To amend the Internal Revenue Code of 1986 to adjust personal exemptions for high cost-of-living areas.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``The Personal Exemption Fairness Act 
of 2010''.

SEC. 2. REGIONAL COST-OF-LIVING ADJUSTMENTS IN PERSONAL EXEMPTIONS.

    (a) In General.--Subsection (d) of section 151 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(5) Area cost-of-living adjustment.--
                    ``(A) In general.--Each of the dollar amounts 
                otherwise in effect under paragraphs (1) and (3)(C) for 
                any taxable year beginning after 2010 shall be 
                multiplied by the applicable multiplier for the taxable 
                year which applies to the statistical area in which the 
                taxpayer's primary place of abode during the taxable 
                year is located.
                    ``(B) Applicable multipliers.--For purposes of this 
                paragraph--
                            ``(i) In general.--Not later than December 
                        15 of each calendar year, the Secretary shall 
                        prescribe an applicable multiplier for each 
                        statistical area of the United States which 
                        shall apply to taxable years beginning during 
                        the succeeding calendar year.
                            ``(ii) Determination of multipliers.--
                                    ``(I) In the case of a statistical 
                                area where the cost-of-living 
                                differential for the calendar year does 
                                not exceed 125 percent, the applicable 
                                multiplier is 1.
                                    ``(II) In the case of a statistical 
                                area not described in subclause (I), 
                                the applicable multiplier is the cost-
                                of-living differential for the calendar 
                                year.
                            ``(iii) Cost of living differential.--The 
                        cost-of-living differential for any statistical 
                        area for any calendar year is the percentage 
                        determined by dividing--
                                    ``(I) the cost-of-living for such 
                                area for the preceding calendar year, 
                                by
                                    ``(II) the average cost-of-living 
                                for the United States for the preceding 
                                calendar year.
                            ``(iv) Cost-of-living for area.--
                                    ``(I) In general.--For each 
                                calendar year beginning after 2009, the 
                                Secretary of Labor shall determine and 
                                publish a cost-of-living index for each 
                                statistical area.
                                    ``(II) Methodology.--The cost-of-
                                living index determined under subclause 
                                (I) for any statistical area for any 
                                calendar year shall be based on average 
                                market prices for the area for the 12-
                                month period ending on August 31 of 
                                such calendar year. The market prices 
                                taken into account under the preceding 
                                sentence shall be selected and used 
                                under the same methodology as is used 
                                by the Secretary of Labor in developing 
                                the Consumer Price Index for All Urban 
                                Consumers.
                            ``(v) Statistical area.--For purposes of 
                        this subsection the term `statistical area' 
                        means--
                                    ``(I) any metropolitan statistical 
                                area as defined by the Secretary of 
                                Commerce, and
                                    ``(II) the portion of any State not 
                                within a metropolitan statistical area 
                                as so defined.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2010.
            (2) Transition rule.--Notwithstanding section 151(d)(5)(B) 
        of the Internal Revenue Code (as added by this section), the 
        date for prescribing applicable multipliers for taxable years 
        beginning in calendar year 2011 shall be the date 1 year after 
        the date of the enactment of this Act.

Summary: Personal Exemption Fairness Act of 2010 - Amends the Internal Revenue Code to require annual metropolitan statistical area cost-of-living adjustments, beginning after 2010, to the personal tax exemption amount. Directs the Secretary of Labor to determine and publish a cost-of-living index for each metropolitan statistical area.