I 
111TH CONGRESS 
2D SESSION 
H. R. 5725 
To amend the Internal Revenue Code of 1986 to repeal taxes on the income 
of senior citizens and to improve income security of senior citizens. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 13, 2010 
Mr. POSEY (for himself and Mrs. BLACKBURN) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Energy and Commerce, for a period to be sub-
sequently determined by the Speaker, in each case for consideration of 
such provisions as fall within the jurisdiction of the committee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to repeal 
taxes on the income of senior citizens and to improve 
income security of senior citizens. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Senior Citizens Income 
Security Act of 2010’’. 
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SEC. 2. REPEAL OF 1993 INCOME TAX INCREASE ON SOCIAL 
SECURITY BENEFITS. 
(a) RESTORATION OF PRIOR LAW FORMULA.—Sub-
section (a) of section 86 of the Internal Revenue Code of 
1986 is amended to read as follows: 
‘‘(a) IN GENERAL.—Gross income for the taxable 
year of any taxpayer described in subsection (b) (notwith-
standing section 207 of the Social Security Act) includes 
Social Security benefits in an amount equal to the lesser 
of— 
‘‘(1) one-half of the Social Security benefits re-
ceived during the taxable year, or 
‘‘(2) one-half of the excess described in sub-
section (b)(1).’’. 
(b) REPEAL OF ADJUSTED BASE AMOUNT.—Sub-
section (c) of section 86 of such Code is amended to read 
as follows: 
‘‘(c) BASE AMOUNT.—For purposes of this section, 
the term ‘base amount’ means— 
‘‘(1) except as otherwise provided in this sub-
section, $25,000, 
‘‘(2) $32,000 in the case of a joint return, and 
‘‘(3) zero in the case of a taxpayer who— 
‘‘(A) is married as of the close of the tax-
able year (within the meaning of section 7703) 
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but does not file a joint return for such year, 
and 
‘‘(B) does not live apart from his spouse at 
all times during the taxable year.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Subparagraph (A) of section 871(a)(3) of 
such Code is amended by striking ‘‘85 percent’’ and 
inserting ‘‘50 percent’’. 
(2)(A) Subparagraph (A) of section 121(e)(1) 
of the Social Security Amendments of 1983 (Public 
Law 98–21) is amended— 
(i) by striking ‘‘(A) There’’ and inserting 
‘‘There’’; 
(ii) by striking ‘‘(i)’’ immediately following 
‘‘amounts equivalent to’’; and 
(iii) by striking ‘‘, less (ii)’’ and all that 
follows and inserting a period. 
(B) Paragraph (1) of section 121(e) of such Act 
is amended by striking subparagraph (B). 
(C) Paragraph (3) of section 121(e) of such Act 
is amended by striking subparagraph (B) and by re-
designating subparagraph (C) as subparagraph (B). 
(D) Paragraph (2) of section 121(e) of such 
Act is amended in the first sentence by striking 
‘‘paragraph (1)(A)’’ and inserting ‘‘paragraph (1)’’. 
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(d) MAINTENANCE OF TRANSFERS TO HOSPITAL IN-
SURANCE TRUST FUND.— 
(1) IN
GENERAL.—There are hereby appro-
priated to the Hospital Insurance Trust Fund estab-
lished under section 1817 of the Social Security Act 
amounts equal to the reduction in revenues to the 
Treasury by reason of the enactment of this section. 
Amounts appropriated by the preceding sentence 
shall be transferred from the general fund at such 
times and in such manner as to replicate to the ex-
tent possible the transfers which would have oc-
curred to such Trust Fund had this section not been 
enacted. 
(2) REPORTS.—The Secretary of the Treasury 
or the Secretary’s delegate shall annually report to 
the Committee on Ways and Means of the House of 
Representatives and the Committee on Finance of 
the Senate the amounts and timing of the transfers 
under this subsection. 
(e) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2009. 
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(2) SUBSECTION (c)(1).—The amendment made 
by subsection (c)(1) shall apply to benefits paid after 
December 31, 2009. 
(3) SUBSECTION
(c)(2).—The amendments 
made by subsection (c)(2) shall apply to tax liabil-
ities for taxable years beginning after December 31, 
2009. 
SEC. 3. ELIMINATE MANDATORY WITHDRAWALS ON IRAS. 
(a) IN GENERAL.—Subsection (a) of section 401 of 
the Internal Revenue Code of 1986 is amended by striking 
paragraph (9). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 403(b)(10) of such Code is amend-
ed by striking ‘‘ sections 401(a)(9)’’ and inserting ‘‘ 
section’’. 
(2) Subsections (a)(6) and (b)(3) of section 408 
of such Code are both amended by striking ‘‘section 
401(a)(9) and’’. 
(3) Section 408A(c)(5) of such Code is amend-
ed to read as follows: 
‘‘(5) MANDATORY
DISTRIBUTION
RULES
NOT 
TO APPLY BEFORE DEATH.—Notwithstanding sub-
sections (a)(6) and (b)(3) of section 408 (relating to 
required distributions), the incidental death benefit 
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requirements of section 401(a) shall not apply to 
any Roth IRA.’’. 
(4) Section 402(c) of such Code is amended— 
(A) in paragraph (4) by striking subpara-
graph (B), by inserting ‘‘and’’ at the end of 
subparagraph (A), and by redesignating sub-
paragraph (C) as subparagraph (B), and 
(B) in paragraph (11)(A)— 
(i) by inserting ‘‘(as in effect on the 
day before the date of the enactment of 
this phrase)’’ after ‘‘section 401(a)(9)(E)’’, 
and 
(ii) by inserting ‘‘and’’ at the end of 
clause (i), by striking ‘‘, and’’ at the end 
of clause (ii) and inserting a period, and 
by striking clause (iii). 
(5) Section 409(d) of such Code is amended by 
striking ‘‘to any distribution required under section 
401(a)(9) or’’. 
(6) Section 457(d) of such Code is amended— 
(A) in paragraph (1) by striking subpara-
graph (B), by inserting ‘‘and’’ at the end of 
subparagraph (A), and be redesignating sub-
paragraph (C) as subparagraph (B), and 
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(B) by striking paragraph (2) and redesig-
nating paragraph (3) as paragraph (2). 
(7) Section 4974(b) of such Code is amended 
by striking ‘‘401(a)(9)’’. 
SEC. 4. ELIMINATE PAYROLL TAX FOR MEDICARE AND SO-
CIAL SECURITY BENEFICIARIES. 
(a) IN GENERAL.—Section 3101 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following: 
‘‘(d) EXCEPTION.—Subsections (a) and (b) shall not 
apply to any individual who— 
‘‘(1) is entitled to benefits under part A of title 
XVIII of the Social Security Act or is enrolled under 
part B of such title, or 
‘‘(2) is entitled to a monthly insurance benefit 
under title II of the Social Security Act based on 
such individual’s wages and self-employment in-
come.’’. 
(b) SELF-EMPLOYMENT.—Section 1401 of such Code 
is amended by adding at the end the following new sub-
section: 
‘‘(d) EXCEPTION.—In the case of any individual 
who— 
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‘‘(1) is entitled to benefits under part A of title 
XVIII of the Social Security Act or is enrolled under 
part B of such title, or 
‘‘(2) is entitled to a monthly insurance benefit 
under title II of the Social Security Act based on 
such individual’s wages and self-employment income, 
subsections (a) and (b) shall be applied for the taxable 
year by substituting one-half of the percent otherwise 
specified in such subsections.’’. 
(c) EFFECTIVE DATES.— 
(1) The amendment made by subsection (a) 
shall apply to wages paid after December 31, 2009. 
(2) The amendment made by subsection (b) 
shall apply to enumeration paid in taxable years 
ending after the date of the enactment of this Act. 
(d) TRUST FUNDS HELD HARMLESS.—There is 
hereby appropriated (out of any money in the Treasury 
not otherwise appropriated) for each fiscal year to each 
fund under the Social Security Act an amount equal to 
the reduction in the transfers to such fund for such fiscal 
year by reason of the amendments made by this section. 
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SEC. 5. AUTHORITY TO ELECT VOUCHER PROGRAM IN-
STEAD OF MEDICARE PART A ENTITLEMENT. 
(a) IN GENERAL.—Section 226 of the Social Security 
Act (42 U.S.C. 426) is amended by adding at the end the 
following new subsections: 
‘‘(k) WAIVER OF ENTITLEMENT AND ELECTION OF 
VOUCHER PROGRAM.— 
‘‘(1) IN GENERAL.—Notwithstanding the pre-
vious provisions of this section, the Secretary shall 
establish a procedure under which an individual oth-
erwise entitled under subsection (a) to benefits 
under part A of title XVIII may waive such entitle-
ment and be automatically enrolled in the Medicare 
Alternative Voucher Program established under sub-
section (l) if— 
‘‘(A) at the time such waiver is made the 
individual— 
‘‘(i) has a health savings account de-
scribed in subsection (d) of section 223 of 
the Internal Revenue Code of 1986; and 
‘‘(ii) is enrolled under a high deduct-
ible health plan, as defined in subsection 
(c)(1) of such section; and 
‘‘(B) the individual waives such entitlement 
during the individual’s initial enrollment period 
described in section 1837(d). 
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‘‘(2) TREATMENT UNDER THE INTERNAL REV-
ENUE CODE OF 1986.—An individual who waives en-
titlement under paragraph (1) shall not be treated 
as entitled to benefits under title XVIII for purposes 
of section 223(b)(7) of the Internal Revenue Code of 
1986. 
‘‘(3) INELIGIBILITY FOR PART B OR D BENE-
FITS.—An individual shall not be eligible for benefits 
under part B or D of title XVIII during the period 
for which the individual waives entitlement under 
part A of such title under paragraph (1). 
‘‘(4) TERMINATION OF WAIVER AND REENROLL-
MENT UNDER MEDICARE PROGRAM.—The Secretary 
shall establish a procedure under which an individual 
who waives entitlement under paragraph (1) may 
terminate such waiver during an annual period that 
shall be the same as the annual general enrollment 
period described in section 1837(e). For purposes of 
applying parts B and D of title XVIII, such indi-
vidual shall be treated as if the individual were enti-
tled to benefits under part A of such title as of the 
date such individual terminates the waiver under 
this paragraph. An individual who has terminated 
such a waiver may not subsequently make such a 
waiver. 
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‘‘(l) MEDICARE
ALTERNATIVE
VOUCHER
PRO-
GRAM.— 
‘‘(1) ESTABLISHMENT OF PROGRAM.—The Sec-
retary shall establish a program to be known as the 
Medicare Alternative Voucher Program (in this sub-
section referred to as the ‘voucher program’) con-
sistent with this subsection. 
‘‘(2) AUTOMATIC ENROLLMENT.—An individual 
who waives entitlement under subsection (k)(1) shall 
be enrolled in the voucher program for the period 
during which such waiver is in effect. 
‘‘(3) AMOUNT OF VOUCHER.— 
‘‘(A) AMOUNT BASED ON AGE COHORT.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), for each month that an individual 
within an age cohort is enrolled in the 
voucher program, the Secretary shall pro-
vide a voucher to such individual in an 
amount that is equal to the monthly actu-
arial rate for that month computed under 
section 1818(d)(1) multiplied by the age 
cohort adjustment factor for such age co-
hort under subparagraph (B). 
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‘‘(ii) MONTHLY LIMIT.—The amount 
of a voucher provided to an individual for 
a month may not exceed $200. 
‘‘(B) AGE
COHORT
ADJUSTMENT
FAC-
TOR.—For each age cohort the Secretary shall 
determine an age cohort adjustment factor 
equal to the ratio of— 
‘‘(i) the monthly actuarial rate de-
scribed in section 1818(d)(1) as deter-
mined by the Secretary for individuals in 
such age cohort, to 
‘‘(ii) the monthly actuarial rate de-
scribed in such section. 
‘‘(C) AGE
COHORT
DEFINED.—For pur-
poses of this paragraph, an ‘age cohort’ means 
a group of individuals whose age falls within a 
span of 5 consecutive years, consistent with the 
following: 
‘‘(i) The first such span begins at age 
65. 
‘‘(ii) Other spans follow consecutively. 
‘‘(4) PERMISSIBLE
USE
OF
VOUCHER.—A 
voucher under paragraph (3) may be used only for 
the following purposes: 
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‘‘(A) As a contribution into a health sav-
ings account established by such individual, as 
described in subsection (k)(1)(A). 
‘‘(B) For payment of premiums for enroll-
ment of such individual under a high deductible 
health plan described in such subsection. 
‘‘(5) EFFECT
OF
SUBSEQUENT
TERMINATION 
OF WAIVER.—If an individual terminates a waiver 
under subsection (k)(3), the enrollment of such indi-
vidual in the voucher program shall be terminated 
on the date on which the termination becomes effec-
tive.’’. 
(b) AMENDMENT OF INTERNAL REVENUE CODE OF 
1986.—Paragraph (7) of section 223(b) of the Internal 
Revenue Code of 1986 (relating to Medicare eligible indi-
viduals) is amended to read as follows: 
‘‘(7) MEDICARE ELIGIBLE INDIVIDUALS.— 
‘‘(A) IN GENERAL.—The limitation under 
this subsection for any month with respect to 
an individual shall be zero for any month such 
individual is entitled to benefits under title 
XVIII of the Social Security Act. 
‘‘(B) MEDICARE
ALTERNATIVE
VOUCHER 
PROGRAM.—In the case of an individual who is 
enrolled in the Medicare Alternative Voucher 
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Program under section 226(l) of the Social Se-
curity Act, the applicable limitation under sub-
paragraphs (A) and (B) of paragraph (2) shall 
be increased by the amount of the voucher de-
scribed in paragraph (3) of such section which 
is contributed to a health savings account of 
such individual.’’. 
(c) EFFECTIVE DATE.— 
(1) IN
GENERAL.—The amendment made by 
subsection (a) shall take effect on the date that is 
six months after the date of the enactment of this 
Act and shall apply to an individual who becomes 
entitled to benefits under part A of title XVIII of 
the Social Security Act on or after such date of the 
enactment. 
(2) AMENDMENT OF INTERNAL REVENUE CODE 
OF 1986.—The amendment made by subsection (b) 
shall apply to months ending after the date referred 
to in paragraph (1), in taxable years ending after 
such date. 
SEC. 6. PARTIAL EXCLUSION OF INTEREST, DIVIDENDS, 
AND CAPITAL GAINS RECEIVED BY INDIVID-
UALS. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
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amounts specifically excluded from gross income) is 
amended by inserting after section 115 the following new 
section: 
‘‘SEC. 116. PARTIAL EXCLUSION FOR INTEREST, DIVIDENDS, 
AND CAPITAL GAINS RECEIVED BY INDIVID-
UALS. 
‘‘(a) IN GENERAL.—Gross income does not include 
the sum of amounts received during the taxable year by 
an individual as— 
‘‘(1) dividends from a domestic corporation, 
‘‘(2) interest, and 
‘‘(3) capital gains. 
‘‘(b) LIMITATION.—The aggregate amount excluded 
under subsection (a) for any taxable year shall not exceed 
$250 ($500 in the case of a joint return), as identified 
by the taxpayer on the return of tax for such year. 
‘‘(c) INTEREST.—For purposes of this section, the 
term ‘interest’ means— 
‘‘(1) interest on deposits with a bank (as de-
fined in section 581), 
‘‘(2) amounts (whether or not designated as in-
terest) paid in respect of deposits, investment certifi-
cates, or withdrawable or repurchasable shares, by— 
‘‘(A) a mutual savings bank, cooperative 
bank, domestic building and loan association, 
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industrial loan association or bank, or credit 
union, or 
‘‘(B) any other savings or thrift institution 
which is chartered and supervised under Fed-
eral or State law, the deposits or accounts in 
which are insured under Federal or State law 
or which are protected and guaranteed under 
State law, 
‘‘(3) interest on— 
‘‘(A) evidences of indebtedness (including 
bonds, debentures, notes, and certificates) 
issued by a domestic corporation in registered 
form, and 
‘‘(B) to the extent provided in regulations 
prescribed by the Secretary, other evidences of 
indebtedness issued by a domestic corporation 
of a type offered by corporations to the public, 
‘‘(4) interest on obligations of the United 
States, a State, or a political subdivision of a State 
(not excluded from gross income of the taxpayer 
under any other provision of law), and 
‘‘(5) interest attributable to participation shares 
in a trust established and maintained by a corpora-
tion established pursuant to Federal law. 
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‘‘(d) DIVIDENDS.—For purposes of this section, the 
term ‘dividend’ means qualified dividend income (as de-
fined in paragraph (11)(B) of section 1(h)) (determined 
without regard to paragraph (13) thereof). 
‘‘(e) SPECIAL RULES.—For purposes of this sec-
tion— 
‘‘(1) DISTRIBUTIONS
FROM
REGULATED
IN-
VESTMENT COMPANIES AND REAL ESTATE INVEST-
MENT TRUSTS.—Subsection (a) shall apply with re-
spect to distributions by— 
‘‘(A) regulated investment companies to 
the extent provided in section 854(c), and 
‘‘(B) real estate investment trusts to the 
extent provided in section 857(c)(3). 
‘‘(2) DISTRIBUTIONS BY A TRUST.—For pur-
poses of subsection (a), the amount of interest prop-
erly allocable to a beneficiary under section 652 or 
662 shall be deemed to have been received by the 
beneficiary ratably on the same date that the inter-
est was received by the estate or trust. 
‘‘(3) CERTAIN
NONRESIDENT
ALIENS
INELI-
GIBLE
FOR
EXCLUSION.—In the case of a non-
resident alien individual, subsection (a) shall apply 
only— 
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‘‘(A) in determining the tax imposed for 
the taxable year pursuant to section 871(b)(1) 
and only in respect of interest which are effec-
tively connected with the conduct of a trade or 
business within the United States, or 
‘‘(B) in determining the tax imposed for 
the taxable year pursuant to section 877(b).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by 
inserting after the item relating to section 115 the 
following new item: 
‘‘Sec. 116. Partial exclusion for interest, dividends, and capital gains received 
by individuals.’’. 
(2) Subsection (h) of section 1 of such Code is 
amended by adding at the end the following: 
‘‘(13) COORDINATION
WITH
PARTIAL
EXCLU-
SION
FOR
INTEREST, DIVIDENDS, AND
CAPITAL 
GAINS RECEIVED BY INDIVIDUALS.—For purposes of 
this section, dividends and capital gains excluded 
from gross income by section 116 shall not be taken 
into account.’’. 
(3) Paragraph (2) of section 265(a) of such 
Code is amended by inserting before the period at 
the end thereof the following: ‘‘, or to purchase or 
carry obligations or shares, or to make deposits, to 
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the extent the interest thereon is excludable from 
gross income under section 116’’. 
(4) Subsection (c) of section 584 of such Code 
is amended by adding at the end thereof the fol-
lowing new sentence: ‘‘The proportionate share of 
each participant in the amount of interest received 
by the common trust fund and to which section 116 
applies shall be considered for purposes of such sec-
tion as having been received by such participant.’’. 
(5) Subsection (a) of section 643 of such Code 
is amended by redesignating paragraph (7) as para-
graph (8) and by inserting after paragraph (6) the 
following new paragraph: 
‘‘(7) INTEREST.—There shall be included the 
amount of any interest excluded from gross income 
pursuant to section 116.’’. 
(6) Section 854 of such Code is amended by 
adding at the end thereof the following new sub-
section: 
‘‘(c) TREATMENT UNDER SECTION 116 FOR OTHER 
DIVIDENDS AND TAXABLE INTEREST.— 
‘‘(1) IN
GENERAL.—For purposes of section 
116, in the case of any dividend (other than a divi-
dend described in subsection (a)) received from a 
regulated investment company which meets the re-
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quirements of section 852 for the taxable year in 
which it paid the dividend— 
‘‘(A) the entire amount of such dividend 
shall be treated as interest if the aggregate in-
terest received by such company during the tax-
able year equals or exceeds 75 percent of its 
gross income, 
‘‘(B) the entire amount of such dividend 
shall be treated as interest if the aggregate in-
terest received by such company during the tax-
able year equals or exceeds 75 percent of its 
gross income, or 
‘‘(C) if subparagraphs (A) and (B) do not 
apply, a portion of such dividend shall be treat-
ed as a dividend (and a portion of such divi-
dend shall be treated as interest) based on the 
portion of the company’s gross income which 
consists of aggregate dividends or aggregate in-
terest, as the case may be. 
For purposes of the preceding sentence, gross in-
come and aggregate interest received shall each be 
reduced by so much of the deduction allowable by 
section 163 for the taxable year as does not exceed 
aggregate interest received for the taxable year. 
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‘‘(2) NOTICE TO SHAREHOLDERS.—The amount 
of any distribution by a regulated investment com-
pany which may be taken into account as a dividend 
and as interest for purposes of the exclusion under 
section 116 shall not exceed the amount so des-
ignated by the company in a written notice to its 
shareholders mailed not later than 45 days after the 
close of its taxable year. 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) The term ‘gross income’ does not in-
clude gain from the sale or other disposition of 
stock or securities. 
‘‘(B) The term ‘aggregate dividends re-
ceived’ includes only dividends described in sec-
tion 116(d). 
‘‘(C) The term ‘aggregate interest received’ 
includes only interest described in section 
116(c).’’. 
(7) Subsection (c) of section 857 of such Code 
is amended by adding at the end the following new 
paragraph: 
‘‘(3) TREATMENT AS INTEREST.— 
‘‘(A) IN GENERAL.—For purposes of sec-
tion 116, in the case of a dividend (other than 
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a capital gain dividend, as defined in subsection 
(b)(3)(C)) received from a real estate invest-
ment trust which meets the requirements of 
this part for the taxable year in which it paid 
the dividend— 
‘‘(i) such dividend shall be treated as 
interest if the aggregate interest received 
by the real estate investment trust for the 
taxable year equals or exceeds 75 percent 
of its gross income, or 
‘‘(ii) if clause (i) does not apply, the 
portion of such dividend which bears the 
same ratio to the amount of such dividend 
as the aggregate interest received bears to 
gross income shall be treated as interest. 
‘‘(B) ADJUSTMENTS
TO
GROSS
INCOME 
AND
AGGREGATE
INTEREST
RECEIVED.—For 
purposes of paragraph (2)— 
‘‘(i) gross income does not include the 
net capital gain, 
‘‘(ii) gross income and aggregate in-
terest received shall each be reduced by so 
much of the deduction allowable by section 
163 for the taxable year (other than for in-
terest on mortgages on real property 
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owned by the real estate investment trust) 
as does not exceed aggregate interest re-
ceived by the taxable year, and 
‘‘(iii) gross income shall be reduced by 
the sum of the taxes imposed by para-
graphs (4), (5), and (6) of section 857(b). 
‘‘(C) AGGREGATE INTEREST RECEIVED.— 
The term ‘aggregate interest received’ includes 
only interest described in section 116(c). 
‘‘(D) NOTICE
TO
SHAREHOLDERS.—The 
amount of any distribution by a real estate in-
vestment trust which may be taken into account 
as interest for purposes of the exclusion under 
section 116 shall not exceed the amount so des-
ignated by the trust in a written notice to its 
shareholders mailed not later than 45 days 
after the close of its taxable year.’’. 
(8) The heading for subsection (c) of section 
857 of such Code is amended by inserting ‘‘AND IN-
TEREST’’ after ‘‘DIVIDENDS’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2009. 
Æ 
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