89–008

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 107–31

PROVIDING FOR CONSIDERATION OF H.R. 6, MARRIAGE

PENALTY AND FAMILY TAX RELIEF ACT OF 2001

MARCH 28, 2001.—Referred to the House Calendar and ordered to be printed

Ms. PRYCE of Ohio, from the Committee on Rules,

submitted the following

REPORT

[To accompany H. Res. 104]

The Committee on Rules, having had under consideration House

Resolution 104, by a nonrecord vote, report the same to the House

with the recommendation that the resolution be adopted.

SUMMARY OF PROVISIONS OF THE RESOLUTION

The resolution provides for consideration in the House of H.R. 6,

the Marriage Penalty and Family Tax Relief Act of 2001, under a

modified closed rule. The rule provides one hour of debate equally

divided and controlled by the chairman and ranking minority member of the Committee on Ways and Means. The rule waives all

points of order against consideration of the bill.

The rule provides that the amendment recommended by the

Committee on Ways and Means now printed in the bill shall be

considered as adopted. The rule further provides for consideration

of the amendment in the nature of a substitute, printed in this report, if offered by Representative Rangel or his designee, which

shall be considered as read and shall be separately debatable for

one hour equally divided and controlled by the proponent and an

opponent. The rule waives all points of order against the amendment in the nature of a substitute. Finally, the rule provides one

motion to recommit with or without instructions.

The waiver of all points of order includes a waiver of clause 4(a)

of rule XIII (requiring a three-day layover of the committee report),

a waiver of section 302 of the Congressional Budget Act of 1974

(prohibiting consideration of legislation providing new budget authority in excess of a committee’s allocation of such authority) and

section 303 of the Congressional Budget Act of 1974 (prohibiting

consideration of legislation, as reported, providing new budget authority, changes in revenues, or changes in the public debt for a fisVerDate 28-MAR-2001 01:17 Mar 29, 2001 Jkt 089008 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR031.XXX pfrm01 PsN: HR031
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cal year until the budget resolution for that year has been agreed

to).

The waiver of clause 4(a) of rule XIII is needed because the report was not available until Wednesday, March 28 and the bill may

be considered by the House as early as Thursday, March 29. The

waiver of section 302 is necessary because, according to the Joint

Committee on Taxation, the bill would increase direct spending by

$5.1 billion over the 2001–2006 period. The waiver of section 303

is necessary because Congress has not yet completed consideration

of a budget resolution for FY 2002 and, according to the Joint Committee on Taxation, the bill would decrease revenues and increase

direct spending in FY 2002.

The waiver of all points of order against consideration of the minority substitute is necessary for the same general reasons as are

necessary for the bill.

SUMMARY OF AMENDMENT MADE IN ORDER

Rangel—Democratic Substitute. Creates a new 12 percent tax

rate (phased-in through 2003) for the first $20,000 of taxable income, equivalent to the approximately $41,000 of total income for

a couple with two children. (The lower rate applies to the first

$10,000 of taxable income on a single return.) Increases the earned

income tax credit by $272 for families with one child and $320 for

families with two or more children. Creates a standard deduction

for married couples equal to twice the standard available to single

individuals (the current law standard deduction of $7,800 per couple is increased to $9,300). Provides marriage penalty relief in the

earned income credit and the rate reductions. Costs $585 billion

over ten years.

TEXT OF AMENDMENT MADE IN ORDER UNDER THE RULE

AN AMENDMENT TO BE OFFERED BY REPRESENTATIVE RANGEL OF

NEW YORK, OR A DESIGNEE, DEBATABLE FOR 60 MINUTES

Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE.

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

Act of 2001’’.

(b) AMENDMENT OF 1986 CODE.—Except as otherwise expressly

provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or

other provision, the reference shall be considered to be made to a

section or other provision of the Internal Revenue Code of 1986.

(c) 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.

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TITLE I—INDIVIDUAL INCOME TAX

RATE REDUCTIONS; EXPANSION OF

EARNED INCOME CREDIT ASSISTANCE

SEC. 101. INDIVIDUAL INCOME TAX RATE REDUCTIONS.

(a) IN GENERAL.—Section 1 is amended by adding at the end the

following new subsection:

‘‘(i) 12 PERCENT RATE BRACKET.—

‘‘(1) IN GENERAL.—In the case of taxable years beginning

after December 31, 2000—

‘‘(A) the rate of tax under subsections (a), (b), (c), and (d)

on taxable income not over the initial bracket amount

shall be 12 percent, and

‘‘(B) the 15 percent rate of tax shall apply only to taxable

income over the initial bracket amount.

‘‘(2) INITIAL BRACKET AMOUNT.—For purposes of this subsection—

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(B), the initial bracket amount is—

‘‘(i) $20,000 in the case of subsection (a),

‘‘(ii) 80 percent of the dollar amount in clause (i) in

the case of subsection (b), and

‘‘(iii) 50 percent of the dollar amount in clause (i) in

the case of subsections (c) and (d).

‘‘(B) PHASEIN.—The initial bracket amount is—

‘‘(i) 1⁄4 the amount otherwise applicable under subparagraph (A) in the case of taxable years beginning

during 2001, and

‘‘(ii) 1⁄2 such amount otherwise applicable under subparagraph (A) in the case of taxable years beginning

during 2002.

‘‘(3) INFLATION ADJUSTMENT.—

‘‘(A) IN GENERAL.—In the case of any taxable year begin- ning in a calendar year after 2003, the $20,000 amount

under paragraph (2)(A)(i) shall be increased by an amount

equal to—

‘‘(i) such dollar amount, multiplied by

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

subsection (f)(3) for the calendar year in which the

taxable year begins, determined by substituting ‘calendar year 2002’ for ‘calendar year 1992’ in subparagraph (B) thereof.

‘‘(B) ROUNDING RULES.—If any amount after adjustment under subparagraph (A) is not a multiple of $50, such

amount shall be rounded to the next lowest multiple of

$50.

‘‘(4) ADJUSTMENT OF TABLES.—The Secretary shall adjust the

tables prescribed under subsection (f) to carry out this subsection.’’

(b) ADJUSTMENT IN COMPUTATION OF ALTERNATIVE MINIMUM

TAX.—Paragraph (2) of section 55(a) is amended to read as follows:

‘‘(2) the sum of—

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‘‘(A) the regular tax for the taxable year, plus

‘‘(B) in the case of an individual, 3 percent of so much

of the individual’s taxable income for the taxable year as

is taxed at 12 percent.’’

(c) REPEAL OF REDUCTION OF REFUNDABLE TAX CREDITS.—

(1) Subsection (d) of section 24 is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).

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

(d) CONFORMING AMENDMENT.—Subclause (II) of section

1(g)(7)(B)(ii) is amended by striking ‘‘15 percent’’ and inserting ‘‘12

percent’’.

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

shall apply to taxable years beginning after December 31, 2000.

(f) PROTECTION OF SOCIAL SECURITY AND MEDICARE.—The

amounts transferred to any trust fund under the Social Security

Act shall be determined as if this Act had not been enacted.

SEC. 102. MODIFICATIONS TO EARNED INCOME TAX CREDIT.

(a) INCREASES IN PERCENTAGES AND AMOUNTS USED TO DETER- MINE CREDIT; MARRIAGE PENALTY RELIEF.— (1) IN GENERAL.—Subsection (b) of section 32 is amended to

read as follows: ‘‘(b) PERCENTAGES AND AMOUNTS.— ‘‘(1) PERCENTAGES.—The credit percentage, the initial phaseout percentage, and the final phaseout percentage shall be determined as follows: ‘‘In the case of an eligible individual

with:

The credit percentage is:The initial phaseout

percentage is:

The final phaseout

percentage is:

1 qualifying child ............................ 34 15.98 18.98

2 or more qualifying children ........ 40 21.06 24.06

No qualifying children .................... 7.65 7.65 7.65

‘‘(2) AMOUNTS.—

‘‘(A) IN GENERAL.—The earned income amount and the

initial phaseout amount shall be determined as follows:

‘‘In the case of an eligible individual with: The earned income amount is:

The initial phaseout amount is:

1 qualifying child ............................................................... $8,140 $13,470

2 or more qualifying children ........................................... $10,820 $13,470

No qualifying children ...................................................... $4,900 $6,130

In the case of a joint return where there is at least 1 qualifying child, the initial phaseout amount shall be $2,500

greater than the amount otherwise applicable under the

preceding sentence. ‘‘(B) FINAL PHASEOUT AMOUNT.—The final phaseout amount is $26,000 ($28,500 in the case of a joint return).’’ (2) MODIFICATION OF COMPUTATION OF PHASEOUT.—Paragraph (2) of section 32(a) is amended to read as follows: ‘‘(2) PHASEOUT OF CREDIT.—The amount of the credit allowable to a taxpayer under paragraph (1) for any taxable year

shall be reduced (but not below zero) by the sum of—

‘‘(A) the initial phaseout percentage of so much of the

total income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds the initial phaseout

amount but does not exceed the final phaseout amount,

plus

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‘‘(B) the final phaseout percentage of so much of the

total income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds the final phaseout

amount.’’

(3) TOTAL INCOME.—Paragraph (5) of section 32(c) is amended to read as follows:

‘‘(5) TOTAL INCOME.—The term ‘total income’ means adjusted

gross income determined without regard to—

‘‘(A) the deductions referred to in paragraphs (6), (7), (9),

(10), (15), (16), and (17) of section 62(a),

‘‘(B) the deduction allowed by section 162(l), and

‘‘(C) the deduction allowed by section 164(f).’’

(4) CONFORMING AMENDMENTS.—

(A) Subsection (j) of section 32 is amended to read as follows:

‘‘(j) INFLATION ADJUSTMENT.—

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

after 2002, each of the dollar amounts in subsection (b)(2) shall

be increased by an amount equal to—

‘‘(A) such dollar amount, multiplied by

‘‘(B) the cost-of-living adjustment determined under section 1(f)(3), for the calendar year in which the taxable year

begins, determined by substituting ‘calendar year 2001’ for

‘calendar year 1992’ in subparagraph (B) thereof.

‘‘(2) ROUNDING.—If any dollar amount, after being increased

under paragraph (1), is not a multiple of $10, such dollar

amount shall be rounded to the nearest multiple of $10.’’

(B) Subparagraph (C) of section 32(c)(1) is amended by

striking ‘‘modified adjusted gross income’’ and inserting

‘‘total income’’.

(C) Paragraph (2) of section 32(f) is amended to read as

follows:

‘‘(2) REQUIREMENTS FOR TABLES.—

‘‘(A) IN GENERAL.—The provisions of subsection (a)(1)

and the provisions of subsection (a)(2) shall be reflected in

separate tables prescribed under paragraph (1).

‘‘(B) SUBSECTION (a)(1) TABLE.—The tables prescribed

under paragraph (1) to reflect the provisions of subsection

(a)(1) shall have income brackets of not greater than $50

each for earned income between $0 and the earned income

amount.

‘‘(C) SUBSECTION (a)(2) TABLE.—The tables prescribed

under paragraph (1) to reflect the provisions of subsection

(a)(2) shall have income brackets of not greater than $50

each for total income (or, if greater, the earned income)

above the initial phaseout threshold.’’

(b) REPEAL OF DENIAL OF CREDIT WHERE INVESTMENT INCOME.—

Section 32 is amended by striking subsection (i).

(c) EARNED INCOME TO INCLUDE ONLY AMOUNTS INCLUDIBLE IN

GROSS INCOME.—

(1) IN GENERAL.—Section 32(c)(2)(A)(i) (defining earned income) is amended by inserting ‘‘, but only if such amounts are

includible in gross income for the taxable year’’ after ‘‘other

employee compensation’’.

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(2) CONFORMING AMENDMENT.—Section 32(c)(2)(B) is amended by striking ‘‘and’’ at the end of clause (iv), by striking the

period at the end of clause (v) and inserting ‘‘, and’’, and by

adding at the end the following new clause:

‘‘(vi) the requirement under subparagraph (A)(i) that

an amount be includible in gross income shall not

apply if such amount is exempt from tax under section

7873 or is derived directly from restricted and allotted

land under the Act of February 8, 1887 (commonly

known as the Indian General Allotment Act) (25

U.S.C. 331 et seq.) or from land held under Acts or

treaties containing an exception provision similar to

the Indian General Allotment Act.’’

(d) MODIFICATION OF JOINT RETURN REQUIREMENT.—Subsection

(d) of section 32 is amended to read as follows:

‘‘(d) MARRIED INDIVIDUALS.—

‘‘(1) IN GENERAL.—If the taxpayer is married at the close of

the taxable year, the credit shall be allowed under subsection

(a) only if the taxpayer and his spouse file a joint return for

the taxable year.

‘‘(2) MARITAL STATUS.—For purposes of paragraph (1), an individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as

married.

‘‘(3) CERTAIN MARRIED INDIVIDUALS LIVING APART.—For purposes of paragraph (1), if—

‘‘(A) an individual —

‘‘(i) is married and files a separate return, and

‘‘(ii) has a qualifying child who is a son, daughter,

stepson, or stepdaughter of such individual, and

‘‘(B) during the last 6 months of such taxable year, such

individual and such individual’s spouse do not have the

same principal place of abode,

such individual shall not be considered as married.’’

(e) EXPANSION OF MATHEMATICAL ERROR AUTHORITY.—Paragraph (2) of section 6213(g) is amended by striking ‘‘and’’ at the

end of subparagraph (K), by striking the period at the end of subparagraph (L) and inserting ‘‘, and’’, and by inserting after subparagraph (L) the following new subparagraph:

‘‘(M) the entry on the return claiming the credit under

section 32 with respect to a child if, according to the Federal Case Registry of Child Support Orders established

under section 453(h) of the Social Security Act, the taxpayer is a noncustodial parent of such child.’’

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

shall apply to taxable years beginning after December 31, 2001.

TITLE II—MARRIAGE PENALTY RELIEF

SEC. 201. MARRIAGE PENALTY RELIEF.

(a) STANDARD DEDUCTION.—

(1) IN GENERAL.—Paragraph (2) of section 63(c) (relating to

standard deduction) is amended—

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(A) by striking ‘‘$5,000’’ in subparagraph (A) and inserting ‘‘twice the dollar amount in effect under subparagraph

(C) for the taxable year’’,

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

(C) by striking ‘‘in the case of’’ and all that follows in

subparagraph (C) and inserting ‘‘in any other case.’’, and

(D) by striking subparagraph (D).

(2) INCREASE ALLOWED AS DEDUCTION IN DETERMINING MINIMUM TAX.—Subparagraph (E) of section 56(b)(1) is amended by

adding at the end the following new sentence: ‘‘The preceding

sentence shall not apply to so much of the standard deduction

under subparagraph (A) of section 63(c)(2) as exceeds the

amount which would be such deduction but for the amendment

made by section 201(a)(1) of the Tax Reduction Act of 2001.

(3) TECHNICAL AMENDMENTS.—

(A) Subparagraph (B) of section 1(f)(6) 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’’.

(B) Paragraph (4) of section 63(c) 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, 2000.

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