543
(3) the project activities to be supported by the 
grant and how the activities will help meet the needs 
of that community and the purpose of this sub-
chapter; and 
(4) the availability of resources for the project, 
and how the resources will be obtained. 
SEC. 3466. AUTHORIZATION OF APPROPRIATIONS. 
There are authorized to be appropriated to carry out 
this subchapter $10,000,000 for fiscal year 2004, and 
such sums as may be necessary for each of the 4 suc-
ceeding fiscal years. 
CHAPTER 5—CHILD OPPORTUNITY ZONE 
FAMILY CENTERS 
SEC. 3471. CHILD OPPORTUNITY ZONE FAMILY CENTERS. 
Title V of the Elementary and Secondary Education 
Act of 1965 (20 U.S.C. 7201 et seq.), as amended by sec-
tion 3401, is further amended by inserting after part E 
the following: 
‘‘PART F—CHILD OPPORTUNITY ZONE FAMILY 
CENTERS 
‘‘SEC. 5751. SHORT TITLE. 
‘‘This part may be cited as the ‘Child Opportunity 
Zone Family Center Act’.
544
‘‘SEC. 5752. PURPOSE. 
‘‘The purpose of this part is to encourage eligible 
partnerships to establish or expand child opportunity zone 
family centers in public elementary schools and secondary 
schools in order to provide comprehensive support services 
for children and their families, and to improve the chil-
dren’s educational, health, mental health, and social out-
comes. 
‘‘SEC. 5753. DEFINITIONS. 
‘‘In this part: 
‘‘(1) CHILD OPPORTUNITY ZONE FAMILY CEN-
TER.—The term ‘child opportunity zone family cen-
ter’ means a school-based or school-linked commu-
nity service center that provides and links children 
and their families with comprehensive information, 
support, services, and activities to improve the edu-
cation, health, mental health, safety, and economic 
well-being of the children and their families. 
‘‘(2) ELIGIBLE PARTNERSHIP.—The term ‘eligi-
ble partnership’ means a partnership—
‘‘(A) that contains—
‘‘(i) at least 1 public elementary 
school or secondary school that—
‘‘(I) receives assistance under 
title I and for which a measure of 
poverty determination is made under
545
section 1113(a)(5) with respect to a 
minimum of 40 percent of the chil-
dren in the school; and 
‘‘(II) demonstrates parent in-
volvement and parent support for the 
partnership’s activities; 
‘‘(ii) a local educational agency; 
‘‘(iii) a public agency, other than a 
local educational agency, such as a local or 
State department of health, mental health, 
or social services; 
‘‘(iv) a nonprofit community-based or-
ganization, 
providing 
health, 
mental 
health, or social services; 
‘‘(v) a local child care resource and re-
ferral agency; and 
‘‘(vi) a local organization representing 
parents; and 
‘‘(B) that may contain—
‘‘(i) an institution of higher education; 
and 
‘‘(ii) other public or private nonprofit 
entities with experience in providing serv-
ices to disadvantaged families.
546
‘‘SEC. 5754. GRANTS AUTHORIZED. 
‘‘(a) IN GENERAL.—The Secretary may award, on a 
competitive basis, grants to eligible partnerships to pay 
for the Federal share of the cost of establishing and ex-
panding child opportunity zone family centers. 
‘‘(b) DURATION.—The Secretary shall award grants 
under this section for periods of 5 years. 
‘‘SEC. 5755. REQUIRED ACTIVITIES. 
‘‘Each eligible partnership receiving a grant under 
this part shall use the grant funds— 
‘‘(1) in accordance with the needs assessment 
described in section 5756(b)(1), to provide or link 
children and their families with information, sup-
port, activities, or services in core areas such as edu-
cation, child care, before- and after-school care and 
enrichment programs, health services, mental health 
services, family support, nutrition, literacy services, 
parenting skills, and dropout prevention; 
‘‘(2) to provide intensive, high-quality, research-
based programs that—
‘‘(A) provide violence prevention education 
for families and developmentally appropriate in-
structional services to children (including chil-
dren below the age of compulsory school attend-
ance); and
547
‘‘(B) provide effective strategies for nur-
turing and supporting the emotional, social, and 
cognitive growth of children; and 
‘‘(3) to provide training, information, and sup-
port to families to enable the families to participate 
effectively in their children’s education, and to help 
their children meet challenging standards, including 
assisting families to—
‘‘(A) understand the applicable account-
ability systems, including State and local con-
tent standards, performance standards, and as-
sessments, their children’s educational perform-
ance in comparison to the standards, and the 
steps the school is taking to address the chil-
dren’s needs and to help the children meet the 
standards; and 
‘‘(B) communicate effectively with per-
sonnel responsible for providing educational 
services to the families’ children, and to partici-
pate in the development and implementation of 
school-parent compacts, parent involvement 
policies, and school plans. 
‘‘SEC. 5756. APPLICATIONS. 
‘‘(a) IN GENERAL.—Each eligible partnership desir-
ing a grant under this part shall submit an application
548
to the Secretary at such time, in such manner, and con-
taining such information as the Secretary may require. 
‘‘(b) CONTENTS.—Each application submitted pursu-
ant to subsection (a) shall—
‘‘(1) include a needs assessment, including a de-
scription of how the partnership will ensure that the 
activities to be assisted under this part will be tai-
lored to meet the specific needs of the children and 
families to be served; 
‘‘(2) describe arrangements that have been for-
malized between the participating public elementary 
school or secondary school, and other partnership 
members; 
‘‘(3) describe how the partnership will effec-
tively coordinate with the centers under section 1118 
and utilize Federal, State, and local sources of fund-
ing that provide assistance to families and their chil-
dren; 
‘‘(4) describe the partnership’s plan to—
‘‘(A) develop and carry out the activities 
assisted under this part with extensive partici-
pation of parents, administrators, teachers, 
pupil services personnel, social and human serv-
ice agencies, and community organizations and 
leaders; and
549
‘‘(B) coordinate the activities assisted 
under this part with the education reform ef-
forts of the participating public elementary 
school or secondary school, and the partici-
pating local educational agency; 
‘‘(5) describe how the partnership will ensure 
that underserved populations such as families of stu-
dents with limited English proficiency, and families 
of students with disabilities, are effectively involved, 
informed, and assisted; 
‘‘(6) describe how the partnership will collect 
and analyze data, and will utilize specific perform-
ance measures and indicators to—
‘‘(A) determine the impact of activities as-
sisted under this part as described in section 
5759(a); and 
‘‘(B) improve the activities assisted under 
this part; and 
‘‘(7) describe how the partnership will protect 
the privacy of families and their children partici-
pating in the activities assisted under this part. 
‘‘SEC. 5757. FEDERAL SHARE. 
‘‘The Federal share of the cost of establishing and 
expanding child opportunity zone family centers—
550
‘‘(1) for the first year for which an eligible 
partnership receives assistance under this part shall 
not exceed 90 percent; 
‘‘(2) for the second such year, shall not exceed 
80 percent; 
‘‘(3) for the third such year, shall not exceed 70 
percent; 
‘‘(4) for the fourth such year, shall not exceed 
60 percent; and 
‘‘(5) for the fifth such year, shall not exceed 50 
percent. 
‘‘SEC. 5758. FUNDING. 
‘‘(a) CONTINUATION
OF FUNDING.—Each eligible 
partnership that receives a grant under this part shall, 
after the third year for which the partnership receives 
funds through the grant, be eligible to continue to receive 
the funds if the Secretary determines that the partnership 
has made significant progress in meeting the performance 
measures used for the partnership’s local evaluation under 
section 5759(a). 
‘‘(b) LIMITATION ON USE OF FUNDS TO OFFSET 
OTHER PROGRAMS.—Notwithstanding any other provision 
of law, none of the funds received under a grant under 
this part may be used to pay for expenses related to any
551
other Federal program, including treating such funds as 
an offset against such a Federal program. 
‘‘SEC. 5759. EVALUATIONS AND REPORTS. 
‘‘(a) LOCAL EVALUATIONS.—Each partnership re-
ceiving funds under this part shall conduct annual evalua-
tions and submit to the Secretary reports containing the 
results of the evaluations. The reports shall include the 
results of the partnership’s performance assessment effec-
tiveness in reaching and meeting the needs of families and 
children served under this part, including performance 
measures demonstrating—
‘‘(1) improvements in areas such as student 
achievement, family participation in schools, and ac-
cess to health care, mental health care, child care, 
and family support services, resulting from activities 
assisted under this part; and 
‘‘(2) reductions in such areas as violence among 
youth, truancy, suspension, and dropout rates, re-
sulting from activities assisted under this part. 
‘‘(b) NATIONAL EVALUATIONS.—The Secretary shall 
reserve not more than 3 percent of the amount appro-
priated under this part to carry out a national evaluation 
of the effectiveness of the activities assisted under this 
part. Such evaluation shall be completed not later than 
3 years after the date of enactment of the Child Oppor-
552
tunity Zone Family Center Act, and every year thereafter 
and shall be submitted to Congress. 
‘‘(c) EXEMPLARY ACTIVITIES.—The Secretary shall 
broadly disseminate information on exemplary activities 
developed under this part. 
‘‘SEC. 5760. AUTHORIZATION OF APPROPRIATIONS. 
‘‘There are authorized to be appropriated to carry out 
this part $100,000,000 for fiscal year 2004, and such 
sums as may be necessary for each of the fiscal years 2005 
through 2008.’’.
TITLE IV—FAIR START—LIFTING 
CHILDREN OUT OF POVERTY 
Subtitle A—Expanding the Child 
Tax Credit 
SEC. 4001. EXPANSION OF CHILD TAX CREDIT; CREDIT 
MADE PARTIALLY REFUNDABLE. 
(a) INCREASE IN AMOUNT ALLOWED.—Paragraph 
(2) of section 24(a) of the Internal Revenue Code of 1986 
(relating to child tax credit) is amended to read as follows: 
‘‘(2) PER
CHILD
AMOUNT.—For purposes of 
paragraph (1), the per child amount shall be deter-
mined as follows:
‘‘In the case of any taxable 
year
beginning in—
The per child amount is—
2001 or 2002 ...........................................................................
$
600
2003 .........................................................................................
700
2004 .........................................................................................
800
2005 .........................................................................................
900
2006 or thereafter ....................................................................
1,000.’’.
553
(b) PORTION OF CHILD CREDIT TREATED AS RE-
FUNDABLE.—
(1) IN
GENERAL.—Paragraph (1) of section 
24(d) of the Internal Revenue Code of 1986 (relat-
ing portion of credit refundable) is amended to read 
as follows: 
‘‘(1) IN GENERAL.—The aggregate credits al-
lowed to a taxpayer under subpart C shall be in-
creased by the sum of the credits allowable under 
this section for all qualifying children of the tax-
payer (determined without regard to this subsection
and the limitation under subsection (b)(3) (sub-
section 26(a) for taxable years beginning before 
2004)). The amount of the credit allowed under this 
subsection shall not be treated as a credit allowed 
under this subpart and shall reduce the amount of 
credit otherwise allowable under subsection (a) with-
out regard to subsection (b)(3) (subsection 26(a) for 
taxable years beginning before 2004).’’. 
(2) CONFORMING AMENDMENTS.—
(A) Section 24(d) of such Code is amended 
by striking paragraphs (2) and (3). 
(B) The heading for section 24(d) of such 
Code is amended to read as follows: ‘‘ADDI-
TIONAL CREDIT FOR CERTAIN FAMILIES.—’’.
554
(c) COORDINATION WITH FEDERAL MEANS-TESTED 
PROGRAMS.—Section 24(d) of the Internal Revenue Code 
of 1986 (relating to additional credit for certain families), 
as amended by subsection (b), is amended by adding at 
the end the following new paragraph: 
‘‘(2) COORDINATION WITH MEANS-TESTED PRO-
GRAMS.—For purposes of any benefits, assistance, 
or supportive services under any Federal program or 
under any State or local program financed, in whole 
or in part, with Federal funds or with State funds, 
taken into account under any maintenance of effort 
requirements, which imposes income limitations on 
eligibility for such program, any refund made to an 
individual (or the spouse of an individual) by reason 
of this subsection shall not be treated as income 
(and shall not be taken into account in determining 
resources for the month of its receipt and the fol-
lowing month).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2002.
555
Subtitle B—Strengthening the 
Earned Income Tax Credit 
SEC. 4101. SHORT TITLE. 
This subtitle may be cited as the ‘‘Tax Relief for 
Working Families Act’’. 
SEC. 4102. INCREASED EARNED INCOME TAX CREDIT FOR 2 
OR MORE QUALIFYING CHILDREN. 
(a) IN GENERAL.—The table in section 32(b)(1)(A) 
of the Internal Revenue Code of 1986 (relating to percent-
ages) is amended—
(1) in the second item—
(A) by striking ‘‘or more’’, and 
(B) by striking ‘‘21.06’’ and inserting 
‘‘19.06’’, and 
(2) by inserting after the second item the fol-
lowing:
‘‘3 or more qualifying children .....................
45 ...............
19.06’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2002. 
SEC. 4103. SIMPLIFICATION OF DEFINITION OF EARNED IN-
COME. 
(a) IN GENERAL.—Section 32(c)(2)(B) of the Inter-
nal Revenue Code of 1986 (defining earned income) is 
amended by striking ‘‘and’’ at the end of clause (iv), by
556
striking the period at the end of clause (v) and inserting 
‘‘, and’’, and by adding at the end the following: 
‘‘(vi) the requirement under subpara-
graph (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 Feb-
ruary 8, 1887 (commonly known as the In-
dian General Allotment Act) (25 U.S.C. 
331 et seq.) or from land held under Acts 
or treaties containing an exception provi-
sion similar to the Indian General Allot-
ment Act.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts received in taxable 
years beginning after December 31, 2002. 
SEC. 4104. SIMPLIFICATION OF DEFINITION OF CHILD DE-
PENDENT. 
(a) REMOVAL OF SUPPORT TEST FOR CERTAIN INDI-
VIDUALS.—Section 152(a) of the Internal Revenue Code 
of 1986 (relating to general definition) is amended to read 
as follows: 
‘‘(a) GENERAL DEFINITION.—For purposes of this 
subtitle—
557
‘‘(1) 
DEPENDENT.—The 
term 
‘dependent’ 
means—
‘‘(A) any individual described in paragraph 
(2) over half of whose support, for the calendar 
year in which the taxable year of the taxpayer 
begins, was received from the taxpayer (or is 
treated under subsection (c) as received from 
the taxpayer), or 
‘‘(B) any individual described in subsection 
(f). 
‘‘(2) INDIVIDUALS.—An individual is described 
in this paragraph if such individual is—
‘‘(A) a brother, sister, stepbrother, or step-
sister of the taxpayer, 
‘‘(B) the father or mother of the taxpayer, 
or an ancestor of either, 
‘‘(C) a stepfather or stepmother of the tax-
payer, 
‘‘(D) a son or daughter of a brother or sis-
ter of the taxpayer, 
‘‘(E) a brother or sister of the father or 
mother of the taxpayer, 
‘‘(F) a son-in-law, daughter-in-law, father-
in-law, mother-in-law, brother-in-law, or sister-
in-law of the taxpayer, or
558
‘‘(G) an individual (other than an indi-
vidual who at any time during the taxable year 
was the spouse, determined without regard to 
section 7703, of the taxpayer) who, for the tax-
able year of the taxpayer, has as their principal 
place of abode the home of the taxpayer and is 
a member of the taxpayer’s household.’’.
(b) OTHER MODIFICATIONS.—Section 152 of the In-
ternal Revenue Code of 1986 (relating to dependent de-
fined) is amended by adding at the end the following: 
‘‘(f) SUBSECTION (f) DEPENDENTS.—
‘‘(1) IN GENERAL.—An individual is described 
in this subsection for the taxable year if such indi-
vidual—
‘‘(A) bears a relationship to the taxpayer 
described in paragraph (2), 
‘‘(B) except in the case of an eligible foster 
child or as provided in subsection (e), has the 
same principal place of abode as the taxpayer 
for more than one-half of such taxable year, 
and
‘‘(C)(i) has not attained the age of 19 at 
the close of the calendar year in which the tax-
able year begins, or
559
‘‘(ii) is a student (within the meaning of 
section 151(c)(4)) who has not attained the age 
of 24 at the close of such calendar year.
‘‘(2) RELATIONSHIP TEST.—An individual bears 
a relationship to the taxpayer described in this para-
graph if such individual is—
‘‘(A) a son or daughter of the taxpayer, or 
a descendant of either, or 
‘‘(B) a stepson or stepdaughter of the tax-
payer. 
‘‘(3) SPECIAL RULES.—
‘‘(A) 2 OR MORE CLAIMING DEPENDENT.—
Except as provided in subparagraph (B), if an 
individual may be claimed as a dependent by 2 
or more taxpayers (but for this subparagraph) 
for a taxable year beginning in the same cal-
endar year, only the taxpayer with the highest 
adjusted gross income for such taxable year 
shall be allowed the deduction with respect to 
such individual. 
‘‘(B) RELEASE
OF
CLAIM
TO
EXEMP-
TION.—Subparagraph (A) shall not apply with 
respect to an individual if—
‘‘(i) the taxpayer with the highest ad-
justed gross income under subparagraph
560
(A), for any calendar year signs a written 
declaration (in such manner and form as 
the Secretary may by regulations pre-
scribe) that such taxpayer will not claim 
such individual as a dependent for any tax-
able year beginning in such calendar year, 
‘‘(ii) the other taxpayer provides over 
half of such individual’s support for the 
calendar year in which the taxable year of 
such other taxpayer begins, and 
‘‘(iii) such other taxpayer attaches 
such written declaration to such taxpayer’s 
return for the taxable year beginning dur-
ing such calendar year.’’. 
(c) RULES RELATING TO FOSTER CHILD.—Section 
152(b)(2) of the Internal Revenue Code of 1986 (relating 
to rules relating to general definition) is amended by strik-
ing ‘‘a foster child’’ and all that follows through ‘‘indi-
vidual)’’ and inserting ‘‘an eligible foster child (as defined 
in section 32(c)(3)(B)(iii)) of an individual’’. 
(d) EXEMPTION FROM GROSS INCOME TEST.—Sec-
tion 151(c)(3) of the Internal Revenue Code of 1986 (re-
lating to definition of child) is amended by inserting ‘‘or 
a descendant of such individual’’ after ‘‘taxpayer’’.
561
(e) WAIVER OF DEDUCTION FOR DIVORCED PAR-
ENTS.—
(1) IN GENERAL.—So much of section 152(e) of 
the Internal Revenue Code of 1986 as precedes 
paragraph (4) is amended to read as follows: 
‘‘(e) SPECIAL RULES FOR CHILD OF DIVORCED PAR-
ENTS.—
‘‘(1) RELEASE OF CLAIM TO EXEMPTION.—In 
the case of a child (as defined in section 151(c)(3)) 
of parents—
‘‘(A) who are divorced or legally separated 
under a decree of divorce or separate mainte-
nance, 
‘‘(B) who are separated under a written 
separation agreement, or 
‘‘(C) who live apart at all times during the 
last 6 months of the calendar year, 
the custodial parent who is entitled to the deduction 
under section 151 for a taxable year with respect to 
such child may release such deduction to the non-
custodial parent. 
‘‘(2) PROCEDURE.—The noncustodial parent 
may claim a child described in paragraph (1) as a 
dependent for the taxable year if—
562
‘‘(A) the custodial parent signs a written 
declaration (in such manner and form as the 
Secretary may by regulations prescribe) that 
such custodial parent will not claim such child 
as a dependent for any taxable year beginning 
in such calendar year, 
‘‘(B) the custodial parent and the non-
custodial parent provide over half of such 
child’s support for the calendar year in which 
the taxable years of such parents begin, and 
‘‘(C) the noncustodial parent attaches such 
written declaration to such noncustodial par-
ent’s return for the taxable year beginning dur-
ing such calendar year. 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) CUSTODIAL PARENT.—The term ‘cus-
todial parent’ means, with regard to an indi-
vidual, a parent who has custody of such indi-
vidual for a greater portion of the calendar year 
than the noncustodial parent. 
‘‘(B) NONCUSTODIAL PARENT.—The term 
‘noncustodial parent’ means the parent who is 
not the custodial parent.’’.
563
(2) 
PRE-1985 
INSTRUMENTS.—Section 
152(e)(4)(A) of such Code (relating to exception for 
certain pre-1985 instruments) is amended by strik-
ing ‘‘A child’’ and all that follows through ‘‘non-
custodial parent’’ and inserting ‘‘A noncustodial par-
ent described in paragraph (1) shall be entitled to
the deduction under section 151 for a taxable year 
with respect to a child ’’. 
(f) CONFORMING AMENDMENTS.—
(1) Section 1(g)(5)(A) of the Internal Revenue 
Code of 1986 is amended by inserting ‘‘as in effect 
on the day before the date of the enactment of the 
Tax Relief for Working Families Act’’ after 
‘‘152(e)’’. 
(2) Section 2(b)(1)(A)(i) of such Code is 
amended by striking ‘‘paragraph (2) or (4) of’’. 
(3) Section 2(b)(3)(B)(i) of such Code is 
amended by striking ‘‘paragraph (9)’’ and inserting 
‘‘paragraph (2)(G)’’. 
(4) Section 21(e)(5)(A) of such Code is amend-
ed by striking ‘‘paragraph (2) or (4) of’’.
(5) Section 21(e)(5) of such Code is amended 
in the matter following subclause (B) by inserting 
‘‘as in effect on the day before the date of the enact-
564
ment of the Tax Relief for Working Families Act’’ 
after ‘‘152(e)(1)’’. 
(6) Section 32(c)(1)(G) of such Code is amend-
ed by striking ‘‘(3)(D).’’ and inserting ‘‘(1)(C). An 
individual whose qualifying child or qualifying chil-
dren are not taken into account under subsection (b) 
solely by reason of paragraph (3)(D) shall be treated 
as an eligible individual if such individual otherwise 
meets the requirements of subparagraph (A)(ii).’’.
(7) Section 32(c)(3)(B)(ii) of such Code is 
amended by striking ‘‘paragraph (2) or (4) of’’. 
(8) Section 35(d)(2) of such Code is amended—
(A) by striking ‘‘paragraph (2) or (4) of’’, 
and 
(B) by inserting ‘‘as in effect on the day 
before the date of the enactment of the Tax Re-
lief 
for 
Working 
Families 
Act’’ 
after 
‘‘152(e)(1)’’. 
(9) Section 51(i)(1)(C) of such Code is amend-
ed 
by 
striking 
‘‘152(a)(9)’’ 
and 
inserting 
‘‘152(a)(2)(G)’’. 
(10) Section 152(b)(2) of such Code is amend-
ed by striking ‘‘specified in subsection (a)’’ and in-
serting ‘‘specified in subsection (a)(2) or (f)(2)’’.
565
(11) Section 152(c) of such Code is amended by 
striking ‘‘(a)’’ and inserting ‘‘(a)(1)’’. 
(12) Section 7703(b)(1) of such Code is amend-
ed by striking ‘‘paragraph (2) or (4) of’’. 
(13) The following provisions of such Code are 
each amended by striking ‘‘paragraphs (1) through 
(8) of section 152(a)’’ and inserting ‘‘subparagraphs 
(A) through (F) of subsection (a)(2) or subsection 
(f)(2) of section 152’’: 
(A) Section 170(g)(3). 
(B) Subparagraphs (A) and (B) of section 
51(i)(1).
(C) The second sentence of section 
213(d)(11). 
(D) Section 529(e)(2)(B). 
(E) Section 7702B(f)(2)(C)(iii). 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2002. 
SEC. 4105. MODIFICATION OF JOINT RETURN REQUIRE-
MENT FOR EARNED INCOME TAX CREDIT. 
(a) IN GENERAL.—Section 32(d) of the Internal Rev-
enue Code of 1986 (relating to married individuals) is 
amended to read as follows: 
‘‘(d) MARRIED INDIVIDUALS.—
566
‘‘(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 para-
graph (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 re-
turn, 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 tax-
able 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.’’. 
(b) EFFECTIVE DATES.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2002.
567
Subtitle C—Expanding the 
Dependent Care Tax Credit 
SEC. 4201. DEPENDENT CARE TAX CREDIT. 
(a) DEPENDENT CARE SERVICES.—Subpart C of 
part IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 (relating to refundable credits), as 
amended by section 4001(b)(1), is amended by redesig-
nating section 36 as section 37 and by inserting after sec-
tion 35 the following new section: 
‘‘SEC. 36. DEPENDENT CARE SERVICES. 
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—In the case of an individual 
who maintains a household which includes as a 
member 1 or more qualifying individuals, there shall 
be allowed as a credit against the tax imposed by 
this subtitle for the taxable year an amount equal to 
the applicable percentage of the sum of—
‘‘(A) the employment-related expenses paid 
by such individual during the taxable year, plus 
‘‘(B) the respite care expenses paid by 
such individual during the taxable year. 
‘‘(2) APPLICABLE PERCENTAGE DEFINED.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘applicable percentage’ 
means 50 percent reduced (but not below 20
568
percent) by 1 percentage point for each full 
$1,000 amount by which the taxpayer’s ad-
justed gross income for the taxable year exceeds 
$15,000. 
‘‘(B) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of a 
taxable year beginning in a calendar year 
after 2002, subparagraph (A) shall be ap-
plied by increasing the $15,000 amount 
contained therein by the cost-of-living ad-
justment (as defined in section 1(f)(3)) for 
such calendar year determined by sub-
stituting ‘2001’ for ‘1992’ in subparagraph 
(B) of section 1(f)(3). 
‘‘(ii) ROUNDING.—If any increase de-
termined under clause (i) is not a multiple 
of $10, such increase shall be rounded to 
the nearest multiple of $10 (or if such in-
crease is a multiple of $5, such increase 
shall be increased to the next highest mul-
tiple of $10). 
‘‘(b) EMPLOYMENT-RELATED EXPENSES.—For pur-
poses of this section—
‘‘(1) 
DETERMINATION
OF
ELIGIBLE
EX-
PENSES.—
569
‘‘(A) IN
GENERAL.—The term ‘employ-
ment-related expenses’ means amounts paid for 
the following expenses, but only if such ex-
penses are incurred to enable the taxpayer to be 
gainfully employed for any period for which 
there are 1 or more qualifying individuals with 
respect to the taxpayer: 
‘‘(i) expenses for household services, 
and 
‘‘(ii) expenses for the care of a quali-
fying individual. 
Such term shall not include any amount paid 
for services outside the taxpayer’s household at 
a camp where the qualifying individual stays 
overnight and shall not include any respite care 
expense taken into account under subsection 
(a). 
‘‘(B) 
EXCEPTION.—Employment-related 
expenses described in subparagraph (A) which 
are incurred for services outside the taxpayer’s 
household shall be taken into account only if in-
curred for the care of—
‘‘(i) a qualifying individual described 
in subsection (d)(1), or
570
‘‘(ii) a qualifying individual (not de-
scribed in subsection (d)(1)) who regularly 
spends at least 8 hours each day in the 
taxpayer’s household. 
‘‘(C) DEPENDENT
CARE
CENTERS.—Em-
ployment-related expenses described in subpara-
graph (A) which are incurred for services pro-
vided outside the taxpayer’s household by a de-
pendent care center (as defined in subpara-
graph (D)) shall be taken into account only if—
‘‘(i) such center complies with all ap-
plicable laws and regulations of a State or 
unit of local government, and 
‘‘(ii) the requirements of subpara-
graph (B) are met.
‘‘(D) DEPENDENT
CARE
CENTER
DE-
FINED.—For purposes of this paragraph, the 
term ‘dependent care center’ means any facility 
which—
‘‘(i) provides care for more than 6 in-
dividuals (other than individuals who re-
side at the facility), and
‘‘(ii) receives a fee, payment, or grant 
for providing services for any of the indi-
571
viduals (regardless of whether such facility 
is operated for profit). 
‘‘(2) 
DOLLAR
LIMIT
ON
AMOUNT
CRED-
ITABLE.—
‘‘(A) IN
GENERAL.—The amount of the 
employment-related expenses incurred during 
any taxable year which may be taken into ac-
count under subsection (a) shall not exceed—
‘‘(i) $3,000 if there is 1 qualifying in-
dividual with respect to the taxpayer for 
such taxable year, or
‘‘(ii) $6,000 if there are 2 or more 
qualifying individuals with respect to the 
taxpayer for such taxable year. 
‘‘(B) REDUCTION.—The amount deter-
mined under clause (i) or (ii) of subparagraph 
(A) (whichever is applicable) shall be reduced 
by—
‘‘(i) the aggregate amount excludable 
from gross income under section 129 for 
the taxable year, and 
‘‘(ii) the amount of the respite care 
expenses taken into account by the tax-
payer under subsection (a) for the taxable 
year.