I 
108TH CONGRESS 
1ST SESSION H. R. 1640
To amend the Internal Revenue Code of 1986 to allow a married couple 
who operates an unincorporated business as co-owners to file separate 
returns for purposes of the self-employment tax, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 3, 2003
Mr. UDALL of Colorado 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 allow a 
married couple who operates an unincorporated business 
as co-owners to file separate returns for purposes of 
the self-employment tax, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. FINDINGS AND PURPOSE. 
(a) FINDINGS.—The Congress finds that—
(1) thousands of married couples own and oper-
ate unincorporated businesses that are classified as 
partnerships for Federal income tax purposes; but
(2) the record-keeping and other requirements 
applicable to partnerships under Federal tax laws 
are so complex and time-consuming that many such 
couples instead report the results of their business 
operations as if the businesses involved were sole 
proprietorships; and 
(3) such reporting not only does not meet the 
technical requirements of the tax laws, it also can 
result in other problems, including the inability of 
one spouse to obtain Social Security and Medicare 
benefits, the inability of surviving children to obtain 
survivor benefits under Social Security, or adverse 
consequences for one spouse in the event of divorce. 
(b) PURPOSE.—The purpose of this Act is to enable 
married couples operating unincorporated businesses to 
comply with certain requirements of Federal tax law in 
a manner that is more convenient and less likely to result 
in adverse consequences in the event of a spouses dis-
ability, the death of the other spouse, or divorce. 
SEC. 2. TREATMENT OF BUSINESSES OPERATED BY HUS-
BAND AND WIFE. 
(a) IN GENERAL.—Section 761 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(f) as subsection (g) and by inserting after subsection (e) 
the following new subsection:
‘‘(f) QUALIFIED JOINT BUSINESSES.—
‘‘(1) IN GENERAL.—In the case of a qualified 
joint business conducted by a husband and wife who 
file a joint return for the taxable year, for purposes 
of this title—
‘‘(A) such joint business shall not be treat-
ed as a partnership, 
‘‘(B) all items of income, gain, loss, deduc-
tion, and credit shall be divided between the 
spouses in such percentages as the spouses des-
ignate, and 
‘‘(C) each spouse shall take into account 
such spouse’s respective share of such items as 
if they were attributable to a trade or business 
conducted by such spouse as a sole proprietor. 
‘‘(2) QUALIFIED
JOINT
BUSINESS.—For pur-
poses of this paragraph (1), the term ‘qualified joint 
business’ means any joint venture involving the con-
duct of a business if—
‘‘(A) the only members of such joint ven-
ture are a husband and wife, and 
‘‘(B) both spouses elect the application of 
this subsection.’’. 
(b) NET EARNINGS FROM SELF-EMPLOYMENT.—
(1) Subsection (a) of section 1402 of such Code 
(defining net earnings from self-employment) is 
amended by striking ‘‘and’’ at the end of paragraph 
(14), by striking the period at the end of paragraph 
(15) and inserting ‘‘; and’’, and by inserting after 
paragraph (15) the following new paragraph: 
‘‘(16) notwithstanding the preceding provisions 
of this subsection, each spouse’s share of income or 
loss from a qualified joint business (as defined in 
section 761(f)(2)) shall be taken into account as 
provided in section 761(f) in determining net earn-
ings from self-employment of such spouse.’’. 
(2) Subsection (a) of section 211 of the Social 
Security Act (defining net earnings from self-em-
ployment) is amended by striking ‘‘and’’ at the end 
of paragraph (14), by striking the period at the end 
of paragraph (15) and inserting ‘‘; and’’, and by in-
serting after paragraph (15) the following new para-
graph: 
‘‘(16) Notwithstanding the preceding provisions 
of this subsection, each spouse’s share of income or 
loss from a qualified joint business (as defined in 
section 761(f)(2) of the Internal Revenue Code of 
1986) shall be taken into account as provided in
such section 761(f) in determining net earnings from 
self-employment of such spouse.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003.
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