21st Century Worker Tax Cut Act

To amend the Internal Revenue Code of 1986 to establish a deduction for married couples who are both employed and have young children and to increase the earned income tax credit for childless workers, and to provide for budget offsets. 1. Short title This Act may be cited as the 21 st 2. Deduction for dual-earner families (a) In general Part VII of subchapter B of chapter 1 224. Dual-earner families (a) Deduction allowed In the case of an eligible taxpayer, there shall be allowed as a deduction for the taxable year an amount equal to 20 percent of the lesser of— (1) $60,000, or (2) the earned income of the spouse with the lower amount of earned income for such taxable year. (b) Limitation The amount of the deduction allowable under subsection (a) shall be reduced (but not below zero) by an amount which bears the same ratio to the amount determined under subsection (a) (as determined without regard to this subsection) as the amount of the taxpayer's excess adjusted gross income bears to $20,000. (c) Definitions In this section: (1) Earned income The term earned income (2) Eligible taxpayer (A) In general The term eligible taxpayer (i) files a joint return for the taxable year under section 6013, and (ii) has at least 1 qualifying child (as defined in section 152(c)) who has not attained 12 years of age before the close of the taxable year. (3) Excess adjusted gross income The term excess adjusted gross income (d) Inflation adjustment (1) In general In the case of any taxable year beginning after 2015, each of the dollar amounts in subsections (a)(1) and (c)(3) 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 2014 calendar year 1992 (2) Rounding If any dollar amount in subsection (a)(1) or (c)(3), after being increased under paragraph (1), is not a multiple of $1,000, such dollar amount shall be rounded to the nearest multiple of $1,000. (e) Additional eligibility requirements (1) Individual claiming benefits under section 911 No deduction shall be allowed under this section if an individual (or the individual's spouse) claims the benefits of section 911 for the taxable year. (2) Non-resident aliens No deduction shall be allowed under this section if an individual (or the individual's spouse) is a nonresident alien individual for any portion of the taxable year unless such individual is treated for such taxable year as a resident of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013. (3) Identification number requirement (A) In general No deduction shall be allowed under this section if the eligible taxpayer does not include on the joint return of tax for the taxable year— (i) the taxpayer identification number of the individual and the individual's spouse, and (ii) the name, age, and taxpayer identification number of any qualifying children. (B) Social security numbers For purposes of this paragraph, the term taxpayer identification number (f) Taxable year must be full taxable year Except in the case of a taxable year closed by reason of the death of an individual, no deduction shall be allowable under this section in the case of a taxable year covering a period of less than 12 months. . (b) Deduction allowed in computing adjusted gross income Section 62(a) of such Code is amended by inserting after paragraph (21) the following new paragraph: (22) Dual-earner families The deduction allowed by section 224. . (c) Enhancement of earned income tax credit Section 32 of such Code is amended— (1) in subsection (a)(2)(B), by striking earned income modified earned income (as defined in subsection (c)(5)) (2) in subsection (c), by adding at the end the following new paragraph: (5) Modified earned income The term modified earned income . (d) Conforming amendment The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as relating to section 225 and by inserting after the item relating to section 223 the following: Sec. 224. Dual-earner families. . (e) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. 3. Strengthening the earned income tax credit for individuals with no qualifying children (a) Credit for certain individuals over age 21 (1) In general Paragraph (1) of section 32(c) (G) Special rule for working individuals over age 20 and without qualifying child (i) In general In the case of an individual (or, if the individual is married, either the individual or the individual’s spouse) who— (I) has attained the age of 21 but not attained age 25 before the close of the taxable year, and (II) is not a full-time student at any time during the taxable year, paragraph (1)(A)(ii)(II) shall not apply for purposes of determining whether such individual is an eligible individual. (ii) Student For purposes of this subparagraph, an individual shall be considered a full-time student if such individual is carrying more than 1/2 . (2) Information return matching Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury shall develop and implement procedures for checking an individual’s claim for a credit under section 32 (b) Increased credit (1) Credit percentage and phaseout percentage The table contained in section 32(b)(1)(A) of such Code is amended by striking 7.65 15.3 (2) Earned income amount and phaseout amount (A) In general The table contained in section 32(b)(2)(A) of such Code is amended— (i) by striking $4,220 $8,820 (ii) by striking $5,280 $10,425 (B) Inflation adjustments Subparagraph (B) of section 32(j)(1) of such Code is amended— (i) by inserting except as provided in clause (iii) in the case of amounts (ii) by striking and , and (iii) in the case of the $8,820 and $10,425 amounts in subsection (b)(2)(A), by substituting calendar year 2014 calendar year 1992 . (c) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. 4. Increased penalty for tax return preparers who fail to comply with due diligence requirements for the earned income tax credit (a) In general Section 6695(g) $500 $1,000 (b) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. 5. Expansion of denial of deduction for certain excessive employee remuneration (a) Application to all current and former employees (1) In general Section 162(m) (A) by striking covered employee covered individual (B) by striking such employee such individual (2) Covered individual Paragraph (3) of section 162(m) of such Code is amended to read as follows: (3) Covered individual For purposes of this subsection, the term covered individual . (3) Conforming amendments (A) Section 48D(b)(3)(A) of such Code is amended by inserting (as in effect for taxable years beginning before January 1, 2015) section 162(m)(3) (B) Section 409A(b)(3)(D)(ii) of such Code is amended by inserting (as in effect for taxable years beginning before January 1, 2015) section 162(m)(3) (b) Expansion of applicable employee remuneration (1) Elimination of exception for commission-based pay (A) In general Paragraph (4) of section 162(m) of such Code, as amended by subsection (a), is amended by striking subparagraph (B) and by redesignating subparagraphs (C) through (G) as subparagraphs (B) through (F), respectively. (B) Conforming amendments (i) Section 162(m)(5) of such Code is amended— (I) by striking subparagraphs (B), (C), and (D) thereof subparagraphs (B) and (C) thereof (II) by striking subparagraphs (F) and (G) subparagraphs (E) and (F) (ii) Section 162(m)(6) of such Code is amended— (I) by striking subparagraphs (B), (C), and (D) thereof subparagraphs (B) and (C) thereof (II) by striking subparagraphs (F) and (G) subparagraphs (E) and (F) (2) Inclusion of performance-based compensation (A) In general Paragraph (4) of section 162(m) of the Internal Revenue Code of 1986, as amended by subsection (a) and paragraph (1) of this subsection, is amended by striking subparagraph (B) and redesignating subparagraphs (C) through (F) as subparagraphs (B) through (E), respectively. (B) Conforming amendments (i) Section 162(m)(5) of such Code, as amended by paragraph (1), is amended— (I) by striking subparagraphs (B) and (C) thereof subparagraph (B) thereof (II) by striking subparagraphs (E) and (F) subparagraphs (D) and (E) (ii) Section 162(m)(6) of such Code, as amended by paragraph (1), is amended— (I) by striking subparagraphs (B) and (C) thereof subparagraph (B) thereof (II) by striking subparagraphs (E) and (F) subparagraphs (D) and (E) (c) Expansion of applicable employer Paragraph (2) of section 162(m) of the Internal Revenue Code of 1986 is amended to read as follows: (2) Publicly held corporation For purposes of this subsection, the term publicly held corporation (A) has a class of securities registered under section 12 of such Act ( 15 U.S.C. 78l (B) is required to file reports under section 15(d) of such Act (15 U.S.C. 780(d)). . (d) Regulatory authority (1) In general Section 162(m) (7) Regulations The Secretary may prescribe such guidance, rules, or regulations, including with respect to reporting, as are necessary to carry out the purposes of this subsection. . (2) Conforming amendment Paragraph (6) of section 162(m) of such Code is amended by striking subparagraph (H). (e) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2014. 6. Low-taxed cross-border foreign income treated as subpart F income (a) In general Subsection (a) of section 952 (3) low-taxed cross-border income (as defined under subsection (e)), . (b) Low-Taxed cross-Border income Section 952 of such Code is amended by adding at the end the following new subsection: (e) Low-Taxed cross-Border income (1) In general For purposes of subsection (a), the term low-taxed cross-border income (A) such income was derived in the home country of the controlled foreign corporation, or (B) such income was subject to an effective rate of income tax imposed by a foreign country in excess of 15 percent. (2) Rules related to income derived in home country For purposes of paragraph (1)(A), income shall be treated as derived in the home country of a controlled foreign corporation only if— (A) such income is derived in the conduct of a trade or business of such corporation in the country in which such corporation is created or organized, (B) such corporation maintains an office or other fixed place of business in such country, and (C) such income is derived in connection with— (i) property which is sold for use, consumption, or disposition in such country, or (ii) services provided with respect to persons or property located in such country. (3) Rules related to determination of effective rate of foreign income tax (A) Country-by-country determination Paragraph (1)(B) shall be applied— (i) separately with respect to each foreign country in which a controlled foreign corporation conducts any trade or business, and (ii) with respect to the aggregate gross income derived with respect to such country. (B) Treatment of losses For purposes of determining the effective rate of income tax imposed by any foreign country under paragraph (1)(B)— (i) such effective rate shall be determined without regard to any losses carried to the relevant taxable year, and (ii) to the extent the income of the controlled foreign corporation reduces losses in the relevant taxable year, such effective rate shall be treated as being the effective rate which would have been imposed on such income without regard to such losses. (4) Deductions to be taken into account The gross income of a controlled foreign corporation taken into account under this subsection shall be reduced, under regulations prescribed by the Secretary, so as to take into account deductions (including taxes) properly allocable to such income. . (c) Effective date The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2014, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.

Summary: 21st Century Worker Tax Cut Act - Amends the Internal Revenue Code to: (1) allow married taxpayers with at least one qualifying child under the age of 12 an income-based tax deduction equal to 20% of the lesser of $60,000 or the earned income of the spouse with the lower amount of earned income; (2) increase the amount of the earned income tax credit for taxpayers with no qualifying children; (3) increase the penalty for tax return preparers who fail to comply with due diligence requirements for determining eligibility for the earned income tax credit; (4) extend the limitation on the tax deduction for employee remuneration to current or former officers, directors, or employees of a publicly-held corporation; and (5) include in subpart F income (income of controlled foreign corporations the tax on which may not be deferred) low-taxed cross-border income (gross income of a controlled foreign corporation except income that was derived in the home country of such corporation or was subject to an effective rate of income tax imposed by a foreign country in excess of 15%).