I

106TH CONGRESS

2D SESSION H. R. 5171

To amend the Internal Revenue Code of 1986 to permit a husband and

wife to file a combined return to which separate tax rates apply.

IN THE HOUSE OF REPRESENTATIVES

Mr. POMEROY 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 permit

a husband and wife to file a combined return to which

separate tax rates apply.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Marriage Penalty Re5 lief Act’’.

6 SEC. 2. COMBINED RETURN TO WHICH UNMARRIED RATES

7 APPLY.

8 (a) IN GENERAL.—Subpart B of part II of sub9 chapter A of chapter 61 of the Internal Revenue Code of
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1 1986 (relating to income tax returns) is amended by in2 serting after section 6013 the following new section:

3 ‘‘SEC. 6013A. COMBINED RETURN WITH SEPARATE RATES.

4 ‘‘(a) GENERAL RULE.—A husband and wife may

5 make a combined return of income taxes under subtitle

6 A under which—

7 ‘‘(1) a separate taxable income is determined

8 for each spouse by applying the rules provided in

9 this section, and

10 ‘‘(2) the tax imposed by section 1 is the aggre11 gate amount resulting from applying the separate

12 rates set forth in section 1(c) to each such taxable

13 income.

14 ‘‘(b) TREATMENT OF INCOME.—For purposes of this

15 section—

16 ‘‘(1) earned income (within the meaning of sec17 tion 911(d)), and any income received as a pension

18 or annuity which arises from an employer-employee

19 relationship, shall be treated as the income of the

20 spouse who rendered the services,

21 ‘‘(2) income from property shall be divided be22 tween the spouses in accordance with their respec23 tive ownership rights in such property (equally in

24 the case of property held jointly by the spouses), and
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1 ‘‘(3) any exclusion from income shall be allow2 able to the spouse with respect to whom the income

3 would be otherwise includible.

4 ‘‘(c) TREATMENT OF DEDUCTIONS.—For purposes of

5 this section—

6 ‘‘(1) except as otherwise provided in this sub7 section, the deductions described in section 62(a)

8 shall be allowed to the spouse treated as having the

9 income to which such deductions relate,

10 ‘‘(2) the deductions allowable by section 151(b)

11 (relating to personal exemptions for taxpayer and

12 spouse) shall be determined by allocating 1 personal

13 exemption to each spouse,

14 ‘‘(3) section 63 shall be applied as if such

15 spouses were not married, except that the election

16 whether or not to itemize deductions shall be made

17 jointly by both spouses and apply to each, and

18 ‘‘(4) each spouse’s share of all other deductions

19 shall be determined by multiplying the aggregate

20 amount thereof by the fraction—

21 ‘‘(A) the numerator of which is such

22 spouse’s gross income, and

23 ‘‘(B) the denominator of which is the com24 bined gross incomes of the 2 spouses.
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1 Any fraction determined under paragraph (4) shall be

2 rounded to the nearest percentage point.

3 ‘‘(d) TREATMENT OF CREDITS.—For purposes of this

4 section—

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), each spouse’s share of credits allowed to

7 both spouses shall be determined by multiplying the

8 aggregate amount of the credits by the fraction de9 termined under subsection (c)(4).

10 ‘‘(2) EARNED INCOME CREDIT.—The earned in11 come credit under section 32 shall be determined as

12 if each spouse were a separate taxpayer, except

13 that—

14 ‘‘(A) the earned income and the modified

15 adjusted gross income of each spouse shall be

16 determined under the rules of subsections (b),

17 (c), and (e), and

18 ‘‘(B) qualifying children shall be allocated

19 between spouses proportionate to the earned in20 come of each spouse (rounded to the nearest

21 whole number).

22 ‘‘(e) SPECIAL RULES REGARDING INCOME LIMITA23 TIONS.—

24 ‘‘(1) EXCLUSIONS AND DEDUCTIONS.—For pur25 poses of making a determination under subsection
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1 (b) or (c), any eligibility limitation with respect to

2 each spouse shall be determined by taking into ac3 count the limitation applicable to a single individual.

4 ‘‘(2) CREDITS.—For purposes of making a de5 termination under subsection (d)(1), in no event

6 shall an eligibility limitation for any credit allowable

7 to both spouses be less than twice such limitation

8 applicable to a single individual.

9 ‘‘(f) SPECIAL RULES FOR ALTERNATIVE MINIMUM

10 TAX.—If a husband and wife elect the application of this

11 section—

12 ‘‘(1) the tax imposed by section 55 shall be

13 computed separately for each spouse, and

14 ‘‘(2) for purposes of applying section 55—

15 ‘‘(A) the rules under this section for allo16 cating items of income, deduction, and credit

17 shall apply, and

18 ‘‘(B) the exemption amount for each

19 spouse shall be the amount determined under

20 section 55(d)(1)(B).

21 ‘‘(g) TREATMENT AS JOINT RETURN.—Except as

22 otherwise provided in this section or in the regulations

23 prescribed hereunder, for purposes of this title (other than

24 sections 1 and 63(c)) a combined return under this section

25 shall be treated as a joint return.
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1 ‘‘(h) LIMITATIONS.—

2 ‘‘(1) PHASE-IN OF BENEFIT.—

3 ‘‘(A) IN GENERAL.—In the case of any

4 taxable year beginning before January 1, 2004,

5 the tax imposed by section 1 or 55 shall in no

6 event be less than the sum of—

7 ‘‘(i) the tax determined after the ap8 plication of this section, plus

9 ‘‘(ii) the applicable percentage of the

10 excess of—

11 ‘‘(I) the tax determined without

12 the application of this section, over

13 ‘‘(II) the amount determined

14 under clause (i).

15 ‘‘(B) APPLICABLE PERCENTAGE.—For

16 purposes of subparagraph (A), the applicable

17 percentage shall be determined in accordance

18 with the following table:

The applicable

‘‘For taxable years beginning in: percentage is:

2002 ......................................................................................... 50

2003 ......................................................................................... 10.

19 ‘‘(2) LIMITATION OF BENEFIT BASED ON COM20 BINED ADJUSTED GROSS INCOME.—With respect to

21 spouses electing the treatment of this section for any

22 taxable year, the tax under section 1 or 55 shall be

23 increased by an amount which bears the same ratio
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1 to the excess of the tax determined without the ap2 plication of this section over the tax determined

3 after the application of this section as the ratio (but

4 not over 100 percent) of the excess of the combined

5 adjusted gross income of the spouses over $100,000

6 bears to $50,000.

7 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

8 such regulations as may be necessary or appropriate to

9 carry out this section.’’.

10 (b) UNMARRIED RATE MADE APPLICABLE.—So

11 much of subsection (c) of section 1 of the Internal Rev12 enue Code of 1986 as precedes the table is amended to

13 read as follows:

14 ‘‘(c) SEPARATE OR UNMARRIED RETURN RATE.—

15 There is hereby imposed on the taxable income of every

16 individual (other than a married individual (as defined in

17 section 7703) filing a return which is not a combined re18 turn under section 6013A, a surviving spouse as defined

19 in section 2(a), or a head of household as defined in sec20 tion 2(b)) a tax determined in accordance with the fol21 lowing table:’’.

22 (c) PENALTY FOR SUBSTANTIAL UNDERSTATEMENT

23 OF INCOME FROM PROPERTY.—Section 6662 of the Inter24 nal Revenue Code of 1986 (relating to imposition of accu25 racy-related penalty) is amended—
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1 (1) by adding at the end of subsection (b) the

2 following:

3 ‘‘(6) Any substantial understatement of income

4 from property under section 6013A.’’, and

5 (2) by adding at the end the following new sub6 section:

7 ‘‘(i) SUBSTANTIAL UNDERSTATEMENT OF INCOME

8 FROM PROPERTY UNDER SECTION 6013A.—For pur9 poses of this section, there is a substantial understatement

10 of income from property under section 6013A if—

11 ‘‘(1) the spouses electing the treatment of such

12 section for any taxable year transfer property from

13 1 spouse to the other spouse in such year,

14 ‘‘(2) such transfer results in reduced tax liabil15 ity under such section, and

16 ‘‘(3) the significant purpose of such transfer is

17 the avoidance or evasion of Federal income tax.’’.

18 (d) PROTECTION OF SOCIAL SECURITY AND MEDI19 CARE TRUST FUNDS.—

20 (1) IN GENERAL.—Nothing in this section shall

21 be construed to alter or amend the Social Security

22 Act (or any regulation promulgated under that Act).

23 (2) TRANSFERS.—

24 (A) ESTIMATE OF SECRETARY.—The Sec25 retary of the Treasury shall annually estimate
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1 the impact that the enactment of this section

2 has on the income and balances of the trust

3 funds established under sections 201 and 1817

4 of the Social Security Act (42 U.S.C. 401 and

5 1395i).

6 (B) TRANSFER OF FUNDS.—If, under sub7 paragraph (A), the Secretary of the Treasury

8 estimates that the enactment of this section has

9 a negative impact on the income and balances

10 of such trust funds, the Secretary shall trans11 fer, not less frequently than quarterly, from the

12 general revenues of the Federal Government an

13 amount sufficient so as to ensure that the in14 come and balances of such trust funds are not

15 reduced as a result of the enactment of this sec16 tion.

17 (e) CLERICAL AMENDMENT.—The table of sections

18 for subpart B of part II of subchapter A of chapter 61

19 of the Internal Revenue Code of 1986 is amended by in20 serting after the item relating to section 6013 the fol21 lowing:

‘‘Sec. 6013A. Combined return with separate rates.’’.

22 (f) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to taxable years beginning after

24 December 31, 2001.

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