I
104TH CONGRESS
2D SESSION
H. R. 4197
To amend the Internal Revenue Code of 1986 to permit States to make
advance payments of the earned income tax credit.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 26, 1996
Mr. CAMP 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 permit
States to make advance payments of the earned income
tax credit.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ADVANCE PAYMENT OF EARNED INCOME TAX
CREDIT THROUGH STATE DEMONSTRATION
PROGRAMS.
(a) IN GENERAL.—Section 3507 of the Internal Rev-
enue Code of 1986 (relating to the advance payment of
the earned income tax credit) is amended by adding at
the end the following:
‘‘(g) STATE ADVANCE PAYMENT PROGRAM.—
‘‘(1) IN GENERAL.—In lieu of receiving earned
income advance amounts from an employer under
subsection (a), a participating resident shall receive
advance earned income payments from a responsible
State agency pursuant to a State Advance Payment
Program that is designated pursuant to paragraph
(2).
‘‘(2) DESIGNATIONS.—
‘‘(A) IN GENERAL.—The Secretary (in con-
sultation with the Secretary of Health and
Human Services) shall designate State Advance
Payment Programs for States submitting plans
that satisfy the requirements of paragraph (3).
The Secretary is required to approve a State
plan 90 days after submission to the Secretary
by the State, or submit to the State the reasons
for not approving the State plan. Administra-
tive costs of a State in conducting a State Ad-
vance Payment Program under this section may
be included for matching under section 403(a)
of the Social Security Act and section 16(a) of
the Food Stamp Act of 1977.
‘‘(B) PERIOD FOR WHICH DESIGNATION IS
IN EFFECT.—
‘‘(i) 
IN
GENERAL.—Designations
made under this paragraph shall be effec-
tive only after December 31, 1996.
‘‘(ii) 
REVOCATION
OF
DESIGNA-
TIONS.—The Secretary may revoke a
State’s designation under this paragraph if
the Secretary determines that the State is
not complying substantially with the plan
described in paragraph (3) submitted by
the State.
‘‘(3) STATE
PLANS.—No State may be des-
ignated under paragraph (2) unless the State’s pro-
posal for such designation—
‘‘(A) 
identifies 
the 
responsible 
State
agency,
‘‘(B) describes how and when the advance
earned income payments will be made by that
agency, including a description of any other
State or Federal benefits with which such pay-
ments will be coordinated,
‘‘(C) describes how the State will obtain
the information on which the amount of ad-
vance earned income payments made to each
participating resident will be determined in ac-
cordance with paragraph (4),
‘‘(D) describes how State residents who
will be eligible to receive advance earned income
payments will be selected, notified of the oppor-
tunity to receive advance earned income pay-
ments from the responsible State agency, and
given the opportunity to elect to participate in
the program,
‘‘(E) describes how the State will verify, in
addition to receiving the certifications and
statement described in paragraph (6)(D)(iv),
the eligibility of participating residents for the
earned income tax credit,
‘‘(F) commits the State to furnishing to
each participating resident and to the Secretary
by January 31 of each year a written statement
showing—
‘‘(i) the name and taxpayer identifica-
tion number of the participating resident,
and
‘‘(ii) the total amount of advance
earned income payments made to the par-
ticipating resident during the prior cal-
endar year,
‘‘(I) amounts required to be de-
ducted and withheld by the State
under section 3401 (relating to wage
withholding) for the period (under
paragraph (4)(B)) on the basis of
which advance earned income pay-
ments are made by the State, and
‘‘(II) amounts required to be de-
ducted for such period under section
3102 (relating to FICA employee
taxes), and
‘‘(III) amounts of the taxes im-
posed on the State for such period
under section 3111 (relating to FICA
employer taxes),
as if the State had paid to the Secretary,
on the day on which payments are made to
participating residents, an amount equal to
such payments.
‘‘(B) ADVANCE PAYMENTS EXCEED TAXES
DUE.—If for any period the aggregate amount
of advance earned income payments made by
the responsible State agency under a State Ad-
vance Payment Program exceeds the sum of the
amounts referred to in subparagraph (A)(ii),
each such advance earned income payment shall
be reduced by an amount which bears the same
ratio to such excess as such advance earned in-
come payment bears to the aggregate amount
of all such advance earned income payments.
‘‘(6) DEFINITIONS.—For purposes of this sec-
tion—
‘‘(A) STATE
ADVANCE
PAYMENT
PRO-
GRAM.—The term ‘State Advance Payment
Program’ means the program described in a
proposal submitted for designation under para-
graph (1) and designated by the Secretary
under paragraph (2).
‘‘(B) RESPONSIBLE STATE AGENCY.—The
term ‘responsible State agency’ means the sin-
gle State agency that will be making the ad-
vance earned income payments to residents of
the State who elect to participate in a State Ad-
vance Payment Program.
‘‘(C) ADVANCE
EARNED
INCOME
PAY-
MENTS.—The term ‘advance earned income
payments’ means an amount paid by a respon-
sible State agency to residents of the State pur-
suant to a State Advance Payment Program.
‘‘(D) 
PARTICIPATING
RESIDENT.—The
term ‘participating resident’ means an individ-
ual who—
‘‘(i) is a resident of a State that has
in effect a designated State Advance Pay-
ment Program,
‘‘(ii) makes the election described in
paragraph (3)(D) pursuant to guidelines
prescribed by the State,
‘‘(iii) certifies to the State the number
of qualifying children the individual has,
and
‘‘(iv) provides to the State the certifi-
cations and statement set forth in sub-
section (b) (except that paragraph (3)
thereof shall be applied by substituting
‘any employer’ for ‘another employer’),
along with any other information required
by the State.’’.
(b) TECHNICAL ASSISTANCE.—The Secretary of the
Treasury and the Secretary of Health and Human Serv-
ices shall jointly ensure that technical assistance is pro-
vided to State Advance Payment Programs and that such
Programs are rigorously evaluated.
(c) ANNUAL REPORTS.—The Secretary of the Treas-
ury shall issue annual reports detailing the extent to
which—
(1) residents participate in the State Advance
Payment Programs,
(2) participating residents file Federal and
State tax returns,
(3) participating residents report accurately the
amount of the advance earned income payments
made to them by the responsible State agency dur-
ing the year, and
(4) recipients of excessive advance earned in-
come payments repaid those amounts.
The report shall also contain an estimate of the amount
of advance earned income payments made by each respon-
sible State agency but not reported on the tax returns of
a participating resident and the amount of excessive ad-
vance earned income payments.
(d) AUTHORIZATION OF APPROPRIATIONS.—For pur-
poses of providing technical assistance described in sub-
section (b), preparing the reports described in subsection
(c), and providing grants to States in support of des-
ignated State Advance Payment Programs, there are au-
thorized to be appropriated in advance to the Secretary
of the Treasury and the Secretary of Health and Human
Services a total of $1,400,000 for fiscal years 1997
through 2000.
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