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an amount equal to the amount described in para-
graph (2) multiplied by the number of qualifying
children of the taxpayer.
‘‘(2) DESCRIPTION OF AMOUNT.—
‘‘(A) IN GENERAL.—The amount described
in this paragraph is an amount equal to $500,
reduced (but not below zero) by the applicable
reduction amount.
‘‘(B) APPLICABLE REDUCTION AMOUNT.—
For purposes of subparagraph (A), the term
‘applicable reduction amount’ means an amount
which bears the same ratio to the amount appli-
cable under subparagraph (A) as—
‘‘(i) the excess (if any) of the tax-
payer’s 
adjusted 
gross 
income 
over
$200,000, bears to
‘‘(ii) $50,000.
‘‘(b) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The credit allowed by sub-
section (a) for the taxable year shall not exceed the
excess (if any) of—
‘‘(A) the sum of—
‘‘(i) the tax imposed by this chapter
for the taxable year (reduced by the credits
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allowable against such tax other than the
credits allowable under this subpart), and
‘‘(ii) the taxpayer’s social security
taxes for such taxable year, over
‘‘(B) the credit allowed for the taxable year
under section 32.
‘‘(2) SOCIAL SECURITY TAXES.—For purposes
of paragraph (1)—
‘‘(A) IN GENERAL.—The term ‘social secu-
rity taxes’ means, with respect to any taxpayer
for any taxable year—
‘‘(i) the amount of the taxes imposed
by sections 3101, 3111, 3201(a), and
3221(a) on amounts received by the tax-
payer during the calendar year in which
the taxable year begins,
‘‘(ii) the taxes imposed by section
1401 on the self-employment income of the
taxpayer for the taxable year, and
‘‘(iii) the taxes imposed by section
3211(a)(1) on amounts received by the
taxpayer during the calendar year in which
the taxable year begins.
‘‘(B) COORDINATION
WITH
SPECIAL
RE-
FUND OF SOCIAL SECURITY TAXES.—The term
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‘social security taxes’ shall not include any
taxes to the extent the taxpayer is entitled to
a special refund of such taxes under section
6413(c).
‘‘(C) SPECIAL RULE.—Any amounts paid
pursuant to an agreement under section 3121(l)
(relating to agreements entered into by Amer-
ican employers with respect to foreign affiliates)
which are equivalent to the taxes referred to in
subparagraph (A)(i) shall be treated as taxes
referred to in such subparagraph.
‘‘(c) INFLATION ADJUSTMENTS.—
‘‘(1) IN GENERAL.—In the case of a taxable
year beginning in a calendar year after 1996, the
$500 and $200,000 amounts contained in subsection
(a)(2) shall each be increased by an amount equal
to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 1995’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
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‘‘(2) ROUNDING.—If any amount as adjusted
under paragraph (1) is not a multiple of $50, such
amount shall be rounded to the nearest multiple of
$50.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ has the meaning given to such term by
section 32(c)(1) (determined without regard to sub-
paragraph (B) thereof).
‘‘(2) QUALIFYING CHILD.—The term ‘qualifying
child’ means an individual who—
‘‘(A) is a qualifying child, within the mean-
ing of section 32(c)(3) (determined without re-
gard to subparagraph (E) thereof), and
‘‘(B) has not attained the age of 18 as of
the close of the calendar year in which the tax-
able year of the taxpayer begins.
‘‘(3) CERTAIN
OTHER
RULES
APPLY.—Rules
similar to the rules of subsections (d) and (e) of sec-
tion 32 shall apply.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 35 of such Code’’.
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(2) The table of sections for subpart C of part
IV of subchapter A of chapter 1 is amended by
striking the item relating to section 35 and inserting
the following new items:
‘‘Sec. 35. Family tax credit.
‘‘Sec. 36. Overpayments of tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 3. CREDIT TO REDUCE THE MARRIAGE PENALTY.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal
credits) is amended by inserting after section 22 the fol-
lowing new section:
‘‘SEC. 23. REDUCTION OF MARRIAGE PENALTY.
‘‘(a) ALLOWANCE
OF CREDIT.—In the case of a
qualified married couple, there shall be allowed as a credit
against the tax imposed by this chapter for the taxable
year an amount equal to the applicable dollar amount.
‘‘(b) QUALIFIED MARRIED COUPLE.—For purposes
of this section, the term ‘qualified married couple’ means
a husband and wife who file a joint return for the taxable
year and who, but for this section, would be required to
pay more in income taxes under this subtitle because of
the fact that they were legally married during such taxable
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‘‘(B) $4,000 LIMITATION FOR CERTAIN AD-
DITIONAL MARRIED INDIVIDUALS.—
‘‘(i) IN GENERAL.—In the case of an
individual to whom this subparagraph ap-
plies for the taxable year, the limitation of
subparagraph (A)(ii) shall be equal to the
sum of—
‘‘(I) the compensation includible
in such individual’s gross income for
the taxable year, plus
‘‘(II) the compensation includible
in the gross income of such individ-
ual’s spouse for the taxable year re-
duced by the amount of the limitation
under subparagraph (A) applicable to
such spouse for such taxable year.
‘‘(ii) INDIVIDUALS TO WHOM CLAUSE
(i) APPLIES.—Clause (i) shall apply to any
individual if—
‘‘(I) such individual files a joint
return for the taxable year, and
‘‘(II) the amount of compensa-
tion (if any) includible in such individ-
ual’s gross income for the taxable year
is less than the compensation includ-
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ible in the gross income of such indi-
vidual’s spouse for the taxable year.
‘‘(C) ADJUSTMENT FOR INFLATION.—
‘‘(i) IN GENERAL.—In the case of a
taxable year beginning in a calendar year
after 1996, the $2,000 amount contained
in subparagraph (A) shall be increased by
an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment under section 1(f)(3) for the cal-
endar year in which the taxable year
begins, determined by substituting
‘calendar year 1995’ for ‘calendar
year 1992’ in subparagraph (B) there-
of.
‘‘(ii) ROUNDING.—If any amount as
adjusted under clause (i) is not a multiple
of $50, such amount shall be rounded to
the nearest multiple of $50.
‘‘(D) TAX ON EXCESS CONTRIBUTIONS.—
Section 4973 shall be applied separately with
respect to individual retirement plans which are
ADS accounts and individual retirement plans
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which are not ADS accounts; except that, for
purposes of applying such section with respect
to individual retirement plans which are ADS
accounts, excess contributions shall be consid-
ered to be any amounts in excess of the limita-
tion under subsection (c)(2)(A).
‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE
701⁄2.—Contributions to an ADS account may be
made even after the individual for whom the account
is maintained has attained age 701⁄2.
‘‘(4) MANDATORY
DISTRIBUTION
RULES
NOT
TO APPLY, ETC.—Subsections (a)(6) and (b)(3) of
section 408 (relating to required distributions) and
section 4974 (relating to excise tax on certain accu-
mulations in qualified retirement plans) shall not
apply to any ADS account.
‘‘(5) LIMITATIONS
ON
ROLLOVER
CONTRIBU-
TIONS.—No rollover contribution may be made to an
ADS account unless—
‘‘(A) such contribution is from another
ADS account, or
‘‘(B) such contribution is from an individ-
ual retirement plan (other than an ADS ac-
count) and is made before January 1, 1998.
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‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) IN GENERAL.—In the case of a qualified
distribution from an ADS account—
‘‘(A) no portion of such distribution shall
be includible in gross income, and
‘‘(B) section 72(t) shall not apply.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ means any payment or distribu-
tion—
‘‘(i) made on or after the date on
which the individual attains age 591⁄2,
‘‘(ii) made to a beneficiary (or to the
estate of the individual) on or after the
death of the individual,
‘‘(iii) attributable to the individual’s
being disabled (within the meaning of sec-
tion 72(m)(7)), or
‘‘(iv) which is a qualified special pur-
pose distribution (within the meaning of
subsection (e)).