1986 (relating to income tax returns) is amended by in-
serting after section 6013 the following new section:
‘‘SEC. 6013A. COMBINED RETURN WITH SEPARATE RATES.
‘‘(a) GENERAL RULE.—A husband and wife may
make a combined return of income taxes under subtitle
A under which—
‘‘(1) a separate taxable income is determined
for each spouse by applying the rules provided in
this section, and
‘‘(2) the tax imposed by section 1 is the aggre-
gate amount resulting from applying the separate
rate set forth in section 1(c) to each such taxable
income.
‘‘(b) TREATMENT OF INCOME.—For purposes of this
section—
‘‘(1) earned income (within the meaning of sec-
tion 911(d)), and any income received as a pension
or annuity which arises from an employer-employee
relationship, shall be treated as the income of the
spouse who rendered the services, and
‘‘(2) income from property shall be divided be-
tween the spouses in accordance with their respec-
tive ownership rights in such property.
‘‘(c) TREATMENT OF DEDUCTIONS.—For purposes of
this section—
‘‘(1) the deductions allowed by section 62(a)
(other than paragraphs (7) and (10) thereof) shall
be allowed to the spouse treated as having the in-
come to which such deductions relate,
‘‘(2) the deduction for retirement savings de-
scribed in paragraph (7) of section 62(a) shall be al-
lowed to the spouse for whose benefit the savings are
maintained,
‘‘(3) the deduction for alimony described in
paragraph (10) of section 62(a) shall be allowed to
the spouse who has the liability to pay the alimony,
‘‘(4) the deductions allowable by section 151
(relating to personal exemptions) shall be deter-
mined—
‘‘(A) by requiring each spouse to claim 1
personal exemption, and
‘‘(B) by allowing the personal exemptions
under section 151(c) to be allocated between
the spouses as they determine,
‘‘(5) by requiring each spouse to claim their
own additional standard deduction (if any) under
section 63, and
‘‘(6) the aggregate amount of all other deduc-
tions shall be allocated between the spouses in such
amounts as they determine.
‘‘(d) TREATMENT OF CREDITS.—Credits shall be de-
termined (and applied against the joint liability of the cou-
ple for tax) as if the spouses had filed a joint return.
‘‘(e) TREATMENT
AS JOINT RETURN.—Except as
otherwise provided in this section or in the regulations
prescribed hereunder, for purposes of this title (other than
sections 1 and 63(c)) a combined return under this section
shall be treated as a joint return.
‘‘(f) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out this section.’’
(b) UNMARRIED
RATE
MADE
APPLICABLE.—So
much of subsection (c) of section 1 of such Code as pre-
cedes the table is amended to read as follows:
‘‘(c) SEPARATE OR UNMARRIED RETURN RATE.—
There is hereby imposed on the taxable income of every
individual (other than a married individual (as defined in
section 7703) filing a joint return or a separate return,
a surviving spouse as defined in section 2(a), or a head
of household as defined in section 2(b)) a tax determined
in accordance with the following table:’’.
(c) BASIC STANDARD DEDUCTION FOR UNMARRIED
INDIVIDUALS MADE APPLICABLE.—Subparagraph (C) of
section 63(c)(2) of such Code is amended to read as fol-
lows:
‘‘(C) $3,000 in the case of an individual
who is not—
‘‘(i) a married individual filing a joint
return or a separate return,
‘‘(ii) a surviving spouse, or
‘‘(iii) a head of household, or’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart B of part II of subchapter A of chapter 61
of such Code is amended by inserting after the item relat-
ing to section 6013 the following:
‘‘Sec. 6013A. Combined return with separate rates.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 3. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUC-
TION.
(a) SPOUSAL IRA COMPUTED ON BASIS OF COM-
PENSATION OF BOTH SPOUSES.—Subsection (c) of section
219 of the Internal Revenue Code of 1986 (relating to
special rules for certain married individuals) is amended
to read as follows:
‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI-
VIDUALS.—
‘‘(1) IN GENERAL.—In the case of an individual
to whom this paragraph applies for the taxable year,
the limitation of paragraph (1) of subsection (b)
shall be equal to the lesser of—
‘‘(A) $2,000, or
‘‘(B) the sum of—
‘‘(i) the compensation includible in
such individual’s gross income for the tax-
able year, plus
‘‘(ii) the compensation includible in
the gross income of such individual’s
spouse for the taxable year reduced by the
amount allowable as a deduction under
subsection (a) to such spouse for such tax-
able year.
‘‘(2) INDIVIDUALS
TO
WHOM
PARAGRAPH
(1)
APPLIES.—Paragraph (1) shall apply to any individ-
ual if—
‘‘(A) such individual files a joint return for
the taxable year, and
‘‘(B) the amount of compensation (if any)
includible in such individual’s gross income for
the taxable year is less than the compensation
includible in the gross income of such individ-
ual’s spouse for the taxable year.’’
(b) IRA ALLOWED FOR SPOUSES WHO ARE NOT AC-
TIVE PLAN PARTICIPANTS.—Section 219(g)(1) of such
Code is amended by striking ‘‘or the individual’s spouse’’.
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 219(f) of such
Code (relating to other definitions and special rules)
is amended by striking ‘‘subsections (b) and (c)’’
and inserting ‘‘subsection (b)’’.
(2) Section 408(d)(5) of such Code is amended
by striking ‘‘$2,250’’ and inserting ‘‘$2,000’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 4. INCREASE IN PERSONAL EXEMPTION FOR CERTAIN
DEPENDENT CHILDREN.
(a) GENERAL RULE.—Paragraph (1) of section
151(d) of the Internal Revenue Code of 1986 (defining
exemption amount) is amended to read as follows:
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘exemption
amount’ means $2,000 (or, in the case of an exemp-
tion under subsection (c) for a child who has not at-
tained age 18 before the close of the calendar year
in which the taxable year begins, $3,500).’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 151(d)(3) of
such Code is amended by striking ‘‘the exemption
amount’’ and inserting ‘‘each dollar amount in effect
under paragraph (1) (after any adjustment under
paragraph (4))’’.
(2) Subparagraph (A) of section 151(d)(4) of
such Code is amended—
(A) by striking ‘‘the dollar amount’’ and
inserting ‘‘each dollar amount’’, and
(B) by adding at the end thereof the fol-
lowing new sentence: ‘‘In the case of the $3,500
amount contained in paragraph (1), the preced-
ing sentence shall be applied by substituting
‘1995’ for ‘1989’ the first place it appears, and
by substituting ‘1994’ for ‘1988’.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
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