A bill to amend the Internal Revenue Code of 1986 to treat certain tribal benefits and Alaska Permanent Fund dividends as earned income for purposes of the kiddie tax.
Bill: S.2522 | Sponsor: Sen. Murkowski, Lisa (R-AK)
Policy area: Taxation

Summary:
This bill treats certain disability payments and other payments made by Indian tribes or Native Corporations to children as the earned income of such children. This exempts such income from the kiddie tax which taxes the unearned income of children at the parent's marginal tax rate.

To amend the Internal Revenue Code of 1986 to treat certain tribal 
   benefits and Alaska Permanent Fund dividends as earned income for 
                      purposes of the kiddie tax.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CERTAIN AMOUNTS TREATED AS EARNED INCOME FOR KIDDIE TAX.

    (a) In General.--Section 1(g)(4)(C) of the Internal Revenue Code of 
1986 is amended to read as follows:
                    ``(C) Treatment of certain amounts as earned 
                income.--For purposes of this subsection, each of the 
                following amounts shall be treated as earned income of 
                the child referred to in paragraph (1) to the extent 
                included in the gross income of such child:
                            ``(i) Distributions from qualified 
                        disability trusts.--Any amount included in the 
                        gross income of such child under section 652 or 
                        662 by reason of being a beneficiary of a 
                        qualified disability trust (as defined in 
                        section 642(b)(2)(C)(ii)).
                            ``(ii) Certain indian tribal payments.--Any 
                        payment which is included in the gross income 
                        of such child and made by an Indian tribal 
                        government (as defined in section 139E(c)(1)), 
                        or from a trust of which the Indian tribal 
                        government is treated as the owner under 
                        subpart E of part I of subchapter J, to or for 
                        the benefit of such child if--
                                    ``(I) such child or a family member 
                                (within the meaning of section 
                                267(c)(4)) is an enrolled member of the 
                                tribe with respect to such Indian 
                                tribal government, and
                                    ``(II) such payment is made by 
                                reason of such enrollment.
                            ``(iii) Certain payments from native 
                        corporations or settlement trusts.--Any payment 
                        which is included in the gross income of such 
                        child and--
                                    ``(I) made by a Native corporation 
                                (as defined in section 646(h)(2)) to or 
                                for the benefit of such child if such 
                                child or a family member (within the 
                                meaning of section 267(c)(4)) has an 
                                equity interest in the Native 
                                corporation, or
                                    ``(II) made by a Settlement Trust 
                                (as defined in section 646(h)(4)) to or 
                                for the benefit of such child if such 
                                child or a family member (within the 
                                meaning of section 267(c)(4)) has a 
                                beneficial interest in such Settlement 
                                Trust.
                            ``(iv) Alaska permanent fund dividends.--
                        The amount of any Alaska Permanent Fund 
                        dividend which is included in the gross income 
                        of such child.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2020.
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