I

103D CONGRESS

2D SESSION H. R. 5193

To amend the Internal Revenue Code of 1986 to reform the earned income

tax credit.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 5, 1994

Mr. PETRI 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 reform

the earned income tax credit.

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

3 SECTION 1. MODIFICATIONS TO EARNED INCOME TAX

4 CREDIT.

5 (a) MODIFICATIONS IN COMPUTATION OF CREDIT;

6 SUPPLEMENTAL CHILD CREDIT.—

7 (1) PERCENTAGES.—Subsection (b) of section

8 32 of the Internal Revenue Code of 1986 (relating

9 to earned income tax credit) is amended to read as

10 follows:
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1 ‘‘(b) PERCENTAGES.—

2 ‘‘(1) IN GENERAL.—For purposes of subsection

3 (a), the credit percentage and the phaseout percent4 age shall be determined as follows:

In the case of an eligible individual with:The credit percentage

is:

The phaseout percentage is:

1 qualifying child ..... 30 ............................... 17

2 or more qualifying

children ................. 42 ............................... 21

5 ‘‘(2) SUPPLEMENTAL CHILD CREDIT.—In the

6 case of a taxpayer with a qualifying child who has

7 not attained 6 as of the close of the calendar year

8 in which or with which the taxable year of the tax9 payer ends—

10 ‘‘(A) the credit percentage shall be in11 creased by 5 percentage points for each such

12 child, and

13 ‘‘(B) the phaseout percentage shall be in14 creased by 2 percentage points for each such

15 child.

16 Not more than 4 children may be taken into account

17 under this paragraph.’’

18 (2) UNIFORM EARNED INCOME AMOUNTS AND

19 PHASEOUT AMOUNTS.—Subsection (a) of section 32

20 of such Code is amended—
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1 (A) by striking ‘‘the earned income

2 amount’’ each place it appears and inserting

3 ‘‘$8,500’’, and

4 (B) by striking ‘‘the phaseout amount’’ in

5 paragraph (2)(B) and inserting ‘‘$10,000’’.

6 (b) REPEAL OF CREDIT FOR INDIVIDUALS WITHOUT

7 CHILDREN.—Subparagraph (A) of section 32(c)(1) of

8 such Code is amended to read as follows:

9 ‘‘(A) IN GENERAL.—The term ‘eligible in10 dividual’ means any individual who has a quali11 fying child for the taxable year.’’

12 (c) QUALIFYING CHILDREN MUST BE UNDER 18

13 YEARS OF AGE OR DISABLED.—Subparagraph (C) of sec14 tion 32(c)(3) of such Code is amended by striking ‘‘19’’

15 in paragraph (1) and inserting ‘‘18’’, by adding ‘‘and’’ at

16 the end of paragraph (1), by striking paragraph (2), and

17 by redesignating paragraph (3) as paragraph (2).

18 (d) ADVANCE PAYMENT PROVISIONS.—

19 (1) Subsection (b) of section 3507 of such Code

20 is amended by striking ‘‘and’’ at the end of para21 graph (3), by striking the period at the end of para22 graph (4) and inserting ‘‘, and’’, and by inserting

23 after paragraph (4) the following new paragraph:
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1 ‘‘(5) states the number and ages of qualifying

2 children (as defined in section 32(c)) of the em3 ployee for the taxable year.’’

4 (2) Paragraph (2) of section 3507(c) of such

5 Code is amended—

6 (A) by striking clauses (i) and (ii) of sub7 paragraph (B) and inserting the following:

8 ‘‘(i) of not more than the credit per9 centage of earned income not in excess of

10 $8,500, which

11 ‘‘(ii) phases out at the phaseout per12 centage between $10,000 and the amount

13 of earned income at which the credit under

14 section 32(a) phases out for such em15 ployee, or’’, and

16 (B) by adding at the end the following new

17 sentence:

18 ‘‘For purposes of this paragraph, the credit percent19 age and the phaseout percentage shall be determined

20 under section 32(b) on the basis of the number and

21 ages of qualifying children specified in the earned in22 come eligibility certificate of the employee.’’

23 (3) Clause (i) of section 3507(e)(3)(A) of such

24 Code is amended by inserting before ‘‘, or’’ the fol25 lowing: ‘‘(or changing the percentages applicable to
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1 the employee under section 32(b) for the taxable

2 year)’’.

3 (e) VERIFICATION OF TAXPAYER IDENTIFICATION

4 NUMBERS.—Section 32 of such Code is amended by add5 ing at the end the following new subsection:

6 ‘‘(k) VERIFICATION OF TAXPAYER IDENTIFICATION

7 NUMBERS.—No credit shall be allowed under this section

8 to any taxpayer until the Secretary has verified that the

9 numbers set forth on the return claiming the credit as—

10 ‘‘(1) the taxpayer identification number of the

11 taxpayer, and

12 ‘‘(2) the taxpayer identification numbers of all

13 qualifying children,

14 are valid.’’

15 (f) CONFORMING AMENDMENT.—Subsection (i) of

16 section 32 of such Code is amended to read as follows:

17 ‘‘(i) INFLATION ADJUSTMENT.—

18 ‘‘(1) IN GENERAL.—In the case of any taxable

19 year beginning after 1996, each credit percentage

20 used for purposes of subsection (a) shall be in21 creased by an amount equal to—

22 ‘‘(A) such percentage, multiplied by

23 ‘‘(B) the cost-of-living adjustment deter24 mined under section 1(f)(3) for the calendar

25 year in which the taxable year begins by sub-
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1 stituting ‘1995’ for ‘1992’ in subparagraph (B)

2 thereof.

3 ‘‘(2) ROUNDING.—If any percentage after being

4 increased under paragraph (1) is not a multiple of

5 0.01 percentage point, such percentage shall be

6 rounded to the nearest 0.01 percentage point.’’

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

8 this section shall apply to taxable years beginning after

9 December 31, 1995; except that the amendments made

10 by subsection (d) shall take effect on January 1, 1996.

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