I

106TH CONGRESS

2D SESSION H. R. 5524

To amend the Internal Revenue Code of 1986 to strengthen the effectiveness

of the earned income tax credit in reducing child poverty and promoting

work.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 23, 2000

Mr. CARDIN (for himself, Mr. STARK, Mr. MENENDEZ, Mr. LEVIN, Mr. LEWIS

of Georgia, Mr. BECERRA, Mr. DOGGETT, and Ms. ROYBAL-ALLARD) 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 strengthen

the effectiveness of the earned income tax credit in reducing child poverty and promoting work.

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 ‘‘Tax Relief for Working

5 Families Act of 2000’’.
2

•HR 5524 IH

1 SEC. 2. INCREASED EARNED INCOME TAX CREDIT FOR 2 OR

2 MORE QUALIFYING CHILDREN.

3 (a) IN GENERAL.—The table in section 32(b)(1)(A)

4 of the Internal Revenue Code of 1986 (relating to percent5 ages) is amended—

6 (1) in the second item—

7 (A) by striking ‘‘or more’’, and

8 (B) by striking ‘‘21.06’’ and inserting

9 ‘‘19.06’’, and

10 (2) by inserting after the second item the fol11 lowing new item:

‘‘3 or more qualifying children 45 ............................. 19.06’’

12 (b) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to taxable years beginning after

14 December 31, 2000.

15 SEC. 3. SIMPLIFICATION OF DEFINITION OF EARNED IN16 COME.

17 (a) IN GENERAL.—Section 32(c)(2)(A)(i) of the In18 ternal Revenue Code of 1986 (defining earned income) is

19 amended by inserting ‘‘, but only if such amounts are in20 cludible in gross income for the taxable year’’ after ‘‘other

21 employee compensation’’.

22 (b) CONFORMING AMENDMENT.—Section

23 32(c)(2)(B) of the Internal Revenue Code of 1986 is

24 amended by striking ‘‘and’’ at the end of clause (iv), by
3

•HR 5524 IH

1 striking the period at the end of clause (v) and inserting

2 ‘‘, and’’, and by adding at the end the following new

3 clause:

4 ‘‘(vi) the requirement under subparagraph

5 (A)(i) that an amount be includible in

6 gross income shall not apply if such

7 amount is exempt from tax under section

8 7873 or is derived directly from restricted

9 and allotted land under the Act of Feb10 ruary 8, 1887 (commonly known as the In11 dian General Allotment Act) (25 U.S.C.

12 331 et seq.) or from land held under Acts

13 or treaties containing an exception provi14 sion similar to the Indian General Allot15 ment Act.’’

16 (c) EFFECTIVE DATE.—The amendment made by

17 this section shall apply to amounts received in taxable

18 years beginning after December 31, 2000.

19 SEC. 4. SIMPLIFICATION OF DEFINITION OF CHILD DE20 PENDENT.

21 (a) REMOVAL OF SUPPORT TEST FOR CERTAIN INDI22 VIDUALS.—Section 152(a) of the Internal Revenue Code

23 of 1986 (relating to definition of dependent) is amended

24 to read as follows:
4

•HR 5524 IH

1 ‘‘(a) GENERAL DEFINITION.—For purposes of this

2 subtitle—

3 ‘‘(1) DEPENDENT.—The term ‘dependent’

4 means—

5 ‘‘(A) any individual described in paragraph

6 (2) over half of whose support, for the calendar

7 year in which the taxable year of the taxpayer

8 begins, was received from the taxpayer (or is

9 treated under subsection (c) as received from

10 the taxpayer), or

11 ‘‘(B) any individual described in subsection

12 (f).

13 ‘‘(2) INDIVIDUALS.—An individual is described

14 in this paragraph if such individual is—

15 ‘‘(A) a brother, sister, stepbrother, or step16 sister of the taxpayer,

17 ‘‘(B) the father or mother of the taxpayer,

18 or an ancestor of either,

19 ‘‘(C) a stepfather or stepmother of the tax20 payer,

21 ‘‘(D) a son or daughter of a brother or sis22 ter of the taxpayer,

23 ‘‘(E) a brother or sister of the father or

24 mother of the taxpayer,
5

•HR 5524 IH

1 ‘‘(F) a son-in-law, daughter-in-law, father2 in-law, mother-in-law, brother-in-law, or sister3 in-law of the taxpayer, or

4 ‘‘(G) an individual (other than an indi5 vidual who at any time during the taxable year

6 was the spouse, determined without regard to

7 section 7703, of the taxpayer) who, for the tax8 able year of the taxpayer, has as their principal

9 place of abode the home of the taxpayer and is

10 a member of the taxpayer’s household.’’.

11 (b) OTHER MODIFICATIONS.—Section 152 of the In12 ternal Revenue Code of 1986 is amended by adding at the

13 end the following:

14 ‘‘(f) SUBSECTION (f) DEPENDENTS.—

15 ‘‘(1) IN GENERAL.—An individual is described

16 in this subsection for the taxable year if such

17 individual—

18 ‘‘(A) bears a relationship to the taxpayer

19 described in paragraph (2),

20 ‘‘(B) except in the case of an eligible foster

21 child or as provided in subsection (e), has the

22 same principal place of abode as the taxpayer

23 for more than one-half of such taxable year,

24 and
6

•HR 5524 IH

1 ‘‘(C)(i) has not attained the age of 19 at

2 the close of the calendar year in which the tax3 able year begins, or

4 ‘‘(ii) is a student (within the meaning of

5 section 151(c)(4)) who has not attained the age

6 of 24 at the close of such calendar year.

7 ‘‘(2) RELATIONSHIP TEST.—An individual bears

8 a relationship to the taxpayer described in this para9 graph if such individual is—

10 ‘‘(A) a son or daughter of the taxpayer, or

11 a descendant of either, or

12 ‘‘(B) a stepson or stepdaughter of the tax13 payer.

14 ‘‘(3) SPECIAL RULES.—

15 ‘‘(A) 2 OR MORE CLAIMING DEPENDENT.—

16 Except as provided in subparagraph (B), if an

17 individual may be claimed as a dependent by 2

18 or more taxpayers (but for this subparagraph)

19 for a taxable year beginning in the same cal20 endar year, only the taxpayer with the highest

21 adjusted gross income for such taxable year

22 shall be allowed the deduction with respect to

23 such individual.
7

•HR 5524 IH

1 ‘‘(B) RELEASE OF CLAIM TO EXEMP2 TION.—Subparagraph (A) shall not apply with

3 respect to an individual if—

4 ‘‘(i) the taxpayer with the highest ad5 justed gross income under subparagraph

6 (A), for any calendar year signs a written

7 declaration (in such manner and form as

8 the Secretary may by regulations pre9 scribe) that such taxpayer will not claim

10 such individual as a dependent for any tax11 able year beginning in such calendar year,

12 ‘‘(ii) the other taxpayer provides over

13 half of such individual’s support for the

14 calendar year in which the taxable year of

15 such other taxpayer begins, and

16 ‘‘(iii) such other taxpayer attaches

17 such written declaration to such taxpayer’s

18 return for the taxable year beginning dur19 ing such calendar year.’’.

20 (c) RULES RELATING TO FOSTER CHILD.—Section

21 152(b)(2) (relating to rules relating to general definition)

22 is amended by striking ‘‘a foster child’’ and all that follows

23 through ‘‘individual)’’ and inserting ‘‘an eligible foster

24 child (as defined in section 32(c)(3)(B)(iii)) of an indi25 vidual’’.
8

•HR 5524 IH

1 (d) EXEMPTION FROM GROSS INCOME TEST.—Sec2 tion 151(c)(3) (relating to definition of child) is amended

3 by striking ‘‘or stepdaughter’’ and inserting ‘‘step4 daughter, or a descendant of such individual’’.

5 (e) WAIVER OF DEDUCTION FOR DIVORCED PAR6 ENTS.—

7 (1) IN GENERAL.—So much of section 152(e)

8 as precedes paragraph (4) (relating to support test

9 in case of child of divorced parents, etc.) is amended

10 to read as follows:

11 ‘‘(e) SPECIAL RULES FOR CHILD OF DIVORCED PAR12 ENTS.—

13 ‘‘(1) RELEASE OF CLAIM TO EXEMPTION.—In

14 the case of a child (as defined in section 151(c)(3))

15 of parents—

16 ‘‘(A) who are divorced or legally separated

17 under a decree of divorce or separate mainte18 nance,

19 ‘‘(B) who are separated under a written

20 separation agreement, or

21 ‘‘(C) who live apart at all times during the

22 last 6 months of the calendar year,

23 the custodial parent who is entitled to the deduction

24 under section 151 for a taxable year with respect to
9

•HR 5524 IH

1 such child may release such deduction to the non2 custodial parent.

3 ‘‘(2) PROCEDURE.—The noncustodial parent

4 may claim a child described in paragraph (1) as a

5 dependent for the taxable year if—

6 ‘‘(A) the custodial parent signs a written

7 declaration (in such manner and form as the

8 Secretary may by regulations prescribe) that

9 such custodial parent will not claim such child

10 as a dependent for any taxable year beginning

11 in such calendar year,

12 ‘‘(B) the custodial parent and the non13 custodial parent provide over half of such

14 child’s support for the calendar year in which

15 the taxable years of such parents begin, and

16 ‘‘(C) the noncustodial parent attaches such

17 written declaration to such noncustodial par18 ent’s return for the taxable year beginning dur19 ing such calendar year.

20 ‘‘(3) DEFINITIONS.—For purposes of this

21 subsection—

22 ‘‘(A) CUSTODIAL PARENT.—The term ‘cus23 todial parent’ means, with regard to an indi24 vidual, a parent who has custody of such indi-
10

•HR 5524 IH

1 vidual for a greater portion of the calendar year

2 than the noncustodial parent.

3 ‘‘(B) NONCUSTODIAL PARENT.—The term

4 ‘noncustodial parent’ means the parent who is

5 not the custodial parent.’’.

6 (2) PRE-1985 INSTRUMENTS.—Section

7 152(e)(4)(A) of such Code is amended by striking

8 ‘‘A child’’ and all that follows through ‘‘noncustodial

9 parent’’ and inserting ‘‘A noncustodial parent de10 scribed in paragraph (1) shall be entitled to the de11 duction under section 151 for a taxable year with re12 spect to a child if’’.

13 (f) CONFORMING AMENDMENTS.—

14 (1) Section 1(g)(5)(A) of the Internal Revenue

15 Code of 1986 is amended by inserting ‘‘as in effect

16 on the day before the date of the enactment of the

17 Tax Relief for Working Families Act of 2000’’ after

18 ‘‘152(e)’’.

19 (2) Section 2(b)(1)(A)(i) of such Code is

20 amended by striking ‘‘paragraph (2) or (4) of’’.

21 (3) Section 2(b)(3)(B)(i) of such Code is

22 amended by striking ‘‘paragraph (9)’’ and inserting

23 ‘‘paragraph (2)(G)’’.

24 (4) Section 21(e)(5)(A) of such Code is amend25 ed by striking ‘‘paragraph (2) or (4) of’’.
11

•HR 5524 IH

1 (5) Section 21(e)(5) of such Code is amended

2 in the matter following subclause (B) by inserting

3 ‘‘as in effect on the day before the date of the enact4 ment of the Tax Relief for Working Families Act of

5 2000’’ after ‘‘152(e)(1)’’.

6 (6) Section 32(c)(1)(G) of such Code is amend7 ed by striking ‘‘(3)(D).’’ and inserting ‘‘(1)(C). An

8 individual whose qualifying child or qualifying chil9 dren are not taken into account under subsection (b)

10 solely by reason of paragraph (3)(D) shall be treated

11 as an eligible individual if such individual otherwise

12 meets the requirements of subparagraph (A)(ii).’’.

13 (7) Section 32(c)(3)(B)(ii) of such Code is

14 amended by striking ‘‘paragraph (2) or (4) of’’.

15 (8) Section 51(i)(1)(C) of such Code is amend16 ed by striking ‘‘152(a)(9)’’ and inserting

17 ‘‘152(a)(2)(G)’’.

18 (9) Section 152(b) of such Code is amended by

19 striking ‘‘specified in subsection (a)’’ and inserting

20 ‘‘specified in subsection (a)(2) or (f)(2)’’.

21 (10) Section 152(c) of such Code is amended by

22 striking ‘‘(a)’’ and inserting ‘‘(a)(1)’’.

23 (11) Section 7703(b)(1) of such Code is amend24 ed by striking ‘‘paragraph (2) or (4) of’’.
12

•HR 5524 IH

1 (12) The following provisions of such Code are

2 each amended by striking ‘‘paragraphs (1) through

3 (8) of section 152(a)’’ and inserting ‘‘subparagraphs

4 (A) through (F) of subsection (a)(2) or subsection

5 (f)(2) of section 152’’:

6 (A) Section 170(g)(3).

7 (B) Subparagraphs (A) and (B) of section

8 51(i)(1).

9 (C) The second sentence of section

10 213(d)(11).

11 (D) Section 529(e)(2)(B).

12 (E) Section 7702B(f)(2)(C)(iii).

13 (g) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 2000.

16 SEC. 5. OTHER MODIFICATIONS TO EARNED INCOME TAX

17 CREDIT.

18 (a) MODIFICATION OF JOINT RETURN REQUIRE19 MENT.—Subsection (d) of section 32 of the Internal Rev20 enue Code of 1986 is amended to read as follows:

21 ‘‘(d) MARRIED INDIVIDUALS.—

22 ‘‘(1) IN GENERAL.—If the taxpayer is married

23 at the close of the taxable year, the credit shall be

24 allowed under subsection (a) only if the taxpayer
13

•HR 5524 IH

1 and his spouse file a joint return for the taxable

2 year.

3 ‘‘(2) MARITAL STATUS.—For purposes of para4 graph (1), an individual legally separated from his

5 spouse under a decree of divorce or of separate

6 maintenance shall not be considered as married.

7 ‘‘(3) CERTAIN MARRIED INDIVIDUALS LIVING

8 APART.—For purposes of paragraph (1), if—

9 ‘‘(A) an individual —

10 ‘‘(i) is married and files a separate re11 turn, and

12 ‘‘(ii) has a qualifying child who is a

13 son, daughter, stepson, or stepdaughter of

14 such individual, and

15 ‘‘(B) during the last 6 months of such tax16 able year, such individual and such individual’s

17 spouse do not have the same principal place of

18 abode,

19 such individual shall not be considered as married.’’

20 (b) MODIFICATION OF RULE WHERE THERE ARE 2

21 OR MORE ELIGIBLE INDIVIDUALS.—Subparagraph (C) of

22 section 32(c)(1) of such Code is amended to read as fol23 lows:

24 ‘‘(C) 2 OR MORE ELIGIBLE INDIVIDUALS.—
14

•HR 5524 IH

1 ‘‘(i) IN GENERAL.—Except as pro2 vided in clause (ii), if 2 or more individuals

3 would (but for this subparagraph and after

4 application of subparagraph (B)) be treat5 ed as eligible individuals with respect to

6 the same qualifying child for taxable years

7 beginning in the same calendar year, only

8 the individual with the highest modified

9 adjusted gross income for such taxable

10 years shall be treated as an eligible indi11 vidual with respect to such qualifying

12 child.

13 ‘‘(ii) EXCEPTION FOR CERTAIN PAR14 ENTS.—An otherwise eligible individual

15 who is not treated under clause (i) as the

16 only eligible individual with respect to any

17 qualifying child shall be treated as an eligi18 ble individual with respect to such child

19 if—

20 ‘‘(I) such child is the son, daugh21 ter, stepson, or stepdaughter of such

22 individual,

23 ‘‘(II) such child is not taken into

24 account under subsection (b) by any

25 other individual, and
15

•HR 5524 IH

1 ‘‘(III) the limitation under sub2 section (a)(2) for the individual who

3 would (but for this clause) be treated

4 under clause (i) as the only eligible in5 dividual with respect to such child

6 would be greater than zero (deter7 mined as if such individual had 2

8 qualifying children).’’

9 (c) EXPANSION OF MATHEMATICAL ERROR AUTHOR10 ITY.—Paragraph (2) of section 6213(g) of such Code is

11 amended by striking ‘‘and’’ at the end of subparagraph

12 (K), by striking the period at the end of subparagraph

13 (L) and inserting ‘‘, and’’, and by inserting after subpara14 graph (L) the following new subparagraph:

15 ‘‘(M) the entry on the return claiming the

16 credit under section 32 with respect to a child

17 if, according to the Federal Case Registry of

18 Child Support Orders established under section

19 453(h) of the Social Security Act, the taxpayer

20 is a noncustodial parent of such child.’’

21 (d) EFFECTIVE DATES.—

22 (1) IN GENERAL.—Except as provided in para23 graph (2), the amendments made by this section

24 shall apply to taxable years beginning after Decem25 ber 31, 2000.
16

•HR 5524 IH

1 (2) EXPANSION OF MATHEMATICAL ERROR AU2 THORITY.—The amendment made by subsection (c)

3 shall apply to taxable years beginning after Decem4 ber 31, 2001.

Æ