bracket for a married couple filing a joint return to

twice the size of the corresponding rate bracket for a single individual. This increase is phased in over six years as shown in the

following table. Therefore, this provision is fully effective (i.e., the

size of the 15-percent regular income tax rate bracket for a married

couple filing a joint return will be twice the size of the 15-percent

regular income tax rate bracket for a single individual) for taxable

years beginning after December 31, 2007. Joint return 15-

percent rate bracket as

a percentage of single

return 15-percent

Taxable year rate bracket

2003 .................................................................................................................. 170.3

2004 .................................................................................................................. 173.8
8

Joint return 15-

percent rate bracket as

a percentage of single

return 15-percent

Taxable year rate bracket

2005 .................................................................................................................. 183.5

2006 .................................................................................................................. 184.3

2007 .................................................................................................................. 187.9

2008 and thereafter ......................................................................................... 200.0

Effective date.—The provision is effective for taxable years beginning after December 31, 2002.

SENATE AMENDMENT

The Senate amendment increases the size of the 15-percent

and 28-percent regular income tax rate brackets for a married couple filing a joint return to twice the size of the corresponding rate

brackets for a single individual. This increase is phased in over six

years as shown in the following table. The Senate amendment is

fully effective (i.e., the size of the 15-percent and 28-percent regular

income tax rate brackets for a married couple filing a joint return

is twice the size of the corresponding regular income tax rate

brackets for a single individual) for taxable years beginning after

December 31, 2006. Joint return 15-

percent and 28-percent

rate bracket as a

percentage of single

return 15- and 28-

percent

Taxable year rate bracket

2002 .................................................................................................................. 170.3

2003 .................................................................................................................. 173.8

2004 .................................................................................................................. 180.0

2005 .................................................................................................................. 183.2

2006 .................................................................................................................. 185.0

2007 and thereafter ......................................................................................... 200.0

Effective date.—The provision is effective for taxable years beginning after December 31, 2001.

CONFERENCE AGREEMENT

The conference agreement follows the House bill, but with a

different phase-in, as described in the following table: Joint return 15-

percent rate bracket as

a percentage of single

return 15-percent

Taxable year rate bracket

2000 .................................................................................................................. 170.0

2001 .................................................................................................................. 173.0

2002 .................................................................................................................. 178.0

2003 .................................................................................................................. 183.0

2004 and thereafter ......................................................................................... 200.0

The agreement further provides that the provision cannot be

taken into account for estimated tax purposes prior to October 1,

2000.

Effective date.—The provision is effective for taxable years beginning after December 31, 1999.
9

3The foreign tax credit is allowed before the personal credits in computing the regular tax

for these years.

C. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST

REGULAR AND MINIMUM TAX LIABILITY (SEC. 3(b) OF THE HOUSE

BILL, SEC. 5 OF THE SENATE AMENDMENT, AND SECS. 24, 26, AND

32 OF THE CODE

PRESENT LAW

Allow nonrefundable personal credits to offset both the regular tax

and the alternative minimum tax

Present law provides for certain nonrefundable personal tax

credits (i.e., the dependent care credit, the credit for the elderly

and disabled, the adoption credit, the child credit, the credit for interest on certain home mortgages, the HOPE Scholarship and Lifetime Learning credits, and the D.C. homebuyer’s credit). Except for

taxable years beginning during 1998–2001, these credits are allowed only to the extent that the individual’s regular income tax

liability exceeds the individual’s tentative minimum tax, determined without regard to the minimum tax foreign tax credit. For

taxable years beginning during 1998 and 1999, these credits are allowed to the extent of the full amount of the individual’s regular

tax (without regard to the tentative minimum tax). For taxable

years beginning during 2000 and 2001, the nonrefundable personal

credits may offset both the regular tax and the minimum tax.3

An individual’s tentative minimum tax is an amount equal to

(1) 26 percent of the first $175,000 ($87,500 in the case of a married individual filing a separate return) of alternative minimum

taxable income (‘‘AMTI’’) in excess of a phased-out exemption

amount plus (2) 28 percent of the remaining AMTI, if any. The

maximum tax rates on net capital gain used in computing the tentative minimum tax are the same as under the regular tax. AMTI

is the individual’s taxable income adjusted to take account of specified preferences and adjustments. The exemption amounts are: (1)

$45,000 in the case of married individuals filing a joint return and

surviving spouses; (2) $33,750 in the case of other individuals; and

(3) $22,500 in the case of married individuals filing a separate return, estates and trusts. The exemption amounts are phased out by

an amount equal to 25 percent of the amount by which the individual’s AMTI exceeds (1) $150,000 in the case of married individuals

filing a joint return and surviving spouses, (2) $112,500 in the case

of other unmarried individuals, and (3) $75,000 in the case of married individuals filing separate returns or an estate or a trust.

These amounts are not indexed for inflation.

Reduction of refundable credits by alternative minimum tax

Refundable credits may offset tax liability determined under

present-law tax rates and allow refunds to an individual in excess

of income tax liability. However, the refundable child credit (beginning in taxable years beginning after December 31, 2001) and the

earned income credit are reduced by the amount of the individual’s

alternative minimum tax.
10

4The foreign tax credit will continue to be allowed before the personal credits in computing

the regular tax. 5 A refundable credit is a credit that not only reduces an individual’s tax liability but also allows refunds to the individual of amounts in excess of income tax liability.

HOUSE BILL

Allow nonrefundable personal credits to offset both the regular tax

and the alternative minimum tax

No provision.

Reduction of refundable credits by alternative minimum tax

The House bill repeals the provisions that reduce the refundable child credit and the earned income credit by the amount of the

individual’s alternative minimum tax.

Effective date.—The provision is effective for taxable years beginning after December 31, 2001.

SENATE AMENDMENT

Allow nonrefundable personal credits to offset both the regular tax

and the alternative minimum tax

The Senate amendment permanently extends the present-law

temporary provision that allows the nonrefundable personal credits

to offset both the regular tax and the minimum tax.4

Reduction of refundable credits by alternative minimum tax

The Senate amendment is the same as the House bill.

Effective date

The provisions are effective for taxable years beginning after

December 31, 2001.

CONFERENCE AGREEMENT

Allow nonrefundable personal credits to offset both the regular tax

and the alternative minimum tax

The conference agreement follows the Senate amendment.

Reduction of refundable credits by alternative minimum tax

The conference agreement follows the House bill and the Senate amendment.

D. MARRIAGE TAX RELIEF RELATING TO THE EARNED INCOME CREDIT (SEC. 4 OF THE HOUSE BILL, SEC. 4 OF THE SENATE AMENDMENT, AND SEC. 32 OF THE CODE)

PRESENT LAW

Certain eligible low-income workers are entitled to claim a refundable earned income credit (‘‘EIC’’) on their income tax returns.5

The amount of the EIC an eligible individual may claim depends

upon whether the individual has one, more than one, or no qualifying children, and is determined by multiplying the applicable

credit rate by the individual’s earned income up to an earned income amount. The maximum amount of the credit is the product

of the credit rate and the earned income amount. The credit is
11

phased out above certain income levels. For individuals with

earned income (or modified AGI, if greater) in excess of the beginning of the phase-out range, the maximum credit amount is reduced by the phase-out rate multiplied by earned income (or modified AGI, if greater) in excess of the beginning of the phase-out

range. For individuals with earned income (or modified AGI, if

greater) in excess of the end of the phase-out range, no credit is

allowed. In the case of a married individual who files a joint return, income for purposes of these tests is the combined income of

the couple.

The parameters of the EIC for 2000 are provided in the following table:

TABLE 3.—EARNED INCOME CREDIT PARAMETERS (2000)

Two or more

qualifying

children

One qualifying childNo qualifying

children

Credit rate (percent) ............................................................................................... 40.00 34.00 7.65

Earned income amount ........................................................................................... $9,720 $6,920 $4,610

Maximum credit ...................................................................................................... $3,888 $2,353 $353

Phase-out begins .................................................................................................... $12,690 $12,690 $5,770

Phase-out rate (percent) ........................................................................................ 21.06 15.98 7.65

Phase-out ends ....................................................................................................... $31,152 $27,413 $10,380

HOUSE BILL

The House bill increases the beginning point of the phase-out

range of the EIC for married couples filing a joint return by $2,000.

Because the rate of the phase-out range is not changed by the

House bill, the endpoint of the phase-out range is also increased by

$2,000. The effect of the increase in the beginning of the phase-out

range is to increase the EIC for taxpayers in the phase-out range

by an amount up to $2,000 times the phase-out rate. For example,

for couples with two or more qualifying children, the maximum increase in the EIC as a result of the provision will be $2,000 multiplied by 21.06 percent, or $421.20. The House bill also expands the

number of married couples eligible for the EIC. Specifically, the

$2,000 increase in the end of the phase-out range will make married couples with earnings up to $2,000 beyond the present-law

phase-out range eligible for the credit. The beginning and ending

points of the phase-out range of the EIC (including the $2,000 increase for joint returns) will continue to be indexed for inflation, as

under present law.

Effective date.—The provision is effective for taxable years beginning after December 31, 2000.

SENATE AMENDMENT

The Senate amendment is the same as the House bill except

that the Senate amendment increases the beginning and ending income levels of the phase-out of the EIC for married couples filing

a joint return by $2,500 rather than by $2,000.

Effective date.—The provision is effective for taxable years beginning after December 31, 2000.
12

CONFERENCE AGREEMENT

The conference agreement follows the House bill, with the

modification that the provision is effective for taxable years beginning after December 31, 1999. The agreement further provides that

the provision cannot be taken into account for estimated tax purposes prior to October 1, 2000.

E. COMPLIANCE WITH CONGRESSIONAL BUDGET ACT (SEC. 6 OF THE

SENATE AMENDMENT)

PRESENT LAW

Reconciliation is a procedure under the Congressional Budget

Act of 1974 (‘‘the Budget Act’’) by which Congress implements

spending and tax policies contained in a budget resolution. The

Budget Act contains rules defining the scope of items permitted to

be considered under the budget reconciliation process. One such

rule, the so-called ‘‘Byrd rule,’’ was incorporated into the Budget

Act in 1990. The Byrd rule, named after its principal sponsor, Senator Robert C. Byrd, is contained in section 313 of the Budget Act.

The Byrd rule is generally interpreted to permit Members to make

a motion to strike extraneous provisions (those which are unrelated

to the deficit reduction goals of the reconciliation process) from either a budget reconciliation bill or a conference report on such a

bill.

Under the Byrd rule, a provision is considered to be extraneous

if it falls under one or more of the following six definitions:

(1) it does not produce a change in outlays or revenues;

(2) it produces an outlay increase or revenue decrease

when the instructed committee is not in compliance with its instructions;

(3) it is outside of the jurisdiction of the committee that

submitted the title or provision for inclusion in the reconciliation measure;

(4) it produces a change in outlays or revenues which is

merely incidental to the non-budgetary components of the provision;

(5) it would increase the deficit for a fiscal year beyond

those covered by the reconciliation measure; and

(6) it recommends changes in Social Security.

HOUSE BILL

No provision.

SENATE AMENDMENT

To ensure compliance with the Budget Act, the provision provides that all provisions of, and amendments made by, the Senate

amendment shall cease to apply for taxable years beginning after

December 31, 2004.

Effective date.—The provision is effective on date of enactment.

CONFERENCE AGREEMENT

The conference agreement follows the Senate amendment.
13

II. COMPLEXITY ANALYSIS

The following tax complexity analysis is provided pursuant to

section 4022(b) of the Internal Revenue Service Reform and Restructuring Act of 1998, which requires the staff of the Joint Committee on Taxation (in consultation with the Internal Revenue

Service (‘‘IRS’’) and the Treasury Department) to provide a complexity analysis of tax legislation reported by the House Committee

on Ways and Means, the Senate Committee on Finance, or a Conference Report containing tax provisions. The complexity analysis

is required to report on the complexity and administrative issues

raised by provisions that directly or indirectly amend the Internal

Revenue Code and that have widespread applicability to individuals or small businesses. For each such provision identified by the

staff of the Joint Committee on Taxation, a summary description

of the provision is provided, along with an estimate of the number

and the type of affected taxpayers, and a discussion regarding the

relevant complexity and administrative issues. Time constraints

prevented the staff of the Joint Committee on Taxation from consulting with the IRS regarding the provisions in the conference

agreement that have widespread applicability.

1. Standard deduction tax relief (sec. 2 of the conference agreement)

Summary description of provision

For taxable years beginning after December 31, 1999, the bill

phases in an increase in the basic standard deduction for a married

couple filing a joint return until it is twice the basic standard deduction for a single individual.

Number of affected taxpayers

It is estimated that the provision will affect approximately 25

million individual tax returns.

Discussion

It is not anticipated that individuals will need to keep additional records due to this provision. The higher basic standard deduction should not result in an increase in disputes with the IRS,

nor will regulatory guidance be necessary to implement this provision. In addition, the provision should not increase individuals’ tax

preparation costs.

Some taxpayers who currently itemize deductions may respond

to the provision by claiming the increased standard deduction in

lieu of itemizing. According to estimates by the staff of the Joint

Committee on Taxation, approximately three million individual tax

returns will realize greater tax savings from the increased standard deduction than from itemizing their deductions. In addition to

the tax savings, such taxpayers will no longer have to file Schedule

A to Form 1040 or need to engage in the record keeping inherent

in itemizing below-the-line deductions. Moreover, by claiming the

standard deduction, such taxpayers may qualify to use simpler

versions of the Form 1040 (i.e., Form 1040EZ or Form 1040A) that

are not available to individuals who itemize their deductions. These

forms simplify the return preparation process by eliminating from
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the Form 1040 those items that do not apply to a particular taxpayer.

This reduction in complexity and record keeping may also result in a decline in the number of individuals using a tax preparation service (or a decline in the cost of using such a service). Furthermore, if the provision results in a taxpayer qualifying to use

one of the simpler versions of the Form 1040, the taxpayer may be

eligible to file a paperless Federal tax return by telephone. The

provision also should reduce the number of disputes between taxpayers and the IRS regarding substantiation of itemized deductions.

2. Expansion of the 15-percent rate bracket for married couples filing a joint return (sec. 3 of the conference agreement)

Summary description of provision

The provision increases the size of the 15-percent regular income tax rate bracket for married couples filing a joint return to

twice the size of the corresponding rate brackets for a single individual. This increase is phased in over five years beginning for taxable years beginning after December 31, 1999. It is fully effective

for taxable years beginning after December 31, 2003.

Number of affected taxpayers

It is estimated that the provision will affect approximately 21

million individual tax returns.

Discussion

It is not anticipated that individuals will need to keep additional records due to this provision. The increased size of the 15-

percent regular income tax rate bracket for married couples filing

joint returns should not result in an increase in disputes with the

IRS, nor will regulatory guidance be necessary to implement this

provision.

3. Interactive effect of the alternative minimum tax rules

Both provisions (i.e., the standard deduction tax relief and the

expanded 15-percent rate bracket) are affected by the alternative

minimum tax (‘‘AMT’’) rules. Specifically, because neither provision

makes corresponding changes to the alternative minimum tax regime other than the allowance of the nonrefundable personal credits against the AMT, additional individual taxpayers will need to

make the necessary calculations to determine the applicability of

the alternative minimum tax rules. It is estimated that for the year

2005, less than two million additional individual income tax returns with a benefit from the provisions will be required to include

a calculation of the tentative minimum tax and file the appropriate

alternative minimum tax forms. By the year 2009, this number is

expected to rise to over seven million additional individual income

tax returns. At the same time, however, by 2009, there will be approximately two million individual income tax returns that will be

relieved of the burden of the AMT calculations by virtue of the extension of the nonrefundable personal credits against the AMT.
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For taxpayers who have to calculate the tentative minimum

tax and file the appropriate alternative minimum tax forms, it

could be expected that the interaction of the provisions with the alternative minimum tax rules would result in an increase in tax

preparation costs and in the number of individuals using a tax

preparation service.

4. Sunset (sec. 7 of the conference agreement)

Summary description of provision

The provision sunsets the provisions and amendments made by

the bill for taxable years beginning after December 31, 2004.

Number of affected taxpayers

It is estimated that the provision would affect almost all individuals affected by the other provisions of the bill.

Discussion

The provision would reverse any simplification achieved under

the other provisions of the bill. Specifically, two categories of individuals would have additional record keeping and tax return filing

complexity. First, individuals who, because of the bill changes,

switch from itemizing deductions to using the increased standard

deduction would likely revert to itemizing deductions when the increased standard deduction sunsets. Second, individuals who are

relieved of the AMT calculations under the bill would be required

to make such AMT calculations after the sunset. The sunset provision also can be expected to result in an increase in the tax preparation cost of individuals using a tax preparation service. In addition, the provision may require the IRS to issue guidance regarding

the termination of the tax benefits as a result of the sunset.
ESTIMATED REVENUE EFFECTS OF THE CONFERENCE AGREEMENT FOR H.R. 4810, THE ‘‘MARRIAGE TAX RELIEF RECONCILIATION ACT OF 2000’’

[Fiscal years 2001–2010 1 in millions of dollars]

Provision Effective 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001–05 

1. Standard deduction set at 2 times single for married filing jointly

(sunset 12/31/04).

tyba 12/31/99 ¥9,873 ¥6,003 ¥6,383 ¥6,523 ¥1,959 ................ ................ ................ ................ ................ ¥30,74

2. 15% rate bracket set at 2 times single for married filing jointly; 5-year

phasein (sunset 12/31/04).

tyba 12/31/99 ¥4,146 ¥6,361 ¥9,718 ¥17,680 ¥6,277 ................ ................ ................ ................ ................ ¥44,18

3. Extension of AMT treatment of refundable and nonrefundable personal

credit (sunset 12/31/04).

typa 12/31/01 ................ ¥343 ¥1,876 ¥2,875 ¥3,460 ................ ................ ................ ................ ................ ¥8,55

4. $2,000 increase to the beginning and ending income levels for the EIC

phaseout for married filing jointly (sunset 12/31/04) 2.

tyba 12/31/99 ¥1,250 ¥1,281 ¥1,255 ¥1,268 ¥1,287 ................ ................ ................ ................ ................ ¥6,34

Net Total ............................................................................................ ............................................. ¥15,269 ¥13,988 ¥19,232 ¥28,346 ¥12,983 ................ ................ ................ ................ ................ ¥89,81

1 The provisions of the bill generally are effective for taxable years beginning after 12/31/99. The bill provides that these provisions can not be taken into account for estimated tax purposes before 10/1/00. Accordingly, the provisi

little to no effect on receipts in fiscal year 2000. 2 Estimate includes the following effects on fiscal year outlays: 2001—1,073; 2002—1,109; 2003—1,078; 2004—1,082; 2005—1,097; 2006—....; 2007—....; 2008—....; 2009—....; 2010—....; 2001–05—5,439; 2001–10—5,439.

Legend for ‘‘Effective’’ column: tyba=taxable years beginning after.Note.—Details may not add to totals due to rounding.Source: Joint Committee on Taxation.
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BILL ARCHER, DICK ARMEY, Managers on the Part of the House.

BILL ROTH,

TRENT LOTT,

Managers on the Part of the Senate.

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