II

106TH CONGRESS

2D SESSION S. 2825

To strengthen the effectiveness of the earned income tax credit in reducing

child poverty and promoting work.

IN THE SENATE OF THE UNITED STATES

JUNE 29, 2000

Mr. ROCKEFELLER (for himself, Mr. JEFFORDS, and Mr. BREAUX) introduced

the following bill; which was read twice and referred to the Committee

on Finance

A BILL

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’’.

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

7 MORE QUALIFYING CHILDREN.

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

9 of the Internal Revenue Code of 1986 (relating to percent10 ages) is amended—
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1 (1) in the second item—

2 (A) by striking ‘‘or more’’, and

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

4 ‘‘19.06’’, and

5 (2) by inserting after the second item the fol6 lowing new item:

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

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

8 this section shall apply to taxable years beginning after

9 December 31, 2000.

10 SEC. 3. SIMPLIFICATION OF DEFINITION OF EARNED IN11 COME.

12 (a) IN GENERAL.—Section 32(c)(2)(A)(i) of the In13 ternal Revenue Code of 1986 (defining earned income) is

14 amended by inserting ‘‘, but only if such amounts are in15 cludible in gross income for the taxable year’’ after ‘‘other

16 employee compensation’’.

17 (b) CONFORMING AMENDMENT.—Section

18 32(c)(2)(B) of the Internal Revenue Code of 1986 is

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

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

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

22 clause:

23 ‘‘(vi) the requirement under subparagraph

24 (A)(i) that an amount be includible in
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1 gross income shall not apply if such

2 amount is exempt from tax under section

3 7873 or is derived directly from restricted

4 and allotted land under the Act of Feb5 ruary 8, 1887 (commonly known as the In6 dian General Allotment Act) (25 U.S.C.

7 331 et seq.) or from land held under Acts

8 or treaties containing an exception provi9 sion similar to the Indian General Allot10 ment Act.’’

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

12 this section shall apply to amounts received in taxable

13 years beginning after December 31, 2000.

14 SEC. 4. SIMPLIFICATION OF DEFINITION OF CHILD DE15 PENDENT.

16 (a) REMOVAL OF SUPPORT TEST FOR CERTAIN INDI17 VIDUALS.—Section 152(a) of the Internal Revenue Code

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

19 to read as follows:

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

21 subtitle—

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

23 means—

24 ‘‘(A) any individual described in paragraph

25 (2) over half of whose support, for the calendar
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1 year in which the taxable year of the taxpayer

2 begins, was received from the taxpayer (or is

3 treated under subsection (c) as received from

4 the taxpayer), or

5 ‘‘(B) any individual described in subsection

6 (f).

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

8 in this paragraph if such individual is—

9 ‘‘(A) a brother, sister, stepbrother, or step10 sister of the taxpayer,

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

12 or an ancestor of either,

13 ‘‘(C) a stepfather or stepmother of the tax14 payer,

15 ‘‘(D) a son or daughter of a brother or sis16 ter of the taxpayer,

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

18 mother of the taxpayer,

19 ‘‘(F) a son-in-law, daughter-in-law, father20 in-law, mother-in-law, brother-in-law, or sister21 in-law of the taxpayer, or

22 ‘‘(G) an individual (other than an indi23 vidual who at any time during the taxable year

24 was the spouse, determined without regard to

25 section 7703, of the taxpayer) who, for the tax-
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1 able year of the taxpayer, has as their principal

2 place of abode the home of the taxpayer and is

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

4 (b) OTHER MODIFICATIONS.—Section 152 of the In5 ternal Revenue Code of 1986 is amended by adding at the

6 end the following:

7 ‘‘(f) SUBSECTION (f) DEPENDENTS.—

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

9 in this subsection for the taxable year if such

10 individual—

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

12 described in paragraph (2),

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

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

15 same principal place of abode as the taxpayer

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

17 and

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

19 the close of the calendar year in which the tax20 able year begins, or

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

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

23 of 24 at the close of such calendar year.
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1 ‘‘(2) RELATIONSHIP TEST.—An individual bears

2 a relationship to the taxpayer described in this para3 graph if such individual is—

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

5 a descendant of either, or

6 ‘‘(B) a stepson or stepdaughter of the tax7 payer.

8 ‘‘(3) SPECIAL RULES.—

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

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

11 individual may be claimed as a dependent by 2

12 or more taxpayers (but for this subparagraph)

13 for a taxable year beginning in the same cal14 endar year, only the taxpayer with the highest

15 adjusted gross income for such taxable year

16 shall be allowed the deduction with respect to

17 such individual.

18 ‘‘(B) RELEASE OF CLAIM TO EXEMP19 TION.—Subparagraph (A) shall not apply with

20 respect to an individual if—

21 ‘‘(i) the taxpayer with the highest ad22 justed gross income under subparagraph

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

24 declaration (in such manner and form as

25 the Secretary may by regulations pre-
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1 scribe) that such taxpayer will not claim

2 such individual as a dependent for any tax3 able year beginning in such calendar year,

4 ‘‘(ii) the other taxpayer provides over

5 half of such individual’s support for the

6 calendar year in which the taxable year of

7 such other taxpayer begins, and

8 ‘‘(iii) such other taxpayer attaches

9 such written declaration to such taxpayer’s

10 return for the taxable year beginning dur11 ing such calendar year.’’.

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

13 152(b)(2) (relating to rules relating to general definition)

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

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

16 child (as defined in section 32(c)(3)(B)(iii)) of an indi17 vidual’’.

18 (d) EXEMPTION FROM GROSS INCOME TEST.—Sec19 tion 151(c)(3) (relating to definition of child) is amended

20 by striking ‘‘or stepdaughter’’ and inserting ‘‘step21 daughter, or a descendant of such individual’’.

22 (e) WAIVER OF DEDUCTION FOR DIVORCED PAR23 ENTS.—

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

25 as precedes paragraph (4) (relating to support test
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1 in case of child of divorced parents, etc.) is amended

2 to read as follows:

3 ‘‘(e) SPECIAL RULES FOR CHILD OF DIVORCED PAR4 ENTS.—

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

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

7 of parents—

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

9 under a decree of divorce or separate mainte10 nance,

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

12 separation agreement, or

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

14 last 6 months of the calendar year,

15 the custodial parent who is entitled to the deduction

16 under section 151 for a taxable year with respect to

17 such child may release such deduction to the non18 custodial parent.

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

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

21 dependent for the taxable year if—

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

23 declaration (in such manner and form as the

24 Secretary may by regulations prescribe) that

25 such custodial parent will not claim such child
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1 as a dependent for any taxable year beginning

2 in such calendar year,

3 ‘‘(B) the custodial parent and the non4 custodial parent provide over half of such

5 child’s support for the calendar year in which

6 the taxable years of such parents begin, and

7 ‘‘(C) the noncustodial parent attaches such

8 written declaration to such noncustodial par9 ent’s return for the taxable year beginning dur10 ing such calendar year.

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

12 subsection—

13 ‘‘(A) CUSTODIAL PARENT.—The term ‘cus14 todial parent’ means, with regard to an indi15 vidual, a parent who has custody of such indi16 vidual for a greater portion of the calendar year

17 than the noncustodial parent.

18 ‘‘(B) NONCUSTODIAL PARENT.—The term

19 ‘noncustodial parent’ means the parent who is

20 not the custodial parent.’’.

21 (2) PRE-1985 INSTRUMENTS.—Section

22 152(e)(4)(A) of such Code is amended by striking

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

24 parent’’ and inserting ‘‘A noncustodial parent de25 scribed in paragraph (1) shall be entitled to the de-
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1 duction under section 151 for a taxable year with re2 spect to a child if’’.

3 (f) CONFORMING AMENDMENTS.—

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

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

6 on the day before the date of the enactment of the

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

8 ‘‘152(e)’’.

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

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

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

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

13 ‘‘paragraph (2)(G)’’.

14 (4) Section 21(e)(5)(A) of such Code is amend15 ed by striking ‘‘paragraph (2) or (4) of’’.

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

17 in the matter following subclause (B) by inserting

18 ‘‘as in effect on the day before the date of the enact19 ment of the Tax Relief for Working Families Act of

20 2000’’ after ‘‘152(e)(1)’’.

21 (6) Section 32(c)(1)(G) of such Code is amend22 ed by striking ‘‘(3)(D).’’ and inserting ‘‘(1)(C). An

23 individual whose qualifying child or qualifying chil24 dren are not taken into account under subsection (b)

25 solely by reason of paragraph (3)(D) shall be treated
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1 as an eligible individual if such individual otherwise

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

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

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

5 (8) Section 51(i)(1)(C) of such Code is amend6 ed by striking ‘‘152(a)(9)’’ and inserting

7 ‘‘152(a)(2)(G)’’.

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

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

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

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

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

13 (11) Section 7703(b)(1) of such Code is amend14 ed by striking ‘‘paragraph (2) or (4) of’’.

15 (12) The following provisions of such Code are

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

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

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

19 (f)(2) of section 152’’:

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

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

22 51(i)(1).

23 (C) The second sentence of section

24 213(d)(11).

25 (D) Section 529(e)(2)(B).
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1 (E) Section 7702B(f)(2)(C)(iii).

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

3 this section shall apply to taxable years beginning after

4 December 31, 2000.

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